The Securities and Exchange Commission is accusing Illinois of the kind of shenanigans typically ascribed to publicly listed companies: securities fraud.

The U.S. watchdog says that between 2005 and 2009 the state “failed to inform investors about the impact of problems with its pension funding schedule as the state offered and sold more than $2.2 billion worth of municipal bonds.”

The state allegedly withheld from buyers of its municipal bonds details about just how dire the fiscal situation is of its pensions systems. In the future, the state could be forced to choose which obligations to cover: repayment of bonds or payment of benefits to its retired public workers.

Every year that the state failed to fully disclose the risks involved with lending money to it, bond buyers basically paid more than they should have, since bond prices and yields (the amount of interest made as profit for the loans once the bonds mature) are linked to future projections of a borrower’s ability to repay.

While it’s unlikely Illinois will default on loan repayments, the withholding of important information about the state’s future financial obligations allows it to get more cash up front at lower yields. The SEC did not estimate how much this withholding of information costs investors, and in the announcement made Monday, it said the state agreed to settle without paying a penalty or admitting guilt.

What this means is that the charges announced on Monday amount to little more than a cease-and-desist order of practices the state says it has already remedied.  What’s more important about the SEC’s announcement are the details it provides in the 11-page order about just how dire the state pension situation is in Illinois.

The state has five public pensions: for teachers, college professors, judges, lawmakers and clerical workers. But together their funding level stands at 40 percent, according to an analysis by the Wall Street Journal. For every dollar the state is obligated to provide its retired, retiring, or soon-to-be-retiring workers, it only has 40 cents.

That’s well below the national average for state pensions systems of 75 cents to the dollar. Illinois has three of the top 10 most underfunded state pension systems in the nation: the ones for state employees, for teachers and for university professors.