By: Mark Glennon*

How much distortion, blather and pure dishonesty can somebody cram into a ten minute interview on the state budget and pensions? An astonishing amount if it’s Illinois Senate President John Cullerton (D-Chicago).

Before we get to his fact claims, consider what was really just a comment.

From Crain’s, October 2013

Five years ago Cullerton earned national and local ridicule for saying Illinois pensions aren’t in “crisis.” For example, the Wall Street Journal asked, “How is a pension system which is less than 40% funded—the lowest ratio in the country—and projected to run dry by the end of the decade not facing a crisis?” Even the Crain’s editorial board mocked him, giving him an Alfred E. Neuman award, using the cartoon on the right, and writing, “Sorry to break it to you, Mr. Cullerton, but this is indeed a bona fide, honest-to-God crisis.”

Since then, the state’s unfunded pension liabilities have jumped 30% higher but Cullerton is at it again: “Not a crisis,” he said on WTTW’s Chicago Tonight show Tuesday.

As for the specific things he said, watch the video and here’s what you’ll find, though I am putting some of it in my own words:

When asked how the pension time bomb is going to be resolved, Cullerton’s answer was clear and specific: through his “consideration model” of pension reform.

That’s brazenly absurd. According to Cullerton’s own numbers his reform would save only $1 billion per year. The taxpayer pension contribution that’s crowding out other state spending under the new budget is $7.3 billion, and that’s at least $3 billion short of even covering interest that effectively accrues on unfunded pension liabilities. Neither Cullerton nor anybody else has ever offered proof of any of it, and the whole idea would probably be struck down by the courts. It’s a gimmick intended to trick the public into thinking something is being done.

And now there’s clearly an issue whether his proposal can even work in light of a pension change contained in the new budget. It’s a buyout plan whereby pensioners will be allowed to cash out, in part, in exchange for giving up part of their automatic 3% COLA and replacing it with a simple COLA. Cullerton’s proposal included a voluntary swap for some of that same COLA.

Cullerton: If we’d just pass his pension reform proposal we could take the $1 billion per year in savings and start paying down our old bills.

Hogwash. Even if his plan would save $1 billion per year, the state’s total debt is growing over $10 billion per year. The general fund, which the budget covers, is even worse. It was $14 billion in deficit last year, a 52% jump over the previous year. If the annual pension contribution were cut by $1 billion, nobody knows where that savings would be spent, but it certainly would not end growing debt.

Cullerton: Not having a budget caused a $6 billion loss to the state in each of the two years during the budget impasse. That’s a common claim now by Illinois Democrats and they blame it entirely on Governor Rauner. Cullerton said that expressly in the interview: “Rauner’s intransigence caused the accumulation of the debt that’s why we have $12 billion in debt.”

In fact, however, absence of a budget had little to do with the state’s losses. Revenue still came in and bills still got paid. We explained in detail in an earlier article linked here. The reason the state loses money is simply that we spend far more than we take in. That was particularly true after the temporary tax increase expired in January 2015, reducing revenues by about $5 billion per year, which neither Cullerton’s Democrats nor Republicans tried to extend. And Democrats, who wouldn’t agree to a single one of the reforms Rauner demanded bear no blame?

And what’s he talking about claiming $12 billion in debt? Officially, unfunded pensions represent are $129 billion of debt, unfunded healthcare liabilities are another $56 billion and bonds exceed $40 billion. Maybe he was referring to the backlog of ordinary bills, but that’s currently $7.5 billion, and not a meaningful measure for how the state doing. Cullerton was just rattling off garbage.

Cullerton: The budget is balanced — a claim he, Rauner and many other lawmakers are making.

I have yet to find a single budget analyst, municipal finance specialist or watchdog from the left, center or right who agrees with that.  It’s nonsense. Only the politicians are claiming otherwise.

Cullerton: No need to worry much about pension liabilities because they are not due today and are “like a mortgage” paid off over time.

Well, maybe like a mortgage on which you’re not even paying the interest. At least with a mortgage there’s a home as collateral to pay the debt when due. Not so with unfunded pension liabilities, which have nothing to back them up.

Joining Cullerton for the interview was House Minority Leader Jim Durkin (R-Western Springs). He mostly sat on his hands and challenged Cullerton on little. Count him among Cullerton’s biggest enablers. The most honest thing he said recently was caught on a hot mic at the budget signing ceremony. His comment indicated concern that the parade of budget supporters would be seen as a “perp walk.”

You’re being lied to, Illinois. Cullerton is perhaps the worst, but there are plenty of others.

*Mark Glennon is founder and Executive Editor of Wirepoints.

 

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world with end
1 year ago

These IL politicians need to leave. Their horrible misrepresentations, dishonesty, lack of understanding, greed, pomposity, etc. are so very tiring and untimely now. Please, IL politicians, go away, and let others take charge and try to reverse this dire situation.

s and p 500
1 year ago

People are brainwashed into thinking that the government “is not a business”. State and local governments still have to report their financial condition on a balance sheet every year and they can run out of money like Sears and Kmart. The Federal Govt. can kick the can down the road a lot longer since it can print money. The Fed balance sheet had less than a trillion dollars in assets in 2008 and now it has around $4 trillion which shows how much money it printed. I heard the Roman Empire fell partly because it defaulted on pensions. https://www.youtube.com/watch?v=hMI-Vvse2vM

Rex the Wonder Dog!
1 year ago

No need to worry much about pension liabilities because they are not due today and are “like a mortgage” paid off over time.
This bogus public employee/union “Talking Point” has been debunked so many times my head is spinning 🙂

nixit
1 year ago

Illinois is like the Babylon Club scene in the movie “Scarface” where the Babylon Club is Illinois; the club patrons are Illinois residents and services oblivious to our predicament; Tony Montana represents the middle/upper-middle taxpayers and small business owners; Frank Lopez’s Hitmen represent the pension debt, and Cullerton is Octavio the Clown. In an attempt to take out Montana (you and me), the hitmen (pensions) spray the entire club with bullets (insurmountable debt), taking out random patrons (schools, social services) in the way, all while the clown (Cullerton) does his dance, distracting the patrons from the threat lying within. Tony… Read more »

Rex the Wonder Dog!
1 year ago
Reply to  nixit

OMD that was AWESOME…I needed that nixit!

Erik
1 year ago
Reply to  nixit

Illinoisans are like the shareholders of Enron, and our legislators are the board members telling us to buy! buy! buy! right up to the moment of collapse. If Illinois was a publicly traded company they’d be looking at 20 years in prison.

Mark M
1 year ago
Reply to  Erik

I find the Enron comparison apt, because for careful readers of Enron’s financial statements I think the fraud was there to see. Chanos and the others shorting Enron in the early 2000’d didn’t do it because they were mean guys, but they saw the business having large stayed profit figures with no correlation to the cash coming in, and the disclosure of related party transactions which had to be corrupt (even if the disclosures were vague). Cullerton and his ilk are no different in terms of pumping out misleading information, except of course the politicians have immunity for their behavior.

JWB
1 year ago

“Well, maybe like a mortgage on which you’re not even paying the interest. At least with a mortgage there’s a home as collateral to pay the debt when due. Not so with unfunded pension liabilities, which have nothing to back them up.”

Unfortunately for Illinois residents, there is something to “back them up.” That would be your home equity. That is what the politicians and pensioners are increasingly counting on.

Jake
1 year ago

There is no hope for Illinois. It has to crash and burn and smolder for a long time. Meanwhile, the exodus continues. People are realistic about their houses not coming back to 2008 value and are just taking the hit. Pay now, or pay much more later. Illinois is a Zombie State.