Illinois agreed to settle with the U.S. Securities and Exchange Commission (SEC) over charges it misled investors about a growing shortfall in its employee pension funds as it sold $2.2 billion in bonds to investors, Bloomberg reported.

From 2005 to 2009, Illinois failed to disclose how much it was underfunding its pension plans, the SEC said today in an administrative action. The state didn't adequately disclose cuts in its annual contributions to the fund, the agency said.

The SEC has been seeking to crack down on faulty disclosure by state and local governments that borrow in the $3.7 trillion municipal bond market. It settled a similar case with New Jersey in 2010, the first time the regulator targeted a state. Read more at Bloomberg. Read the press release from the SEC.