June 22, 2026

• June 22, 2026

By: Mark Glennon*

How much are pension contributions taking out of annual resources for U.S. public K-12 schools?

A comprehensive, new report from Stanford University’s Hoover Institute has the answers, broken down by state and even school district for the period from 2015 through 2023.

Illinois is the most overburdened.

Pension contributions for Illinois schools rose to $3,788 per student over the course of the study. That’s 21 percent of every dollar of associated education spending for Illinois schools — the portion of school district budgets tied to employees who teach, support, and operate America’s school. That’s about double the national average contribution rate of around 10 percent, and the highest per student contribution rate in the country.**

Moreover, the portion of new education dollars going to pensions is accelerating rapidly, especially in Illinois. Nationally, associated education expenditures increased by $59 billion in real terms (inflation-adjusted) 2015-2023, but pension contributions absorbed approximately one-third of that increase.

Illinois was far worse: Real growth in Illinois pension contributions consumed all the real growth in associated education expenditures plus another 52 percent.

The study’s authors are Joshua Rauh and Gregory Kearney of Stanford’s Hoover Institute. Students of Illinois pensions will remember Rauh from the last decade when, while teaching at Northwestern and University of Chicago business schools, he frequently wrote about the Illinois crisis. The full study is here and an explainer column by the authors is here. The study’s Illinois page is here.

The study also addresses what happens if pension investment returns do not hit their expectations. Many pension critics believe pensions use overly optimistic assumptions about their returns. As the authors said in the explainer column:

The current contribution amounts across states are in large part determined by each pension system’s assumption that its investments will earn roughly 7 percent per year in perpetuity. Over the past decade, most systems were able to hit that target, but they managed to do so due to one of the strongest sustained bull markets in modern history.

Financial economists argue that guaranteed benefits should be valued using a guarantied rate of return, which is lower than pensions use, and that makes a huge difference. From the authors:

To illustrate what this looks like in some of the most financially distressed states, consider Illinois. While Illinois already contributes one of the highest shares of its covered employee budgets toward retirement costs at 20.6 percent, under this risk-free investment rate scenario the share jumps to 37.0 percent. In dollar terms, this translates into an increase from roughly $7 billion to more than $15.7 billion — or a jump from $3,776 to $8,546 per pupil.

The authors conclude their related article with this:

When you hear framings like “schools are underfunded” or “schools are overfunded,” usually those are missing the point. It’s that a growing share of what we already spend never reaches students, and until that problem is directly confronted, even the largest tax increases will struggle to deliver on their stated promises.

That gets to the fundamental nature of Illinois’s pension problem. Its out-sized pension burden is like a ball and chain around the neck of a runner. Interstate competition is a race, and Illinois can never expect to return to competitive levels of taxation and quality of benefits while it bears so large a pension burden, whether it be in education or other government services.

Illinois’ political establishment and much of our media, however, have chosen to forget the problem. Voters, in turn, have disregarded the issue. Real pension reform is off the table — reforms such as switching to 401(k)-style programs, capping the biggest pensions, ending spiking and more. None of that will happen. Nothing will change.

*Mark Glennon is founder of Wirepoints.

**Technically, the study shows Illinois with the second highest pension contribution rate in the nation, not the highest. However, as explained to me by one of the study’s authors, that’s only because Indiana made a very large, one-off, voluntary contribution to its pensions in 2023, making Indiana the highest. That was an act of conservative fiscal prudence, not a true reflection of Indiana’s pension burden, so it’s appropriately disregarded.

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