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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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So the trend line is no longer linear? I would think that debt trends work downward the same as compound interest works upward, logarithmically. As it gets worse it accelerates? The actuaries job now should be to accurately predict it’s breaking point, not what contribution will, at best, just flatten the trend. Contributing with borrowed money gets them nowhere. Property taxes are at some point borrowed money as well, the cost of repayment is lowered property values as homes hit market for leavers. And your housing base becomes a buyers market for a dwindling supply of buyers. We may be… Read more »
Rick – I was going to ask the same question regarding the Forbes article (a good article). But I see you ask it here (and well put, by the way). I understand that the Chicago Police fund could go to zero in 2021. I would be interested in having that verified. One big fund goes, and given the interconnectedness of Chicago and Illinois finances, a 2008 domino style event is possible.
There’s actually no magic to what happens when it goes to zero. At that point, it becomes entirely “pay-go,” as they call it. The city becomes directly liable to the pensioners for their monthly payments. Think of it as a gradual creep down towards pay-go. It becomes more and more expensive for the city. With funding levels as low as they are, the cost is already roughly three or four times what it would be if the pensions were fully funded. It just gets more expensive when it goes to zero. That won’t happen in 2021. The date it would… Read more »
Buried in the article is that Chicago’s total liability for other post employment benefits, mostly retiree health care, is only $684.9 million. That seems a very low and manageable amount for a city of its size. How about occasionally acknowledging some good news, for a change?
OPEBs, especially for Chicago, are the most opaque data we’ve had to deal with. It is indeed buried and, to the best of my knowledge, Chicago’s reforms are still subject being litigated (at least they were at the time of the last annual financial report). That’s why we’ve never said much good or bad about Chicago OPEBs. We are hoping that the new GASB 75 rules will make this easier when we look at it again.
The reality is the giant prop tax increase i recieved on my 1,100 sf chicago nw side bungalow is now to the point where its not even about any illusion of treading water,,,its flush my home down the toilet time and all the years my wife and i scrimped and scraped to make those payments happen….a moody’s downgrade is are only hope to wake the dullard voters up!!
“The city’s debt to its retirement system, which covers benefits for 119,700 people…”
120,000 leeches bankrupt an entire city. Insanity.