-- Connecting the dots between our economy, government and business --
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.
SIGN UP HERE FOR OUR FREE WIREPOINTS DAILY NEWSLETTER
Understand there are no sound defined benefit plans, I have not seen a single one in the 31 years since I was awarded my finance degree and passed my first CFA exam. The only plans that are fiscally sound are defined contribution plans – period. Understand that the underlying theory of defined benefit plans is very simple. It ASSUMES that over time the equity and debenture markets will earn return that is greater than inflation and that there is a positive return beyond that will close the gap between the initial investment and the promised benefits. Furthermore it is predicated… Read more »
“There are no sound define benefit plans.” Bingo! They are inherently dangerous.
Thank you for saying that. I honestly don’t think the people understand the premises defined benefit plans are based on. It needs more exposure, IMO.
Cheers mate.
I still don’t get the 70% target funding. Why not show what the level-dollar reamortization plan would look like if we kept the 90% target? Would that require bigger or multiple POBs? How long will it take after 2045 to hit 90%? Glaring omissions, tbh.
The study itself is riddled with dubious claims such as “The funded ratio could continue to grow after FY2045 to a higher target” and “assuming an extremely conservative estimate of 6.5 percent interest rates.” Uh, 3% would be “extremely” conservative. Since when is one percentage point reduction from the current state “extreme” anything?
doesn’t the CTBA re-amortization projections still rely on overly optimistic 7.2% discount rate and other accounting shenanigans? (i only find link to skimpy 4 page PDF CTBA plan- CTBA is assuming $110 pension debt and not +$200 billion that moodys comes up with)
what actuarial/ accounting standards does CTBA use to calculate their re-amortizing scheme? GASB? or do they even state anywhere? or who knows/ who cares as long as the taxpayer dullards buy in