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NB-Chicago
1 month ago

Great job Mark & Ted!!. How would fed go about bailing out bankrupt state pensions?–from previous wp piece would seem there are two routes. 1.) either by offering some kind of tax exempt POBs with some sort of federal guaranteed backstop (where’s good old ralphie martie and his ctba pals?). But with all the $trillions$ of bad debt & junk bonds on the brink of collapse out there wouldn’t it take a lot more than tax exempt status to entice investors to show any interest in POBs from a bankrupt Illinois? ie– the feds would have to be offering up… Read more »

Admin
1 month ago
Reply to  NB-Chicago

I don’t know which way they would go, but they could find a way if they wanted. Per WSJ last week: Under its governing law, the Fed can’t directly buy corporate debt, and it is limited to purchasing municipal debt of six months or less. But it can work around these restrictions by creating lending facilities that lend or purchase debt, subject to approval of the Treasury secretary…. Among the questions Fed officials are considering: Whether to expand existing facilities to accommodate other municipal debt or to launch a new facility devoted to state and local finance. Fed officials will… Read more »

Tom Paine's Ghost
1 month ago

Structural Pension Reform Item No.1 is elimination of Public Sector Unions. The corruption of politicians by public sector unions is inevitable wherever public sector unions can engage in collective bargaining. The politicians determine the unions pay and benefits so the unions bribe the politicians with “contributions”, votes and election help at the expense of the taxpayers. This is the root cause of the pension mess in virtually every state and municipality that is now on the abyss of bankruptcy. In private industry, imagine being able to provide “gifts” to your boss on employee review day and having a boss who… Read more »

Tom Berman
1 month ago

Another great piece guys but I am afraid you are fighting a losing battle. JB and LL will use the Covid-19 crisis to great political advantage to get bailout money for the pension funds that have bankrupted city and state. Even though you can detail all the facts, figures and history of mismanagement and corruption in Chicago and Illinois it will fall on deaf ears. Over the next several years, anytime there is any discussion about the precarious financial situation in either Chicago or IL all you are going to hear from our political class is “Covid-19, Covid-19, Covid-19” .… Read more »

That was a really good Op-Ed piece Mark. We all know this, everyone does today. But your commentary that these ridiculous, including $100K@age 50 (and lower) pensions, should be bailed out by America is spot on. No way. Time for pension hair cuts. Just CUT them to the amount they are funded. If they are just 50% funded, that is where we start with the cuts at, cut them to a 50% funded level. And if they gov employees are unhappy tell them to BLAME their UNION LEADERS and the politicians that gifted away the farm. Not us.

nixit
1 month ago

“Defined contribution plans, cost of living reforms and increased retirement ages are all part of the suite the federal government should require. And for states that have constitutional protections, lawmakers must commit to removing them or lose out on aid.”

Bingo. Just like the corporate bailouts, any pension assistance should have major strings attached.

bagelgirl
1 month ago

The federal government cannot preach to the states because the feds are guilty of carrying huge deficits as well. They would look like big hypocrites. Let’s face it. The deficits continue to grow. There is no safeguard in place to stop it from going too low.

Reply to  bagelgirl

The federal government cannot preach to the states because the feds are guilty of carrying huge deficits as well. They would look like big hypocrites.
So two wrongs make a right in your book? That is an illogical fallacy.

Admin
1 month ago
Reply to  bagelgirl

Keep in mind that we are talking about Congress. Sure, they may be hypocritical, but they represent states that will not be keen on bailing out places like IL, especially in the Senate.

Pension lawyer
1 month ago

Issues: 1) Money is fungible so states can use federal funds for other purposes and add put “different” money into pension trusts. 2) How to prevent undoing of reforms at a later date? 3) How to assure voter support needed for constitutional amendment(s)? 4) Could state and local governments be bypassed altogether and let individual retirees waive “excess” pensions and opt in to a PBGC-type of federal guarantee? It’s obviously more convenient for the federal government to let states deal with the details. [Pro-choicers don’t like that approach in other realms, of course.] A lot of Federal-State issues were encountered… Read more »

Admin
1 month ago
Reply to  Pension lawyer

All great questions. Re 1), that fungibilty issue is indeed hard to avoid entirely. We have no problem with not conditioning the direct aid to people and certain industries that was in last week’s bill, though there’s obviously pork and some other problems in it, and it indirectly may support pensions. But direct aid in the future, which is what we were addressing, will be more controllable and attaching conditions should work. Re 2) and 3) We think mechanisms are available to assure compliance. For example, loans or grants could be subject to mandatory repayment if future conditions are not… Read more »

Pension lawyer
1 month ago
Reply to  Mark Glennon

A key component would be the ability of a retiree or vested participant to “waive” his constitutional contract right. According to McQuillin, The Law of Municipal Corporations § 12.158, “signing a waiver, in the absence of duress, may operate as estoppel to claim a pension” and McQuillan cites Van Antwerp v. Detroit, 47 Mich App 707 (1973) in support of the validity of pension waivers in appropriate circumstances. The individual (and perhaps the spouse) would agree to forego whatever government pension they had earned in exchange for the Federal [agency] guarantee. The municipality could be a party also and transfer… Read more »

debtsor
1 month ago
Reply to  Pension lawyer

On the one hand, a lot of people would panic if this choice was presented to pensioners. On the other hand, I could only imagine the defiance of the unions, advising them not to take any deal, any reduction, any haircut on their pensions. It would be insane.

Pension lawyer
1 month ago
Reply to  debtsor

FDR used deposit insurance to stop runs on the banks. That’s not a great analogy because retirees can’t get more pension than one month at a time. Pension buy-outs have adverse selection problems: sick people take lump sums; others don’t. Current or prospective government retirees ought to be panicked already if they look at the declining funded status of their plans — particularly in view of the latest market declines. Unions will of course try to maintain solidarity. That principle already requires teachers not to oppose superintendent pensions (for example). I wonder how many have stopped paying union dues? From… Read more »

Stanley Craig
1 month ago
Reply to  Pension lawyer

“ That principle already requires teachers not to oppose superintendent pensions (for example)”
School superintendents aren’t in the teachers’ unions. They are management.

Pension lawyer
1 month ago
Reply to  Stanley Craig

Sorry if I was in error. However, I found a statement online that said “Retirement can be lucrative for some former Illinois educators who are taking home pensions from the state’s Teachers Retirement System. The top pension earner this year is Lawrence A. Wyllie, an indicted former superintendent of Lincoln-Way High School District 210, who stands to make $321,443 this year.” The statement could be incorrect and/or the superintendent may not be in the teachers union but the union would likely argue that Lawrence’s full pension is protected by the Illinois constitution.

Stanley Craig
1 month ago
Reply to  Pension lawyer

One doesn’t have to be in the teachers’ union to be part of the TRS.
“the union would likely argue that Lawrence’s full pension is protected by the Illinois constitution.”
Why would the teachers’ union put resources in legal fees for a person who isn’t even in their collective bargaining unit. That makes no sense.

Pension lawyer
1 month ago
Reply to  Stanley Craig

I’m not suggesting anybody would put money into legal fees. However, I do not think the teachers union would support benefit cutbacks for anybody participating in TRS. The union would not support any cutbacks in any public pension in Illinois. They’d probably oppose cutbacks and contact legislators by phone or letter or e-mail and encourage their members to do the same. They’d put their money into campaign contributions for those legislators who think like the public unions think. That is to say that we get ours before anyone else gets theirs. My wife is a retired teacher and her pension… Read more »

Stanley Craig
1 month ago
Reply to  Pension lawyer

“I expect you disagree.” I disagree that they would fight someone else’s fight. It’s all speculation on your part.

chumpchange
1 month ago

Nice work guys.