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Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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The 202 performance by SURS and TRS was a little less that a negative 2%. DIJA was down -18.6% in 2022.
Poor investment performances of below 0% on a market value basis from all systems in FY 2022 added upward pressure on the unfunded liability, and higher-than-projected salary increases across all five systems in FY 2023 also contributed to an increase as well. It goes back to what I’ve been saying for a while now. Poor investment choices were made most likely by the same fund managers (still under contract) and their fees which probably went up regardless of returns. The politically connected never lose their jobs. Market returns were decent yet no money was made. Even though the article state… Read more »
Freddy, sorry, but you are incorrect about investment performance. They’ve been quite good. Look at chart 3 for the most current year. Over 8%. Last year over 6%. I don’t have other years handy but they, too, have been surprisingly good. You can’t measure returns on investments just by looking at change in unfunded liability. It’s more complicated than that. Other factors like underfunding cancel out the investment gains. Generally, speaking, the staffs on these pensions are investment pros whom I respect. There are, however, some politically connected third party managers who add no value and should not be there… Read more »
Sorry Mark. I was referring to year 2022 only where it seemed like TRS had a negative return for the year. I copied and pasted the article from Chart 1 last sentence in paragraph one. If that link below is true how much larger in returns should 2023 to make up for losses the year before? If 7% was expected but ended up negative 1.7% you must get much higher than 14% the next year due to the loss of 7% plus the compounding effect is also lost. But the bottom line is no matter what the funding level/returns are… Read more »
You’re certainly right that it will never be enough. A simple way to look at it is how much the annual contributions to the pensions are short of Actually Required Contribution. That’s about $5 billion/year just for the state pensions, so much higher depending on where you live for the local pensions. If the state tried to raise taxes by $5B to cover that there would be be a stampede out of the state, far worse than the exit levels today that are already killing the state. The pension obligation is like a 50-pound weight tied around Illinois’ neck as… Read more »
A few more questions. Is the money we pay every year via property and other taxes that are for pensions going to current workers or is the money diverted to retirees with an IOU given to current workers? By that I mean the millions we or employees pay into pensions for those working is or more less than what is paid to retirees?
This will be messy: IF the unfunded liability doesn’t change in a given year, then the money you and current workers pay in each year plus earnings on pension assets = what is paid out to existing retirees plus Actual Cost for that year. (Actual cost is the additional future liability created that year for work performed during that year). Of course, it gets messier with discounting what’s in the future and any “smoothing” adjustments.