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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’s high time bond holders start to take a haircut, it’s is time to default on bond payments. It’s either them or the taxpayers that get screwed, I’d much rather it be the bond holders. Moodys has been screwing over the taxpayers with fraudulently “just above junk” ratings that should be junk, attracting many to this market to soak us on rates. The chickens need to roost, screw these bond holders, every one of them, they used the situation here to profit on the giant Ponzi scheme the raters keep alive.
Maybe defaulting on bond payments would have some blowback for Moody’s but they didn’t buy the bonds. The bonds are likely secured by assets or other resources of whichever municipality issued them, or by assets of the state. In the Detroit bankruptcy, both pensioners and bondholders took a haircut. State and municipal debts are ultimately paid by taxpayers unless there is a bankruptcy. States can’t go bankrupt under the current law and municipalities would probably be prevented by the state legislature or the governor from filing for bankruptcy. If those taxpayers who are voters would focus their outrage and displeasure… Read more »
Unfortunately bondholders can’t lose because Madigan sneaked in the last minute a provision that in the event of bankruptcy of a home rule community bondholders can get 90% of future sales tax revenue for up to 40 years or until paid in full. This even trumps (no pun intended) pensioners. Check out Jeanne Ives speech at the City Club on youtube starts just past the 36:00 minute mark. I think that provision is not for only Chicago but for all home rule cities in Illinois. Mark may know more details. Please correct me if I am mistaken!!
You got it. Ives was the one who noticed the importance of the bill and her comments alerted us. We were the only ones even discussing the bill as it moved through the legislature. We criticized it often and harshly, then and afterwards, here and in Crain’s. The law was written by and for muni bondholders. Especially appalling is how the sponsor, Barbara Flynn Currie, lied about the purpose of the bill on the House floor, which you can see here: https://wirepoints.org/unbelievable-illinois-house-votes-with-senate-to-hand-over-public-assets-to-bondholders-wirepoints-original/ Rauner vetoed the bill but the Dems overrode. One thing, though, is that not all bonds are secured… Read more »
And so it begins. First one investor refuses to lend. Soon there will be others.
Was wondering myself this morning. This could either be much ado over nothing, or it could be a watershed moment where the boom is finally lowered and nobody wants city and state bonds from Chi/IL any more. Only time will tell.