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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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It just has to run its actuarial course; it’s the only way the truth will be told.
It really doesn’t matter if pensions are funded or not. You as a good Illinois slave must pay those pensions as decreed by your democrat masters. No matter what. After all, you as an Illinois resident, if you ever voted for an Illinois democrat, assented to this. If you think it is ever going to change, you are deluding yourself. When they run out of money, they will rob, steal and connive to get more. When that doesn’t work, they will just reach into your slave pocket for more. And some of you will be OK with that because you… Read more »
I’d say when you go from 100% funded to around 15%, there’s a looming crisis. Thanks for the heads up Crain’s.
The Contract defense has won and will be very difficult to overturn. And like it or not, the pension is due from a right and wrong POV. That cop, firefighter and yes even teacher put in their time and did their part of the deal. Supposedly, There is a big fat landmine out in the grass. am not an accountant, but I heard from a pension consultant that if a pension fund pays out as much in pension and benefit as it takes in for member contributions, the IRS has determined that entity is just be a conduit and the… Read more »
Is your contention that a pension fund would need to pay federal taxes because it’s underfunded and it entered pay go? However, if the pension fund isn’t “pay go”, then somehow that fund is tax exempt? Not an IRS agent but basic common sense doesn’t align to that line of thinking.
It’s also a state or municipal instrumentality and tax exempt as such.
I posted earlier today an alternate basis for the system’s exemption from tax, namely that the system is viewed as an instrumentality of the tax exempt government entity. Lack of “qualified” status may, however, adversely affect employees and retirees.
To paraphrase Tommy Lee Jones in “No Country for Old Men,” “If it ain’t, it’ll do ’til the crisis gets here.” Adding fuel to the fire is federal COVID handouts having dried up. Also, if Trump or any Republican gets elected, he’s not into throwing money at mismanaged blue states to keep them afloat.
OK.. So I live on the fifth floor of my building. There is a raging fire on the first and second floors and every unit on those floors is already gutted by flames, but so far no smoke or fire in my unit. So– no crisis on my floor. I’m just fine. Great logic, Crains. But what do you expect from the paper that basically ignored the entire issue for twenty years?
Good news. No need for any additional taxes. Pensions are fine. Nothing to worry about.
https://www.ilga.gov/commission/lrb/con13.htm#:~:text=PENSION%20AND%20RETIREMENT%20RIGHTS%20Membership,not%20be%20diminished%20or%20impaired.
PENSION AND RETIREMENT RIGHTS Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
Ok then. As an enforceable contract, there are actually ways to nullify the contract such as when and if provisions become impossible to fulfill. Impossibility is a defense from liability under criminal law and an excuse for non-performance under contract law. Under contract law, a party can raise an impossibility defense when an unforeseen event occurs after the contract is made which makes performance impossible. The politicians that wrote Article 13 of Illinois’ Constitution may have foreseen the current crop of spendthrift political animals refusing to make required pension payments in the future, but I highly doubt that. They codified… Read more »
Pensions are guaranteed by the state constitution.
Not for long!
Care to share the changes to our constitution? When will this happen Wild Bill?
When the people left cannot pay any longer, the constitution will be amended
To change the verbage. No changes welcome to Detroit II .
When will that occur Wild Bill? When? People have been making this claim for decades.
It will be the impossibility defense, followed by a Federal court ordered restructuring of the plans, possibly with them taken on by the PBGC. The other option is worse, as that will hurt retirees collecting at that time by court ordered cuts to benefits. You can point to the IL Constitution all you want, when the money runs out, it’s gone.
This gross mismanagement of pension funds in the private sector would not be allowed.
FIRE WILL BE THE FIRST
Nothing to see here move along, only the usual carnival barkers. All is well no crises.
I’ve been saying for years that these Democrats will do nothing about the pension issue until the pension checks start bouncing. They’re running out of room on the Ponzi scheme of current residents paying the pensions for the retired employees, because the net producers are escaping. All that will be left are the people on welfare.
I am changing my initially negative comment here because when you really focus on all that’s said in the article it does firmly say why the crisis is coming. That’s the correct and commendable thing to write.
Mark Glennon – what would practically occur if just one of the City funds went on a pay go status? The then applicable budget would have crushing pressures, and there likely would be a domino effect with regard to the other funds as money for contributions would not be there. Will we see borrowing on horrific terms to avoid pay go? I agree with your characterization of the article – everything is ok until it is not.
It’s a gradual slide, not an event. As the assets dwindle the annual cost goes up dramatically until peaking when there are zero assets and it’s purely pay-go. So, we are already seeing the additional cost strangling the city, and it only gets worse.