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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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And what is the funded status of Chicago Police pensions? Nowhere close to 100% funded. So here we go again. Hiking salaries will hike the employer contribution to the pension fund. Will refinancing existing debt cover the hiked employer contribution to the pension fund? If not, the hiked employer contribution comes from government revenue such as taxes; or, the government simply shorts the hiked contribution, effectively financing it over a period of years, the result would be even more hiked employer contributions eventually. And when the underfunded pension issue arises, what will we hear? The employer did not make its… Read more »
Just the circumstance of financing operating costs (salaries) is really troubling. Any business using long term financing to meet payroll is going to have a limited existence.
I bet if you asked FOP for a pay freeze and to instead take those raises and put them into their pension fund and guaranteed the city would quadruple that amount out of their own pockets, FOP would flatly turn it down. Pension participants don’t give two damns about their pension funding because they never had to deal with the true ramifications of proper pension funding, which is lower salaries and higher taxes. They think the money magically comes from somewhere that is totally disconnected from their pay.
“I bet if you asked FOP for a pay freeze and to instead take those raises and put them into their pension fund and guaranteed the city would quadruple that amount out of their own pockets, FOP would flatly turn it down.” That would be the smart move on the FOP’s part. New Jersey offered this kind of deal (agree to cuts and we guarantee funding) to pensioners a few years back. Christie promised to guarantee pension funding if cuts (additional employee contributions) to the pensions were also agreed upon. The employees held up their end and then the state… Read more »
PPF – you have identified why Chicago’s pension funds are in such a dismal state. Of course the unions have no incentive to compromise in any way. The only way the unions will act is when they start receiving IOU’s instead of cash. And while that will likely happen at some point, Chicago will first enter into the disaster of pay as you go status, which again, will make the day of reckoning all that more difficult. Deep down, Democratic politicians have a strategy of somehow getting the Feds to pay for all of this. They won’t express this of… Read more »
Gee, I wonder if stressed government’s refinancing debt could be one of the reasons the Fed has not yet raised interest rates.