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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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Chicago’s “shortage” of cops is more driven by decades of progressive governance then debt.
Think defund the police, Kim Foxx, no cash bail, ankle monitors for felons that belong in jail, COPA, under-funding the police pension, the long period of time that elapsed when the police worked under an expired contract before they got a new contract, no chase, etc.
All these progressive ideas have convinced many people to become anything but the Chicago Police.
Detroit is alot closer than a 4 hour drive….
Why are all the animals going crazy at the Chicago zoo?
Sorry, Frank, but that’s just nutty. Illinois’ rainy day fund is a pittance — about $2 billion. And you sure as heck can’t count pension assets as if they are free to use. Those assets are already $140 billion short of what they need to honor promises made for work already performed. They are not earning minimal returns but have mostly averaged over 7% per year. There’s nothing IL could do with a bank that it should be doing now that it could not do now. One place where cash on hand is not managed wisely, however, is Treasurer’s office.… Read more »
“There’s nothing IL could do with a bank that it should be doing now that it could not do now.” Yeah right, except keep the interest on loans instead of paying usury to the big boys. See also World War II.
Frank, for education’s sake, kindly walk me through that thing about loans and interest, respecting how it’s done now and how you think it should be done.
North Dakota has a state-owned bank and their story should be educational for most people.
Here is a comment I made on Wirepoints several months ago. Search for “Illinois CAFR” and you will find the Comprehensive Annual Financial Reports for the State of Illinois. Here is a summary, I normally look at 10 year intervals. 2021 Revenue – $120 billion 2021 Expenses – $124 billion 2011 Revenue – $65 billion 2011 Expenses – $71 billion 2001 Revenue – $44 billion 2001 Expenses – $46 billion So the State could go back to spending money like they did in 2011, and erase the unfunded pension liability in 3 years, or perhaps spend $20 billion less per… Read more »
True! I haven’t checked your numbers, but that’s no doubt directionally right. The problem is getting our esteemed leaders to consider going back to spending only what they did in 2011.
Revenue and expenses are listed on page 20 of the 2021 CAFR. The solution has been there all along. Notice the State only wants to talk about ‘the budget’. They want people to focus on the future liability for pensions without including future revenue in the equation that will offset the liability. And never say a word about public or state-owned banking. “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their… Read more »
Frank, with all due respect, I think you have lots of catching up to do on these matters. Various reports certainly do reflect future revenue and how it would be used to address pensions. You can see it, for example, in GOMB budget projections and scheduled pension contributions. That’s where the problem is because the contribution up-ramp demands devotion of a huge part of projected revenue to go to pensions, putting a permanent albatross on Illinois’ neck. On CAFRs, I suggest you look at changes in Net Position for the all-inclusive results, which include growing debt. That measure is widely… Read more »
I have researched and talked about the CAFR for over 20 years, and pay little to no attention on yearly budget discussions. Sorry, I don’t want to try and fix a broken system. As a final note, the federal government could have balanced the budget of every state in the nation, instead of blowing $5 trillion on a fake virus program.
I find it hilarious that a grown adult living in Chicago who can move anywhere else can wake up in the morning and say, I with my free will live in Chicago, LOL! The stupidity is definitely rampant in Chicago. It must be all the fluoride in their water that dumbs them down and of course all the death jabs they all willingly took and masks they wore during the plandemic scam of 2020. I’m going to be a good little cuck and listen to the government that absolutely hates me and wants me dead for their depopulation agenda, i’m… Read more »
In this article it talks about a “usual suspect” plowing into a crowd and police not coming. What are the police going to do? All they would do is arrest the “usual suspect” and then the “usual suspect” would be let out the same night and no charges would be filed against them. Why even have police in Chicago at this point? They are pretty much glorified babysitters to the “usual suspects”
or maybe the lead water pipes!
Very true, where are the trillions from the infrastructure bills congress passed? I think they passed about $4 trillion over the years yet no roads, bridges, or lead pipes have been fixed anywhere in the country. Typical political thievery
This title of the article is misinformation, it should read How Democrats Destroyed Chicago….
Fantastic article!! (fantastically depressing!!). The only issue I take exception to in article is at beginning he states there’s a shortage of cops? Even with CPD down to 11,500 cops Chicago still has more cops per capita than almost all big cities I believe with exception of NYC & DC (Huston has 5,300 cops for example). I’m not picking on CPD, but ditto for all other city departments from CPS to Street & San, etc. There’s no shortage of city employees on a comparative per capita basis. The city & dopey taxpayer/homeowners are just stuck with massively inefficient city departments… Read more »
In the suburbs we pay separate for our garbage collection. My town contracts it out so we are not paying for that with tax dollars. City residents keep voting for leaders that want MORE services like sidewalk snow removal. Your neighbors just want to be big spenders. If city voters don’t like it then stop voting for more spending. The politicians are just giving the voters what they want.
It would be good to know having a breakdown of which voters are voting for this. Are they renters? Is a large part the free stuff army? Are the voters in well to do areas or in the middle of the city? Inquiring minds want to know.
Yup, most city services could be competively bid out…..but any metric of cost accounting for services rendered isn’t even on the progressive’s table and/ or is constitutionally prohibited. Or could ever have anything to do with the “community disinvestment” bs….!!!EQUITY!!!
I think it is important to note this: There are so many ETFs, Mutual Funds etc out there focused on buying muni debt. In their fund formation documents, they have provisos that say they need to be either fully invested or close to fully invested in muni debt. This means there is always a market for muni debt, no matter how bad the debt looks. Chicago will always have a market for debt. The problem for Chicago is the interest rate it will pay to issue that debt, along with the fine print in the issuance. Covenants in prior debt… Read more »
At some point, I’m not claiming to be a financial expert (but I do listen to them), Chicago WILL have to declare bankruptcy, probably within 2 – 3 years max. Detroit II
Hopefully the state can’t buy this debt, but they won’t stop digging either.
Since you “listen” to financial experts, could you tell everyone who predicted that Chicago will file bankruptcy within the next 2-3 years? I have yet to see any expert make that prediction. Even this author of this article doesn’t make such a bold prediction. That doesn’t mean that the city will necessarily suffer Detroit’s fate and find itself in bankruptcy. The dangers of insolvency are real, but, just as with the exploding federal debt, too much focus has been put on the possibility of a single disaster and too little on the more obvious cost: deepening decline. Chicago could keep… Read more »
PPF – Detroit went into bankruptcy because the politicians in the State outside of Detroit pushed Detroit into it. There was a cadre of Detroit politicians who really resisted going into bankruptcy. As these conditions won’t exist in Illinois, with the State being reliably Democratic, you are correct that Chicago won’t go into bankruptcy. Even a city like Harvey which is a poster child for bankruptcy won’t go into it because state politicians simply won’t permit it, even if a pension intercept means minimal revenues are collected to run the City. The comments to the City Journal are interesting. Some… Read more »
I’m not looking at Chicago and its finances through a narrow lens. They have serious finance troubles and worse, a desire to spend even more. I’m simply challenging someone who believes that Chicago will go bankrupt in the next 2-3 years. I don’t understand the purpose of making long shot predictions and selling them off as likely.
Yes you do look at matters through a narrow lens. You repeatedly state there is plenty of money for pensions. Of course, from a legal and political angle there has to be. But the real issue is whether this is all sustainable in Chicago. It is not.
I think there is enough money to pay pensions and I also don’t think Chicago’s current spending is unsustainable. It sounds like we are in agreement. Your lens and mine must be very similar.
Meant Chicago’s current spending is unsustainable. We are in agreement.
Chicago won’t, and can’t, go bankrupt in the next 2-3 years. However, Chicago can go insolvent, but not likely in the next 2-3 years. Chicago will just stop paying some of its bills at some point. Its inevitable. My guess is that at the depths of the next recession things will get bad enough. You are correct that Chicago can still raise taxes and fees. Chicago’s tax base has grown significantly since the 1990’s with gentrification and there are still a lot of wealthy people concentrated in mostly but not entirely north and northwest side neighborhoods. I don’t know what… Read more »
We sound very much in agreement debtsor. Careful, people might start labeling you a communist because you can correctly read the tea leaves.
I’m not seeing a ton of evidence of reverse gentrification aka blight happening except in fringe areas to begin with. There seems to be actually a lot of speculation due to lack of inventory with flipper taking chances on places pretty far out there, I’m looking right now on Redfin a 2 flat in Belmont Gardens that sold for $580,000 two weeks ago. That’s west of Pulaski, I haven’t been in that area in a while (there’s a vet near there IIRC) but that’s a lot of money, using the prior sales price in 1990 (listed on redfin) the price… Read more »
Willow, Detroit’s bankruptcy was well timed with Obama in office. President Trump won’t be so understanding or generous.
“Bleeding services and hiking taxes seems like a much safer prediction.” This has been happening for years. The city is already a shell of its former self when it was a thriving metropolis, when we were a Second City in the 1950’s and 1960’s. When was the last time anyone here visited Chatham, or Back of the Yards, or West Pullman, or New City, or Englewood, or Dunning, etc? Likely not in a long time, or ever. As a Cook County resident, I’ve spent more time McHenry County in the past 30 years than I’ve spent in any neighborhood that… Read more »
It sounds like you expect it to continue as well.
PPF we know you cuck out to “experts” like Fauci and you probably got your covid death jab and booster and wore a mask anywhere. You’re a communist and you want your communist nonsense to continue. Its obvious.
Good luck with covenants that try to automatically increase taxes on existing suckers, scratch that, tax payers. Enforce
The covenants go ahead the stampede to the border by people who can afford to pay will
Be a full scale tsunami, the people left well
Good luck it’s like watching a line of dominoes fall it will not work.
It’s off to see the wizard of bankruptcy the wonderful bankruptcy judge, because, because were broke, cue the flying monkeys.
This article is not some right wing MAGA piece. As Pritzker always says in denial. It is well researched and uses cold hard numbers to illustrate its case. Yet why do Chicago, IL politicians, and the unions ignore some basic rules of economics as this article points out? As often pointed out, people move with their feet when the political situations looks hopeless. Not one Democratic politician has sounded the alarm and proposed a solution. Is Brandon Johnson really so ignorant of financial realities?
The current politicians in Chicago don’t care if it goes bankrupt, it isn’t their money anyways, all they care about are virtue signaling and putting the criminals above everyone else
Finances have been an issue for decades. Daley helped run the city into the ground as well (parking meters etc), but at least the city was clean of graffiti and the crime was being managed. The problem you have now are some people noticing when they blow out a tire hitting the same unrepaired pothole as the year before.
This is an exceptionally thorough summary.
I agree, Mark. Also, there’s not much in this insightful article that City of Chicago pols would want to read or believe. Finally, doesn’t Illinois have some of the same types of problems?
Yes, for sure, though not as severe.
I totally agree this report is the best I have seen in a while, Springfield and Chicago ignore it. The state is a bit better off than Chicago but here is the rub. As Chicago goes into the financial hole deeper it will reach out to the state for help, the vicious circle continues pulling the state finances down with it. No governor wants to be the one who puts Chicago into oblivion. No real solution as The run for the border will not stop. The moving of business will not stop. The collapse is a self fulfilling prophecy. All… Read more »