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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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From 2010, a blast from the past. . As Illinois Appellate Court Justice Thomas E. Hoffman puts it, the state of Illinois runs three Ponzi schemes, otherwise known as the Illinois State Employees’ Retirement System, Illinois Judges’ Retirement System and Illinois General Assembly Retirement System. “These three plans are nothing more than state-operated Ponzi schemes,” said Mr. Hoffman, chairman of the judicial retirement system and a trustee of the Illinois State Board of Investment, Chicago, which oversees the combined $10.2 billion in assets of the three systems, all based in Springfield. “We are taking current contributions and using it to… Read more »
Social Security is another Ponzi scheme. Only your IRA or 401k is a legitimate investment
Yes of course, but the people who paid in by force should get something I believe. Knock off all the benefits that would exceed SS. People who didn’t contribute anything don’t necessarily have anything coming to them. That;’s all i would ask for them.
Liz Bauer’s saying that benefit increases/enhancers without the necessary cash contrib increases, is what did it. 20 yrs ago 8% interest rate to discount all benefit payments for Accd Liab calc, changing to current 7%, would only increase Liab by about 15%. But she shows that Accd Liab has increased by 200% in last 20 year, tripling. How’s this for unfunded description. The 4 main Chicago plans have Unfunded Accd Liab of 28B at the 7% discount rates. Interest on unfunded is therefore $2B, but to just “tread water”, the annual NC must ALSO be contributed, and that’s $1B. These… Read more »
E Bauer is great. Once again, seems the main vehicle politicians/ gov org labor use as cover to smooth things over while passing all the decades of amendment enhancers is what she calls “expected-return-on investment valuation interest rate” or 7%+ discount rate using only partially adhered to GASB standards. I read about HR6290 PEPTA-Public Employee Pension Trans. Act (introduced by Rep. D. Nunes-R. Calf) which would mandate state & local pensions report pension debt base on discount rate base on return of treasury bond 3.5% (similar to private sector pension plans). Bill has gone nowhere. bill has been around for… Read more »
Good points. But Liz Bauer’s saying that benefit increases/enhancers without the necessary cash contrib increases, is what did it. 20 yrs ago 8% interest rate to discount all benefit payments for Accd Liab calc, changing to current 7%, would only increase Liab by about 15%. But she shows that Accd Liab has increased by 200% in last 20 year, tripling. How’s this for unfunded description. The 4 main Chicago plans have Unfunded Accd Liab of 28B at the 7% discount rates. Interest on unfunded is therefore $2B, but to just “tread water”, the annual NC must ALSO be contributed, and… Read more »
yes I agree, the absurd debt situation Ill is in today is a result of 20+ years of a convaluted history of a zillion benefit increases/enhances and in part skipping payments. but all I was trying to say the pols/unions are only able to get away with all the decades of byzantine convoluted benefit increases/enhances because there are no rules—the GASB standards are only voluntary recommendations which the various pensions only partially adhere to at best. And the biggest scam that GASB allows pension actuaries to use is 7-8% discount rate based on return on equities “expected-return-on investment valuation interest… Read more »
Yep, you’re so right on so many points. It’s even true that govt DB pension plans are exempt from all funding reqt rules AND exempt from all the max Bft amounts which they exceed very often. ..too large and too early. Sick stuff how they succeeded in feathering their nests at the taxpayers’ expense .
The drafters of ERISA thought about covering government plans but were persuaded by arguments of federalism (i.e. “states’ rights”). Similar deal for “church plans” (e.g., separation of church and state). The law evolved during the Nixon administration and was signed by Gerald Ford — different in many philosophical respects from today’s republicans and very different from today’s liberals. I expect those of today’s liberals who run state and local governments (and those who elect them) would favor a massive federal bailout. When it comes to other peoples’ money, federalism sucks. Sanctuary cities, not so much.
I am not sure I see any issue at all. Who cares if Chicago implodes fiscally from pensions? What is the real downside? The whole state is not obligated by Chicago pensions are they? If not I say let them collapse. They only people who would be hurt are those who deserve to be hurt.
Emotionally I tend to agree. The problem is what happens to the physical and intellectual infrastructure when the people take to the streets? When hospitals, courts, universities, airports and rail yards don’t function the hurt is spread. You have to concede that public employees have made a science out of civil disruption. And Teamsters know how to start a general strike. Nobody knows for sure the results of fiscal implosion or political chaos — some days I think it’s the only way to “stimulate” necessary changes and end the tyranny of the public unions. But I think a lot of… Read more »
Agreed. There’s lots to be said in favor of “just blow it up,” but lots of risk, too, because it’s impossible to predict how chaotic it could get.
I’m of the opinion the Democrats destroy the whole state via Scorched Earth Death Spiral before they let the pension funds simply fail. Damage 12 million lives to try and save a couple hundred thousand pensioners.
A few points, one advantage the U.S. has that is underutilized is 50 separate states that act as isolated test beds for public policy and within many states one or more large metropolitan areas that also act as field tests within state for public policy. Chicago is an entity by itself. It does not mirror the rest of Illinois demographically or politically. It has less half that average white population and almost double the Hispanic and black population of Illinois as a whole with a median income that is about 11% lower than the rest of Illinois. Chicago is strongly… Read more »