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A delay in property tax receipts left the system without enough money to pay the city’s retirees. Pension managers contended with the difficult decision of whether to sell off pension assets to raise cash quickly. In the end, Chicago funneled in at least $512 million that was earmarked for payments later in the year and early 2023. The payout was the largest advance ever in one year in Chicago, a sign of just how fragile the pension system is, especially at a time when markets are headed for their worst annual return since 2008.
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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Pension payments to the city funds have always been a playground for the city officials. Skipping payments under Daley 2 resulted in the loss of a billion dollars or more for 5he funds over the course of 30 yrs when figuring out compounded interest.
Chicago has a history of being guided by morons. It’s a house of cards and the winds are blowing. Pensions, real estate taxes, CPS; the list is nearly endless. Real estate taxes are a joke Hmmmm…….we’re going to increase your bill by 440%! Is that a problem? Call your alderman. $510,000,0000 from Lori’s spread around fund. Yikes!
Things that can’t last, won’t last! You cannot borrow your way out of debt. Anyone who has ever shuffled debt from one credit card to another knows the truth of those old saws our grandparents use to recite. Lightfoot is moving borrowed money into pension funds selling their assets in a down market. Bleak days ahead!
Looming downturn? No worries for the beneficiaries of the sacred unique contract that requires performance from only one of the parties. Kids can’t read? Market going south? Don’t disturb the pensioners with petty worries- they have a contract. Just shut up and keep paying.
It is not “IF” it will go broke, it is “WHEN” it will go broke. The Chitty of Chicago has sold out the taxpayers for many, many years. Now the Chickens are coming home to roost. People are fleeing the city and the state ASAP to avoid the higher and higher taxes that are going to be required to pay for this theft from the taxpayers. They have managed to STEAL from unborn children, it should be a crime. The pension fund is nothing but a Ponzi scheme and should be declared as Illegal. The taxpayers should be let off… Read more »
The taxpayers should not be left off the hook. There must be consequences for how a community votes, otherwise voting is pointless. The taxpayers do have an out in that they can leave.
Have to agree, they’ve voted for these politicians for forty years, knowing (or stupid) what they were doing. Get out or be on the hook for when the stuff hits the fan.
The voters basically could only vote for a Democrat that sold them out as fast as they could. The unborn children never voted, and they have to pick up the tab for government employee GREED. Union thugs run the state, not voters. An illegal Ponzi scheme is what the pension fund is. Just look at it and it screams it out loud.
Are any of the 10 (can’t remember how many?) fake-progressive mayoral candidates even mentioning the all consuming astronomical pension debt??–answer NO!! Its a sickening thought, but the horrific crime levels in many ways serves as political cover for this tital wave of debt….heaven forbid anyone should connect the two.
Hhhm, wonder if crain’s will have the cajones to post this one? They post a lot of other bloomberg articales.
Great Crain’s did post!!
I think Crain’s has improved recently — more balanced and more realistic — though still a way to go. Their real estate section has always been good, IMO, with no political bias.
I made a comment to PPF recently about inflated internal rates of return. He responded that I was wrong as the actual returns have been close to 7 percent. Of course, PPF conveniently did not mention 2008-2009. With those terrible years factored in, and we are talking about pensions which require a multi-generational outlook, well, an internal rate of return of 4 percent and an appurtenant contribution scheme would make for a far better capacity to weather the rainy days. When the market loses 25 percent, it takes a lot of hard work and time to get back to where… Read more »
“He responded that I was wrong as the actual returns have been close to 7 percent.” I responded that you were wrong because well, you were and are wrong. Stick with facts instead of your made up beliefs and that shouldn’t happen to you in the future. You commented that 4% would be appropriate. I merely pointed out that the 10 year rate of return for TRS was in FACT around the 7% benchmark. I used the 10 year mark to show a longer term as that’s what matters. Now you’re ignorantly stating that I purposely omitted 2008-2009. Well then,… Read more »
Bad news can sometimes be uplifting if the result is to bring a crisis to the point that action must be taken. Because states or some state entities can’t presently file for bankruptcy, something like the Puerto Rico alternative may be required (absent federal congressional action which is unlikely). Apologies for venting my schadenfreude while I observe that this article is a welcome holiday gift!
See https://ecp.yusercontent.com/mail?url=https%3A%2F%2Farizent.brightspotcdn.com%2F41%2F55%2F0d38a03248fd9fffbaeddbd45a74%2Fphoto-of-prepa-central-palo-seco-toa-baja-power-plant.jpg&t=1672165219&ymreqid=1e500af5-a794-a772-2f2c-5a0012017f00&sig=5zkxILbg9TerSq1h0CfhKw–~DPuerto Rico board defends its latest motions in PREPA case