The Illinois Pension Crisis has Influenced Rising Property Taxes for Decades

O'Connor discusses how the Illinois pension crisis has influenced rising property taxes for decades.

CHICAGO, TX, UNITED STATES, January 28, 2026 /EINPresswire.com/ --


Throughout 2025 and into 2026, Illinois and Cook County in particular have been through the wringer when it comes to property tax issues. In general, property taxes have increased every year for the past 30 years. In some townships, this can be a relatively small number, while in others, residents can see increases that will make a home or business unaffordable overnight. Cook County jumped 16% on average in 2025, though many townships saw increases close to or exceeding 100%. This was especially devastating for the South and West Sides, where working people got late tax bills that they had little or no ability to pay.

While Illinois has a long history that has led to these issues, one of the oldest and most problematic causes is the pension system. Be it state employees or those for counties or cities, the pension system has been a persistent obstacle for financial solvency for over 100 years. O'Connor will explore the Illinois pension crisis, how it came to be, and how it has affected property taxes for the past century.

The Illinois Public Pension Systems

The state of Illinois has five major pension systems. The Teachers’ Retirement System (TRS), the State Employees’ Retirement System (SERS), the Judges’ Retirement System (JRS), the State Universities Retirement System (SURS), and the General Assembly’s Retirement System (GARS). These are the largest pensions in the state and represent billions of dollars in liabilities every year. Thanks to strong unions, these retirement systems see growing requirements every year, which further raise costs.

There are similar systems at the local level across all of Illinois. Obviously, due to size and economics, Cook County and Chicago boast impressive systems. Each of these pensions requires funding from a shrinking budget. These pensions go to teachers, police officers, firefighters, and more. These are also backed by unions, giving them significant power. Illinois has long been known for its connection to unions, which is usually a great thing. However, the inability to reform pensions is leading to an unsolvable crisis, one that forces higher taxes every year. Currently, these five systems have an unfunded liability of $144 billion.

Pension Problem Enshrined in the Illinois Constitution

The modern-day problem has not been helped by recent legislation, but the true origins lie deep in the past. In 1970, the Illinois Constitution guaranteed an increase of 3% a year for pensions to cover changes to the cost of living and inflation. This caused an issue of compounding percentages that has ballooned to the present day. Court cases affirmed that these increases could not be cut in the future. In general, this has hamstrung reform and acts as the root cause from which the rest of the crisis grew.

The Edgar Ramp

If the 1970 legislation started the fire, Governor Jim Edgar poured gallons of gasoline on it. As it was becoming clear in the 1990s that the pension system was unsustainable, Edgar launched a number of reforms and pieces of legislation. The centerpiece became known as the Edgar Ramp, which basically kicked the can down the road and leveraged future revenues to pay for the present. The Edgar Ramp would gradually increase the pension funding ratio, starting at 52% and ending at 90% in 2045. The Ramp is extremely backloaded, designed to give relief when it was proposed, with future generations paying the piper. Edgar also increased benefits for pensioners, instead of cutting back, planning on future revenues to fill the gap.

As the ramp nears its terminus in 2026, the funding ratio has rapidly increased, with an even steeper climb set for the next decade. It was hoped that reforms would happen in the meantime, which would make the pensions more affordable in the long run. Unfortunately, these major reforms never came, which puts the pension system at over 20% of Illinois’ economy. Originally, investment returns allowed the Edgar Ramp and the pensions function as intended, however, this was derailed by several financial crashes.

Final Crisis

The Edgar Ramp was initially buoyed by the Dot-Com bubble of the late 90s. While the good times lasted for years, it all came falling down when the bubble finally burst. This forced the pension funds deeply into debt, from which they have never fully recovered. Some progress was made to right the ship, but this was torpedoed by the 2008 financial crisis, which caused yet another spiral toward insolvency, building up more debt. While investments were foundering, employee contributions were also falling, leaving the whole system deeply in the red. The debt doubled between 2007 and 2010, reaching around $86 billion. Along with recessions, these financial freefalls meant that the well-intentioned Edgar Ramp was a disaster that would only make things worse.

Court Strikes Down Reforms

In 2013, meaningful reform was finally passed. This introduced a complete overhaul of the pension system, which included reduced payouts, higher ages of retirement, and lower annual increases. While balked at by unions, it was seen as the only way to have funding meet 100% of demand by 2040. This would hopefully lead to pensions being just 2% of general spending by 2040. However, pension rights being enshrined in the Illinois Constitution came back to bite the reformers. In 2015, the Supreme Court of Illinois ruled that the 2013 reforms violated the pension rules of the constitution and struck them down. This ruling put pensions on their current trajectory.

Tier 2 Pensions Established

In a rare win for reformers and accountants alike, Illinois was able to establish a tiered system for pensioners in 2010. Tier 1 pensioners got the full benefits previously established, while Tier 2 saw lesser benefits with higher contributions. Tier 2 is for employees who were hired after 2011, meaning younger workers will see higher burdens with fewer benefits. This is generally seen as the best current option, and could save countless billions in the years to come. The main problem is that there is still a large contingent of Tier 1 employees in the system, including those just hired in 2011. This means Tier 1 employees could be active and building benefits for decades to come. While a step in the right direction, it shows that the system still needs major overhauls.

Reform and Funding

While basic economics, legislators, governors, mayors, and union heads have been at each other’s throats for generations trying to bring the system to heel. Not only are growing budgets a concern, but deficits continue to rise as well. While all agree that reform is needed, how to achieve this is debated. Draconian cuts to pension funds are one option, though unpopular with unions and voters, while also being opposed by the courts. Obviously, raising taxes to fund pensions has the same problem, though this has been the solution that Illinois, and especially Cook County, have used in the past. If reforms are to happen, they need to jump partisan hurdles, unions, and even the Illinois constitution itself. This means a possible amendment, which is unlikely in the current political climate.

Chicago and Cook County Crisis Worse Than the State

While things are dire statewide, Chicago is facing an even larger crisis. Chicagoland takes every Illinois problem and turns it up to 11, and pensions are a perfect example. 2026 started with Chicago facing the first government shutdown in its history, with pensions being one of the primary factors. From firefighters and police officers to general government employees, Chicago pensions are in a hole that surpasses the pension debt of most states. This is in the face of falling revenues, especially from businesses in the Loop, which have suffered since the pandemic. It is currently estimated that 80% or more of all property taxes in the city go toward pensions, which are still underfunded. While Cook County property taxes hit record highs to close 2025, most of it went to pensions, with the funding still falling short.

Pensions and Property Taxes

The primary source of funding for public pensions across Illinois is property taxes. Property tax levies are spread across thousands of taxing districts in the state, each with budgets that need to be met. While township assessors set taxable value and equalization factors, it is these taxing districts that decide the tax rate. When the demand for pension funding drains the budget, taxing districts have no choice but to raise rates. While Chicago is the biggest offender when it comes to raising property taxes, it is far from alone. Even the smallest rural townships are seeing spikes thanks to spiraling pensions. Whether statewide or local, Illinois’ pension system is a boondoggle that will keep growing into the near future.

With so much money going to pensions, other government services may be cut. Fire departments, police, and other first responders are often greatly impacted. While teachers get great retirement plans, many school districts are suffering massive shortfalls. This was applied in 2025 in Cook County when delayed tax bills forced most school districts to take out predatory loans to stay solvent. These loans are also being used to keep pensions afloat, which leads to more debt and interest payments. This cycle continually builds on itself, leading to the death spiral that the entire state is currently experiencing. Just like the Edgar Ramp in the 1990s, Illinois is mortgaging its future to barely stay above water.

About O'Connor:
O’Connor is one of the largest property tax consulting firms, representing 185,000 clients in 49 states and Canada, handling about 295,000 protests in 2024, with residential property tax reduction services in Illinois, Texas, Georgia, and New York. O’Connor’s possesses the resources and market expertise in the areas of property tax, cost segregation, commercial and residential real estate appraisals. The firm was founded in 1974 and employs a team of 1,000 worldwide. O’Connor’s core focus is enriching the lives of property owners through cost effective tax reduction.

Property owners interested in assistance appealing their assessment can enroll in O’Connor’s Property Tax Protection Program ™. There is no upfront fee, or any fee unless we reduce your property taxes, and easy online enrollment only takes 2 to 3 minutes.

Patrick O'Connor, President
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