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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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Replacing pension fund debt with bond debt results in an infusion of cash into the pension funding, reducing its unfunded liability. More money in the pension fund means there’s that much less to cut if pension benefits are reduced in the future. Thus public sector workers and retirees are generally in favor of such schemes. The infusion of revenue allows the city to more easily balance the current year budget. But borrowing money to invest in the stock market, private equity, bond market, etc. is not a sound financial practice if you are a unit of government, an individual, a… Read more »
An appropriate strategy if one is looking toward bankruptcy — and I suspect even the teacher unions are mindful of this.
The City of Chicago contributes to several pension funds. Chicago Teacher Pension Fund (CTPF). Fire. Laborers (LABF). Municipal Employees (MEABF). Police. The City has to figure out how to fund the pensions and employee pay. To that end the City has collective bargaining agreements (cba’s) with 43 union locals. http://www.chicago.gov/city/en/depts/dol/supp_info/city_of_chicago_collectivebargainingagreements.html And Chicago Public Schools has cba’s with 9 union locals. http://www.cps.edu/about/policies/employee-engagement/collective-bargaining And that is not including management and non-union employees. That is a nightmare scenario which has been grossly mismanaged as a result of state and local decisions. Add on top of that add current benefits (for those currently employed)… Read more »