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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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There oughta be a law . . . all new residents to Illinois should be given a document to sign that they understand their portion of the state debt that they are assuming and that taxes may be raised as deemed necessary by the state to fulfill that obligation.
Good luck ever getting language like that on a ballot. Somehow I think the unions will prevent/alter the language with the help of the ILSC. The court will not allow you to add language to the Illinois constitution that violates the contracts clause of the US constitution. Then you’ll be left with language that only impacts new employees and you’ll be right where you started. It will never make it to the voters as written. As you noted in the article, even Republicans don’t think it’s legal. Go ahead and try to get elected officials to put it on the… Read more »
“The court will not allow you to add language to the Illinois constitution that violates the contracts clause of the US constitution.” Nonsense. That’s what would be decided under federal Contract Clause law. Read the Rhode Island case. See what Arizona did. Read other Contract Clause cases. You are just repeating the standard union disinformation.
“Nonsense”. That’s your argument. Solid. I’m actually repeating what the ILSC stated in their last decision. The Illinois Supreme Court will absolutely step in if they believe the language violates the contracts clause. During the last decision they were very clear that it violated this clause and referenced throughout. So even though the ILSC stated that changes violated the US contracts clause they are going to allow language into the IL constitution that does just that? None of it matters anyway. You can’t even get Republicans to agree with your fantasy. You’ll need a massive majority to even get the… Read more »
I repeat that that’s nonsense — public union propaganda. The issue would be decided solely under federal law so federal precedent, not the ILSC’s decision, would control. It would ultimately be appealable to SCOTUS. Most importantly — and there is no disputing this– it would be decided as a fact issue — whether the impairment is fair and reasonable under the circumstances based on the actual pension reforms the legislature would make under the amendment. The ILCS decided that the particular reforms then attempted weren’t justified under the particular circumstances at the time. They noted that the temporary income tax… Read more »
Only public union lawyers and The Illinois Supreme Court. I repeat Mark that you will NEVER get that language on the ballot. It will never get to SCOTUS if the ILSC never allows the language on the ballot as written. I understand that contracts are not absolute but if other options are available the ILSC won’t allow it. As long as taxes can be raised there is another option per the court. The ILSC stated that this funding issue belongs to ALL Illinois residents not just pensioners and the pain with any issues will not fall solely on them. You… Read more »
The language assumes there is a contract, and there is. The language assumes what is obvious, which is that federal Contract Clause law still limits what could be done, and therefore would not permit unfair, unreasonable reforms. If you don’t think that’s obvious, fine, add a few words saying so. ILCS’s opinions mean nearly nothing under federal law. I do not hate public employees. Their enemies are those who perpetuate a doomed system and who created a grossly inadequate Tier 2 that forces Tier2s to subsidize Tier 1, which is where the entire problem is. Those Tier 2s have a… Read more »
“Bondholders, however, signed up for a different deal, having a payment priority and, in some cases, liens.”
You’re right. Bondholders signed up for a certain level of risks. Pensioners signed up for exchanging labor for a constitutional guarantee where their benefits can’t be reduced. They will be given priority. Don’t believe me believe what is happening in other cities such as Harvey.
Nothing in this Constitution or in any law shall be construed to limit the power of the General Assembly to reduce or change pension benefits or other benefits of membership in any public pension or public retirement system, whether now or in the future, accrued or yet to be earned. Pensioners currently have a contract that can’t be impaired by the legislature. Under your proposed language they no longer have that guarantee. They would now have what the courts referred to as a gratuity that could be changed at the will of the legislature. That’s not a contract. Imagine the… Read more »
In 1857, Scott v. Sandford aka Dred Scott, the United States Supreme Court said that slaves were property, and those property rights that could not be impaired. A slave from Missouri caught in free state must be returned to the slave state because the slave owner had a constitutional property right. The civil war ensued a few years later. Two amendments to the constitution, the 13th and 14th amendments, stripped those slave owners of their property rights, and essentially confiscated private property. We fought a war to confiscate private property and break slavery and indentured servant contracts. The supreme court… Read more »
At the end of the day, the ILSC’s constitutionality analysis of Mark’s amendment will always be a political decision. The exact language of the amendment, or even the repeal of the current amendment, it doesn’t matter. Our Justices in IL are elected, and they all recently learned that retention is no longer guaranteed in today’s political environment. The justices will stick their fingers in the air and determine which way the wind is blowing. And if the political will is there to stiff the pensioners, with protestors screaming outside their chambers, they’ll get the message quite quickly, and they’ll find… Read more »
Debtsor, all true. The federal bailout has kicked the can for a year or two, allowing them to do nothing. In the meantime, the hole will deepen by another $10 or $20 billion, and the flight from the state will accelerate because the jig is up. People know how impossible the debt load is and they don’t want to throw their money into the pit.
A simple question for PPF, do you or your constituents admit the true pension debt figure is in fact the Moodys # of $420 billion as opposed to so called gov cash accounting figures Illinois politicians and press throw around? or does that matter? For me, excepting the astronomical math is the ethical/ equitable political argument that must be made at a time when all politicians want to talk about is EQUITY.
The high (and debatable) $420 billion figure you’ve mentioned might best be considered as a CURRENT estimate based upon the presently low interest rate environment, a matter that can change sometimes quite a lot from year to year. If the IL pension funds track such rates over time in a rising-rate era that creates a reduced financial obligation on the part IL and its subsidiary governments to fund those pension systems. In short, we all need to take today’s truly high estimates as to what’s owed by the state to its pension sytems in the way of fulfilling all known… Read more »
James, what you have described is simply what folks in finance call “risk,” all of which is born by taxpayers in our system. Its cost is measurable — the difference between treasury rates and expected stock returns, but nowhere appears in any calculation of pension costs.
Sure, and I didn’t imply otherwise. My intent was only to portray the underlying wishy-washy quicksand sand thinking that is used in determining the state’s total unfunded pension debt obligation. Its an economic snapshot in time to be replaced by others as over many years circumstances change. Many would say higher inflation lies awaits, and that may well greatly decrease this currently worrisome obligation.
The only point I was trying to make from earlier comment was, if Illinois pension clause was challenged with state amendment and it was argued that proposed amendment was an infringement on contract clause in fed sc, at what point does the total pension debt burden on illinoisans become a “reasonable and necessary” insurmoutable burden? When the pension dedt is– $144 billion, $420 billion, $1 trillion??? Shouldn’t illinoisans at the very least be entitled to be presented with an honest bill of debt?, especially by those pols obsesed with preaching EQUITY? Or PPF, is honesty ever any issue?
Agreed we are not there by a long shot. You will need to see all forms of tax increases exhausted and cuts made to the budget before the courts ever allow it. You would need to prove that there is no other option. People leaving the state by itself will not justify a reduction. You will need to show that the state is no longer able to raise taxes by showing that revenue does not increase. We aren’t even close to that yet. Look around the state. Evanston paying reparations, floating a state run single payer healthcare, increasing taxes on… Read more »
“You would need to prove that there is no other option.” That may have been what the ILSC said in the past. But that won’t be what they say in the future. The court changes its mind all of the time for any reason it wants. Stare Decisis applies until it doesn’t or it is ‘distinguishable’. Reforming pensions will be a political decision from a political court facing election and retention challenges in the face of a taxpayer and voter revolt. We aren’t there yet not because we aren’t taxed enough (because we are overtaxed) but because the population of… Read more »
I told you the ISC doesn’t matter. Mark and Ted 100% agree, and they both are much smarter than you. This will be a federal issue, and the pensions will lose. You are a total public union troll idiot. People will keep leaving until this is fixed in larger and larger amounts. Taxes cannot be raised much more because people in Illinois are tapped out. Only so many cuts can be made by federal law. If nothing is done by the state about the pensions then the pensions collapse and are cut at the federal level anyway because there will… Read more »
How many times does Mark have to say it? The ISC won’t be ruling on this, it will be a federal court, and they will allow it. The ISC doesn’t mean squat now. And, if the pensions collapse, then it becomes a federal issue as well. The ISC can watch as the pensions get cut one way or another due to reality and math which are 100% undefeated, and that is all they will be able to do.
Pensions Cut has no plan because he is a union stooge with an IQ of 2. Deep down though, he knows the pensions are doomed. Math and reality ALWAYS win. I can’t wait until his pension is cut.
Ever heard of schadenfreude? Its not a desirable human trait and one that shows a psyche at endless war with the world at large. Some say meditation is helpful.
James – can you pitch in and help here?. Mark Glennon thinks it a fantasy that taxes could ever be raised enough to close the deficit and restore the State (and Chicago) to financial stability. I happen to agree with him, but that still leaves an open question. Let’s accept the State’s inflated rate or return (one thing with investments and finance is that yearly average returns can be meaningless; one bad year with a negative return can make it difficult claw back to what you had, even with inflation). What are the tax rates necessary to get to financial… Read more »
Willowglen like so many others here I think IL is in an ending downward spiral and probably unrepairable so. In general, “the math always wins” as is often stated here. But, that make take at least a few more years, or—as we are reminded from time to time—it may take place slowly until it doesn’t. I wish I could be of a more positive mindset on this topic, but even the federal treasury is stretched way, way beyond reasonableness in its indebtedness, it seems to me. They can’t bail out IL and not do likewise for other states. There simply… Read more »
Illinois may be the first state owned by a private equity firm.
James – the feds are a different matter. They can inflate the currency. Illinois has no such option. I am not sure of your conclusion. Tax rates are not worth discussing because there is no set of income tax hikes (even in a progressive system) that could be made to fix the problem? I again agree with you if this is your point but putting forth the notional rates should illuminate the depth of the problem. I think it needs to be done, especially with the Capital Fax crowd – they just have no idea how bad of shape the… Read more »
Willowglen, what kinds of higher taxes would both fix the huge IL unfunded public pension problem and simultaneously allow both its citizenry and businesses to thrive enough not to move elsewhere? I don’t think there is any such combo-tax-increase package available. Any future tax increase that theoretically might solve one set of problems will exacerbate others. If there is a bright side to this I read a few days ago that governmental employees and retirees represent something less than 5% of all IL citizens–excluding family members, I presume. So, while the outstanding public pension underfunding problem seems gargantuan maybe in… Read more »
I think your comment reflects the excesses of the public union mandarin class in Illinois. Which is why Mark Glennon writes what does.
Mandarin class, Willowglen? Well, orange you the smart one?
How would you know whether I am smart? Heck, I want to college on an athletic scholarship, worked for the Teamsters and the UFCW in a slaughterhouse for a while. Not the background of Prtizker, although I am grateful to his family for making the Teamster job available so I could finish college, ironically at the same place JB went. In any event, it would be illuminating to hear of your educational background – although smart means you did the last thing you did in an intelligent way.
“Smart” can mean several things depending upon the observant’s personal definition. Its not necessarily restricted to one’s I. Q., although most include many of them. To me it has more to do with “savvy,” the ability to discern and discriminate about what’s crucial and what’s unimportant, irrelevant and/or fluff. Its not hutzpah necessarily, but can be that. Also, I think “smart” people—regardless of formal educational attainment—can more easily find patterns, generalize even while recognizing thing that seem the same may not be the same and make reasonably sane predictions as compared to others who “shoot from the hip” based on… Read more »
For what it is worth, my single mom was not educated. All kinds of problems. I ended up being at the very top of the class at a Tier 1 law school and and a law review editor. Not sure that makes me educated. One thing I did learn however. The progressive elites who were on the Law Review with me were not in any way looking out for middle class or lower middle class people, and I learned early on not to trust them. Of course, those on the left don’t agree with me. But you could not design… Read more »
You are confusing smart with wise
I have no problem with that. Still, I think the concept was stated clearly enough for most readers, or at least I hope that’s the case. Your more precise wording is probably the smarter way to say it, too? I think maybe I used that word correctly correctly here. Like Pete, you be da judge.