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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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Calif. had no problem furloughing employees in 2010. I guess Illinois is a whole different level of corruption.
https://sanfrancisco.cbslocal.com/2010/10/04/california-supreme-court-upholds-schwarzeneggers-worker-furloughs/
“But it’s too early to say for sure how badly the coronavirus shutdown will hurt the city’s bottom line.” “I can’t tell you yet what the full magnitude of the impact” I can give LL a clue – it will be devastating. She won’t be able to find a vendor who will sell her street lamps or pothole patch on open terms. Virtually anyone reading this who has worked in the private sector has been subjected to layoffs / right-sizing /reductions-in-force / furloughs /mergers & acquisitions / plant closures / etc. Sometimes I wonder if public sector workers realize how… Read more »
“Sometimes I wonder if public sector workers realize how insulated they are from the real-world workplace.”
Yes they do, and they feel entitled to their protections. They negotiated those protections! Thank goodness for the state employees’ unions!
“Maybe as a show of sharing the pain the retirees can agree to forgo their annual 3% raise?” Why would retirees give away their own hard earned money to the city? Should bondholders not collect their payments from the city? Both of these are contractual debts. You wouldn’t expect Fidelity to tell Chicago “That’s ok. We know you guys are struggling with the virus so no need to pay us on the muni bonds”. If the city can’t pay their debts they will need to seek a bailout, cut spending, raise taxes, or convince the state to allow bankruptcy. Some… Read more »
“Why would retirees give away their own hard earned money to the city? ”
Hard earned? really? But you’re right – there is no reason for them to collectively give up their COLAs. Why would they.
And that’s the entire problem here.
“Hard earned? really?”
Yes I believe that police, teachers, and firefighters work and earned their money. I don’t have this complex that makes me believe that only private sector workers earn a living. Should Fidelity give up their bond income? Why do you believe public sector workers should give up THEIR money voluntarily but not bondholders. Why are you not giving them money voluntarily? Why isn’t that the problem?
There is no logic to your argument other than you don’t want to honor that contract. Why?
Oh that’s right. Public sector bad. Union bad. Fat man bad.
Pension leeches aren’t earning their money. They’re fleecing it from my pocket. We are paying them not to work, at the expense of sick children, poor children, indigent elderly, and critical infrastructure. But shame on us! We got suckered by union bosses who threatened to strike! It’s our fault that these unfair contracts CAN NEVER BE ALTERED FOR ANY REASON EVER. Now go take your boat out and do some fishing.
Bondholders are screwed regularly around the world in the corporate, national and municipal markets. It’s a risk.
BUT ILLINOIS PENSIONERS HAVE NO RISK AT ALL.
“Pension leeches aren’t earning their money.” They already earned their money. It’s in the form of deferred income. They have a contract and the taxpayers owe.
“We are paying them not to work.” Wrong again. You are paying them for work already performed per their contract.
Illinois Bondholders haven’t been shorted and you are not calling for them to take less. Pensioners have the exact same risk as bondholders. I just don’t hear you drone on and on about that debt. Always with public sector workers.
“They have a contract and the taxpayers owe.” Yes they have a contract but the contract is too rich and is not affordable for the taxpayers. Also, taxpayers never got a say in these contracts. Taxpayers would never have agreed to any of these six figure pensions.
Easy to say, but how do you do that? We have representative govt., so you’re not going to get contracts put up for voting by the public at large if that’s what you mean? NO ONE wants to pay what you all are so quick to call high wages to ANY other worker I know, “high” presumably meaning a wage higher than the individual voter deciding what that means. There are lots of minimum wage earners likely to feel that way. Do you think it’s realistic and even desirable to reduce teacher wages to that level? If so, what person… Read more »
Wrong, we are not paying them for work already performed. They have already been paid for work performed. The pension is specifically to pay them in retirement, after they’ve stopped working. A financing, or an installment contract, is paying for work performed, spread out over a series of payments, and paychecks are for worked performed. This does not describe a pension. A pension is defined as “a regular payment made during a person’s retirement from an investment fund to which that person or their employer has contributed during their working life.”
Unions say it’s deferred compensation (that is, part of a package under which they negotiated to get a part of their current pay in the future). I am curious where the quote comes from because “payment from an investment fund” seems to limit the source to the pension fund and could undermine any PayGo claim when the fund runs dry. I doubt Illinois courts would read it that way but the trajectory the state and municipalities on will lead to PayGo before long.
“Wrong, we are not paying them for work already performed. They have already been paid for work performed.”
Wrong. They were partially paid for the work they performed. The remainder of their pay was in the form of deferred compensation or pension payments. It’s their money not yours.
“They have a contract and the taxpayers owe” – Remember all those raises they got while we were shorting the pensions? That was our payment. I don’t recall any pensioners foregoing raises for full pension payments. Why they decided to use the state pension contributions for tomorrow to fund their raises of yesteryear is beyond me. Not sure why I should pay twice.
There are arguments under the U.S. Constitution that the federal government may not pass a law permitting state bankruptcies. So we can expect a 5+ year legal battle there, notwithstanding that such a law would be to HELP states like Illinois. Likely a state would have to initiate bankruptcy on its own, even if it were to be permitted. Perhaps the federal government could help things along by denying federal funds to a state that did not get its financial house in order — or send in the national guard when the state can not maintain public order. But it… Read more »
I read an article saying that states will just have to default and deal with the consequences. There’s not much any creditor can do in IL to get paid, our backlog of bills is literally insane. Bondholders and pensioners and creditors would just have to get in line. it would be craziness but we’d all get used to it. How long did it take you to get used to the idea that a child in the womb has no independent rights and can be aborted up until (and maybe after, wink wink) the moment it comes out of the womb?… Read more »
“There’s not much any creditor can do in IL to get paid, our backlog of bills is literally insane.”
Creditors will seek judicial support for payment. Pensioners and bondholders will be paid first. Then the backlog of vendors based on court order. Look to the Rauner budget years for a sense of what will happen.
Judicial support for payment? You mean the Court of Claims?
(705 ILCS 505/8) – The court shall have exclusive jurisdiction to hear and determine the following matters: * * * * (b) All claims against the State founded upon any contract entered into with the State of Illinois.
So, seems to me pensioners, who have a contract (enshrined in the IL Constitution) have to go to the court of claims. Oh boy.
“Why they decided to use the state pension contributions for tomorrow to fund their raises of yesteryear is beyond me. Not sure why I should pay twice.”
Because the state uses that money to fill in the potholes on your street, give children in your community health insurance, feed the hungry indigent poor people in your town, perform basic repairs on bridges and infrastructure, and try to improve the atrocious schools in your town.
But you respond: “Howmuchamonth is my pension check? I last worked 20 years ago, didn’t save a dime, and need my money.”
“Remember all those raises they got while we were shorting the pensions? That was our payment. I don’t recall any pensioners foregoing raises for full pension payments.”
That was our partial payment. Those raises actually increased our pension obligation. Their contract doesn’t state pay raises OR pensions. Their contract includes both. When you finance a car you don’t tell the bank that you already made the down payment. You need to make monthly payments. It’s in the contract. Just like pensions.
Yes, but the finance contract is for a set period of payments with a total payment amount, and can be modified, amended, changed, rescinded, reformed or revoked. The pension ‘contract’ cannot be modified, amended, changed, rescinded, reformed or revoked in favor of the taxpayer, only in favor of the pensioner. It’s in the constitution. For the life of the taxpayer and his or her surviving spouse. So the state is paying retired employees not to work. Call it part of your compensation – we both know that’s a fiction you believe to make yourself feel better. it really is just… Read more »
“Their jobs were ‘hard’ and they ‘earned’ the right to be paid first before the children literally dying because they can’t get the medical care they need.”
So you are saying children can’t get medical care? You sure you’re not a democrat. That’s the kind of talk out of the mouths of AOC and the medicare for all crowd. Who knows maybe you can start a movement for government care with government controlled hospital. Staffed by public employees with big fat pensions.
Courts can say what a creditor is entitled to and courts can attach debtor assets but if the debtor has no money and the pension fund is dry the pensioners won’t get paid. The test will be whether a lawyer will take your collection case on a contingent fee. One-third of nothing is still nothing. Moreover, once you miss a pension payment you have to sue for THAT payment. You can’t “accelerate” the future payments. So, you say, hundreds of us will hire the same lawyer and she’ll sue one month at a time. She’ll get one-third of nothing and… Read more »
No need. Money will not completely “run out”. There won’t be enough for all of the state’s bills but plenty for bondholders and pensioners who are first in line. Please go back and look what happened during the Rauner budget years. There wasn’t enough money but debt obligations were paid first. The courts will intervene well before the pension funds run dry.
Time will tell. The fact remains that courts can’t print money. Illinois and Chicago are both begging for federal aid while taking no measures (such as layoffs) to stop the bleeding. Are they hiding some money? What about the facts that rainy day fund and the unemployment fund are out of money? Let’s keep our eyes on how much the state and the city put into the pension funds going forward. Recent past experience shows that more goes out than goes in to those funds. Nobody’s happy that the State and the city are broke and there’s not much point… Read more »
I am not part of any pension fund. I am merely pointing out what will happen based on the law and past actions. You are making the classic mistake in believing that the pension funds have anything to do with payments made to pensioners. It’s an easy mistake considering that’s how private pension plans work. In this case if the pension plans were to ever run low the courts will force payment to shore up the funds. Google Harvey IL pension intercept to get an idea. No kool aid here. Most people are burying their head in the sand and… Read more »
Pension obligations arise under statutes, ordinances and union contracts. My points are: 1) Contributions in recent years have not kept up with payouts. I call it the leaky bucket. 2) Chicago spends more than it takes in, primarily through issuing bonds. 3) The trajectory of item 1 is that the fund will run out of money. 4) Legally speaking, Chicago will have a legal obligation to pay pensions out of its general assets — known as PayGo. 5) Chicago teachers fear that the City won’t be able to keep up those payments. That’s why they want the state to take… Read more »
“My perception is that the revenue that makes it “do-able” is going down at an unprecedented rate.” Revenue is in a free fall right now. Think about your own expenses right now and what little tax you’ve paid in the previous six weeks, and how little you will spend during the next four weeks. And when things reopen, I’m not going to be spending any money on big ticket items, or large purchases, or anything like that, because my income is down, way down, and I’m in that top tier of IL tax payers (low rung of the top tier,… Read more »
“So you are saying children can’t get medical care? ”
Yes. My childrens’ peditrician’s office has a big sign at the front desk that says “WE’RE SORRY BUT WE ARE NO LONGER ACCEPTING NEW MEDICAID PATIENTS” because they are owed hundreds of thousands of dollars. That money to pay children is instead going to pensioners in Florida and Tennessee who have boats and condos and live the high life on the tax payers dime.
“NO LONGER ACCEPTING NEW MEDICAID” The key word is NEW. They are still accepting medicaid they just don’t want their payer mix to be too high towards medicaid so they cap their percentage. It pays out at a lower rate than private insurance. This happens in every state. New medicaid patients need to find a different doctor. They are not denied care and they certainly aren’t dying because of this. Doctors also stop accepting certain private plans as well. Those patients didn’t die either. You’re using a tired plea right out of the democrats socialist playbook. Won’t somebody think of… Read more »
I of course am using the “think of the children” angle because it’s true. Medicaid children do have a difficult time getting care because so few doctors want any medicaid patients because they pay so little and they pay so slow, if ever pay at all. “Most people are burying their head in the sand and not understanding that pension payments will be made before almost everything else.” Yes, most. But not me, I’ve always said there are pot holes in your street because a streets and sans pensioner living in Florida has a new F150 payment to make; and… Read more »
Children are not dying because your child’s doctor doesn’t accept new medicaid patients. You lied. You told the same lie that democrats told when passing the Affordable Care Act. Illinois medicaid pays out at 85% compared to medicare. This ratio is equal or higher than other surrounding states. It’s still not very lucrative so every doctor limits their percentage that they take. It has nothing to do with the state’s pension debt. How do I know that? Every surrounding state reimburses at lower rates than Medicare. Limiting this group in your payer mix is done in every state. Doctors can… Read more »
“Most feel it’s their duty to take a certain percentage of government insured but they all will limit their exposure so they can make a living.” Not for duty reasons, it because they sometimes don’t get paid at all. And as their patients age out of medicaid, they’re not being replaced, they’re actively changing the mix of their patients. And sick children are dying because of this. They can’t get the help they need. We can argue all day over this but the fact remains that the retired pensioner getting $100,000k a year is $100,000k a year that isn’t being… Read more »
“retired pensioner getting $100,000k a year is $100,000k a year that isn’t being spent to help poor children.”
Yes. Money spent on debt is not available for other services. That’s how debt works. The state already made the decision to spend that money. The $5 billion the state spent on servicing debt also isn’t available to help poor kids. It sounds like you are supporting a tax increase to help these poor kids.
Won’t somebody think of the children? More money for poor kids. You sure you’re not a democrat?
“The $5 billion the state spent on servicing debt also isn’t available to help poor kids.”
Exactly.
The root of conservative is conserve (although that hasn’t been in vogue for a while in some circles). But it’s not conserving money if it’s spent on retired people no longer working for the state and debt servicing.
I would love for the state to spend less money. They are also going to be required to pay their debts. Since they have to pay their debts they will need to cut discretionary spending and/or raise taxes. Most people are opposed to paying more in taxes and our politicians don’t identify any areas where they are willing to cut services. That’s why we are in this predicament. Complaining about pension debt allows people to feel like they are willing to cut spending when in reality that is not a legally viable option. So more taxes it is. Since people… Read more »
No progressive income tax without a yes vote on a constitutional amendment. Even lower income folks may vote against it because once such a tax is enabled, there’s no restraint on what future legislators may do. Legally viable? Where do you draw the line between speed limits and pension funding? Pensions have been short-changed for almost as many years as people have driven 80 in the 65 zone. Unless a law is enforced it ignored. The logical plaintiffs to force pension contributions have been the unions. “No can sue.” Give us pay increases and we’ll vote you in. Somebody else… Read more »
“No progressive income tax without a yes vote on a constitutional amendment. ”
That’s exactly what is on the ballot in November.
Unions have sued for pension contributions in the past. The courts have ruled that pensioners have a right to their pension payments but have no right to any specified pension funding level.
I know what’s on the ballot in November. I care what courts rule. No doubt an Illinois court would rule that the city or the state should contribute. My whole point is that the city and the state are out of money and the virus promises to make that a long term condition. If the teachers union weren’t worried about the city’s financial survival, they would not be trying to get the state to take over the teachers’ pension system. Anybody can sue anybody if they find a hungry enough lawyer (or they can do it without a lawyer), Just… Read more »
I’m betting they’ll be left…in the cold. You would be wrong. The courts have already ruled. Pensioners will be paid first. Plenty of money for them and bondholders just not all the other expenses. Comments from the IL SC During the Great Depression, for example, the city of Chicago omitted from its annual appropriations for 1932, 1933 and 1934 a portion of the funds necessary to pay the full salaries of the chief justice and 36 associate judges of the city’s municipal court. The affected judges were subject to a provision of the Illinois Constitution that prevented their compensation from… Read more »
As mentioned before, we know what the IL courts have said and will say in the future. But payment will still require money. Perhaps the court will require dismissal of all city workers in order to pay those who no longer work. It has the same logic as the soldiers who “had to destroy the village in order to save it.” It is for those between a rock and a hard place (forced to choose between two bad results) that bankruptcy laws were designed. The solution abounds with paradoxes. Fire the tax collectors and pay the pensioners. Fire the public… Read more »
“…or convince the state to allow bankruptcy.” Or a gradual slide into insolvency. The so-called “Cost of Living Adjustment” could end up being the final straw.
One thing we all need to remember is that its human nature to think that the present time represents what’s likely to be the future as far as we can imagine it. But, history shows that the pendulum swings from good times to bad and from bad to good in about any way you’d care to care to think about such things really. So, what looks to be an excessive AAI (what others erroneously often call the Cost of Living Adjustment, COLA) seems unduly high at the moment, and I can’t disagree with that. But, I remember very well that… Read more »
James, I will concede – your point is well-taken. I all but forgot in the Pres Carter era nearly passing out when my former college roommate told me he obtained a 15% mortgage.
So the Chicago businesses lay off 30% of the workforce, and all those fine folks get to watch the city bureaucrats sit at home collecting a paycheck on their way to a fine pension that the laid off guys taxes are paying for. Lori that seems more “demoralizing” than cutting the city payroll by 30%. What planet are you from?
Planet Progressive, where feelings are more important than fiscal reality.
The City of Chicago will raise property taxes before they layoff public sector union workers. Take that to the bank.
Raise taxes then foreclose empty houses and stores then hire workers to maintain or tear down the houses and stores when they’re vandalized. Check out how much the city of Detroit is paying AFTER BANKRUPTCY on demolition of all the empty buildings. The city can’t keep up with proliferation of worthless empty gutted structures. Of course it’s totally illegal for the owner to leave behind a public nuisance. Just like it’s illegal not to fund a pension. Find them, arrest them, jail them, feed them. Banks holding the mortgages are smart enough not to foreclose and become the owners. My… Read more »