The Wall Street Journal proclaimed it this week: “The latest dirty word in corporate America” is ESG.
ESG (environmental, social, governance) investing has long been ridiculed by critics as woke investing philosophy that subordinates getting the best return to whatever the do-gooder social justice goals of the day are. It’s also hopelessly undefined leaving it easily open to political manipulation. The investment world has now mostly shunned it, thanks primarily to poor returns on investment. Even BlackRock, the biggest of of ESG investment firms, recently announced it will be laying off 600 employees in its ESG and sustainability departments.
But just a couple months ago Illinois Treasurer Michael Frerichs wrote in the Chicago Tribune of his undying commitment to ESG investing of taxpayers’ money:
I, Michael Frerichs, am Illinois state treasurer, and it’s my job to seek the highest risk-adjusted returns over the long-term for working people, retirees and local government entities. And this anti-ESG fad isn’t going to distract me from that mission. I remain as committed to sustainability as ever before.
Frerichs went on: “The anti-ESG campaign is nothing more than a poorly conceived scheme, propped up by special interest groups and the fossil fuel industry, with no future among investors, fund managers or anyone who wants to protect their money from foreseeable risks.”
Bad call, Treasurer Frerichs.
It’s tempting to let Frerichs go ahead and make a fool of himself, forever dedicated to a dead cause.
Unfortunately, however, Frerichs has nearly unfettered, personal control over investment of massive amounts of your money, which we detailed in our November column here.
He manages about $30 billion for the State of Illinois, called the State Investments, plus about $18 billion on behalf of local Illinois governments, called the Illinois Funds. So he is now is responsible for a major income source. Its most recent report shows earnings on just the State Funds of $125 million for August alone. That’s $1.5 billion per year.
Politicians are often criticized for blowing in the wind of changing opinions, but that would sure be nice for ESG. Frerichs should reverse course on ESG or the General Assembly should force him to do so.
-Mark Glennon
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
He should be passionately committed to an asylum.
PPF-I put up the transcript to your reply on the 3% compounding and when it starts which also includes survivors close to the bottom but here it is on page 330-331 it starts at 326 STATE OF ILLINOIS 86th GENERAL ASSEMBLY REGULAR SESSION SENATE TRANSCRIPT 59th Legislative Day June 30, 1989 First Conference Committee Report on Senate Bill 95. PRESIDING OFFICER: (SENATOR DEMUZIO) Senator Jones. SENATOR JONES: Yeah. Thank you, Mr. President and Members of the Senate. First Conference Report on Senate Bill 95 is the Omnibus Pension Bill, and — and — it contains several provisions in there. Number… Read more »
Will the Wirepoints team publish commentary on Natural Asset Corporations?
Only if there is some meaningful tie to Illinois.
What are these funds supposed to be for? I know this can’t be the pensions, because $30B is way too little in money for the state pensions — is this for operational costs or capital costs?
I went to the page where the funds are listed, but it’s not clear to me that other than the state-run IRAs (hmph), none of them sound like retirement funds. These sound like these should be primarily liquid for regular spending, though perhaps they need some rainy-day funds.
Either way, how is ESG relevant to these funds? How is this actually fulfilling fiduciary duty?
It isn’t fulfilling fiduciary duty – it’s fulfilling his ESG pledge.
Absolute fiscal malfeasance.
Mary Pat, that’s a scandal in itself that I’ve been writing repeatedly about for some eight years. It’s not pension money. Illinois has nearly a thousand different “funds” segregated for all kinds of uses. Some are legit and necessary like bond escrow funds and grant money from the feds. But most of them were created by the legislature pretending to dedicate money for particular uses. It makes no sense whatsoever to be managing cash, in the aggregate, that way. Here is one of the first articles I wrote on it explaining it and I’ve done many others. https://wirepoints.org/12-billion-sits-unused-with-illinois-treasurer-why-wp-original/ Nobody I… Read more »
The Illinois Funds are getting 5% interest. Because of inflation, money in low-risk accounts is earning more interest. However, a couple of years ago, local governments were earning almost nothing in interest. It was ridiculous.
Don’t forget the 1% per month after 90 days the state was paying for money owed to vendors/suppliers/etc. This was paid in a near zero interest rate environment for many years but was never indexed to inflation with a cap. Those who could afford not getting paid on time were making 12% a year after 90 days.
Municipal governments have their life savings invested in the Illinois Funds. Kane County has about $40 Million invested at this point.
Many of my neighbors in Alabama are ex Illinois pensioner’s. They brag how their pensions grow at 3% compound interest every year. A retired Illinois educator told me how his pension doubled after 22 years of collecting. What the hell.
Not quite but close. It would take 24 years before their pension doubled but that’s how compounding works.
I have friends who retired as teachers from the Naperville school district. They both earn over $110,000.00 in retirement per year. If you want to see a list of those making over 100G per year check out this link from open the books: https://www.openthebooks.com/maps/?Map=90045&MapType=Pin&Zip=60521
I’ve viewed the list Mark F but don’t understand your point as it pertains to my comment. So some retirees earn over 100k per year? So?
So? It’s the reason we are the most taxed state AND STILL going broke.
It’s a debt of the state. What’s the point of complaining about money that has already been spent? We now need to cut other spending to pay our obligations or increase taxes. Complaining won’t solve the problem.
Good to know. You are on record now for cutting “other state spending.” That would include trash pickup, snow plowing, road maintenance, firefighters, police, city inspectors, support for the homeless, etc., ALL services supplied by the state. What about revenue loss from suggesting increasing taxes? More taxpayers will exit. You know Illinois, you made a mistake when you agreed to this plan. As you write, “Complaining won’t solve the problem.” Demanding everyone else pay for mistakes they didn’t make won’t either.
I’ve always been open to cutting spending. I just don’t believe there will be enough to cut so tax increases are in order. Also, tax increases have yet to result in “revenue loss”. The actual revenue results don’t align with the theory that too many people are leaving and revenue is going down. In the last 5 years our revenue has increased from $36 billion per year to over $50 billion per year. Before that time period, the state had a massive increase in income taxes. Did revenue decline? Nope. Just went way up. Plenty of taxes left to be… Read more »
Typical, you ignored and didn’t respond to much of what I said. I said all I need/want to say. We disagree. That’s it.
What didn’t I address? Try being an adult instead of child.
You asked about revenue loss from tax increases. I addressed it and pointed out it’s not true. I also addressed that the state is responsible for paying the debt.
You said all of what you needed/wanted to say? You haven’t said anything. I guess you have nothing to offer. Thanks for clearing that up.
That’s where your mistake is. The government cannot declare bankruptcy. Thus, it needs to be able to renegotiate on the debt.
Connie, I’ve made no mistake. I’m fully aware the state can’t declare bankruptcy. The state doesn’t need to be able to renegotiate debt as it has the ability to raise way more in taxes. Taxes going up is not a reason to not pay the debt. From the IL Supreme Court. “A governmental entity can always find a use for extra money,” the Court observed, “especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no… Read more »
Trash hauling is not covered by the state in the suburbs – perhaps in Chicago, but not the ‘burbs or the rural areas.
In many cities in Illinois they have pensions to pay of their own. They are cutting many of the positions I listed. I’m living it. Pensions thru Illinois or Illinois municipalities, the same results.
I guess you are on record for wasteful spending. What makes you the expert?
Here is some older info from Taxpayers United for Rockford so adding 3% compounding per year will give you up to date figures. https://www.taxpayersunitedofamerica.org/wp-content/uploads/2018/09/Trs-rock-2018.pdf https://www.taxpayersunitedofamerica.org/wp-content/uploads/2018/09/Rockford-top-200-2018-IMRF.pdf https://www.taxpayersunitedofamerica.org/wp-content/uploads/2018/09/Rockford-top-200-2018-SURS.pdf What I don’t understand is how do the contributions factor in when the pension seems to be based on the 4 highest earning years of the last 10. Are contributions also factored in or are those numbers irrelevant? For example if you work part time for 26 out of 30 years the contributions would be minimal but the 4 highest years you work double shifts or overtime and your pension is based on the… Read more »
To my knowledge of it there is no direct correlation to the contributions made by the employee. But, that’s not to say there is no correlation whatsoever. A “year” of creditable service, I think, is 170 days of contractual service. It would be a true rarity for a part-time substitute teacher to have even a significant fraction of that amount over a 16-years span in terms of becoming a 20-year retiree, wouldn’t it? Even if credited as a fractional part of a year as might be the case having substantially less than a 170-day year of service means a truly… Read more »
“The real pity here is that anyone who governmental job short of being eligible for a pension also was shorted those years as far as earning Social Security pension creditable years as well unless their state also requires a Social Security deduction from each of their governmental paychecks as well. IL doesn’t.” Very true James. I read somewhere that less than 50% of new teachers will make it to the 10 year mark where they will be vested under tier 2 rules. They quit before the 10 year mark and have no pension and zero social security credits for their… Read more »
Yes, its my impression a lot of married women teachers quit around age 30 or so, let’s say. From such conversations it seems to me that they almost never give any real thought to the downside financially of doing that. As you realize, there’s a double-whammy pension-eligibility penalty in IL for doing that which might not even occur to such people until maybe 20 years later. “You snooze, you lose” and caveat emptor both seem to apply here, I’d have to say.
Your comment “they almost never give any real thought to the downside” fits about every Illinois person I have ever met. To them its all wine, roses and good feelings because life is so wonderful in Illinois. The ones that do know I often see leaving the State.
I’ll suppose like many others on the websit you’re likely irritated at your tax consequences in IL as compared to most states, and I can’t blame you. But, everyone tends to see life a bit differently than the next guy, so my guess is that the people whom you describe might simply place more value on some things not nearly so important to you. In short, “different strokes for different folks” appears at work when one man’s junk is another’s treasure. “Home is where the heart is,” too, and that plays its role in the story you’ve given. My wife… Read more »
Thanks but my comment is somewhat hypothetical but my wife knows a few teachers that work and have worked part time for a long time due to raising a family and some with health concerns but plan to work full time teaching after the kids are gone plus they are able to buy service credit years if they choose to so as to hit the 20 year mark and age 55. Their contributions will be on the low side but the pension they receive will probably be based on the 4 highest earning years if she is able to work… Read more »
I can’t speak with authority to completely give you total confidence, but I do recall that “a full year” of teaching is granted with 170 days of contracted work. I can also say that “years of service” are recorded in a fractional sense where lesser amounts of service apply. So, my guess is that for a teacher working a minimum of 16 years with few, if any, being at the 170-day level most would be recorded as fractional parts of that 170-day full-year status. Presuming that’s the case its highly unlikely such a person would be granted 16 “170-day years”… Read more »
I don’t necessarily disagree with your last paragraph at all, but the reality is that pension formulas are based upon rules established years somewhat concretely ago in most cases and not upon rules as we might individually have come to prefer meantime.
The reason I’m asking is all the links show contributions and the pension and estimated payout to age 85. Nothing is mentioned on what their 4 highest earning years were and if they spiked or put in years of unused sick/vacation/etc to enhance the pension over 4 years before retirement. Professors/superintendents are highly paid but their contributions of 9.5% or so are also high but their 4 highest earning years are also high so there must be a formula connection. If not why are there contributions if they do not apply to the pension? Just take the 4 highest years… Read more »
Its above my pay grade to account for why some data are entered or others are not. Apparently its an attempt to be accountable but less than fully transparently so.
Speaking of compounding the unfunded amounts due are growing at a compound rate meaning the inevitable gets higher by the day. Meanwhile, instead of funding, funds are spent everywhere on all sorts of fuzzy feel good programs in true Illinois fashion. Illinois people for some reason just don’t know how to live within their means but each and every day the end looms. I can almost hear the whines now about “how did this happen?”
It really adds up if they are able to collect at a young age.
Retiring younger doesn’t increase the growth of the pension. A 55 year old retiree would start to receive 3% increases compounded annually starting at age 61. It’s flat during the early years. So that 55 year old retiree would double their pension by the time they reach 85 years old or 30 years later.
If I’m not mistaken the 3% compounding starts at age 55 whether someone is retired or not. So the pension grows at 3% at 55 until you claim it. I read the transcript when Senator Shuneman was discussing with colleagues on the House floor on what that would cost but could not get an answer. I cannot find the link but it is Senate bill 95-pages 326-333 in the Omnibus Pension Bill 1989. The back and forth was quite interesting but somehow the Senator asked why is it that the 3% was intended for one specific group (not sure if… Read more »
For TRS the 3% compounding does not begin until age 61. If you have proof that other plans start before that then post it. Otherwise you are just speculating at best and at worst spreading false information.
From my personal experience on this issue I’d say you remind me of the two blind men describing the elephant in that both descriptions are right but not totally right. Starting retirement at age 55 I had no 3% bump from age 56-60, but at age 61 I got the one-year compounded percentage bump for all those intervening years without the intervening lost cash itself being included. So, my 60-61 bump was something like 18+ percent with another 3% each year thereafter. There are two caveats here to ponder here, though. First, that was many years ago, and while I… Read more »
Thanks for explaining that James. The TRS website states that the 3% compounding does not begin until age 61 and it also doesn’t include a retroactive lump sum. That was my mistake in not realizing that the first increase at age 61 includes the number of years that had lapsed. I should have read more carefully. Thanks for the clarification and congrats on your well earned pension. From the TRS website: Nearly all annuitants receive a 3 percent annual increase in their annuities. You will receive the increase on the later of:Jan. 1 following your first anniversary in retirement orJan. 1… Read more »
Here is the misinformation as you call it. Pages 300-331 explain the 3% compounding starts at age 55 as long as 20 years were put in and it also applies to survivors. The entire transcript starts at page 326. What was intended for just one group ended up for everyone. STATE OF ILLINOIS 86th GENERAL ASSEMBLY REGULAR SESSION SENATE TRANSCRIPT 59th Legislative Day June 30, 1989 First Conference Committee Report on Senate Bill 95. PRESIDING OFFICER: (SENATOR DEMUZIO) Senator Jones. SENATOR JONES: Yeah. Thank you, Mr. President and Members of the Senate. First Conference Report on Senate Bill 95 is… Read more »
ESG. DEI. GTFO.
Frerichs unwittingly played a key role in the defeat of JB’s “fair tax” by stating it would allow the possibility of taxing retirement income at a lower rate. Given that retirement income isn’t taxed at all, this understandably angered retirees! There’s no chance Frerichs is going to risk angering King Pritzker again, so he’ll gladly maintain his ridiculous ESG money losing philosophy. Just another in a long line of fiscal malfeasance by the liberal progressive socialist Democrats running Illinois into the ground.
We don’t need a tax on retirement income, we need a 10% service charge for any state retirement income sent to people out of state. All these people who sucked on the state’s t..t and then leave and contribute nothing back to the state.
You would need to change federal law as it would be currently illegal to tax pension income sent to other states. Any other illegal ideas?
Maybe we just put a 10% tax on all real estate sold within the state. If you buy an equal or greater value home then the tax is waved. If not then the state gets to tax any resident one last time. This way all those residents that voted for politicians that didn’t fund the pensions will finally start to contribute the correct share.
Pensioners would just buy second homes out of state and rent out their IL, thereby artificially limiting the supply of ‘boomer’ homes that would ordinarily come onto the market. A 10% tax would just turn pensioner boomers into IL’s homeowner rentier class. There are too few homes for sale in IL as is, taxing boomers into becoming remote landlords seems like a terrible idea.
That’s fine if people held on to their homes and just rented them out. Property taxes will be paid either way and home values will be adjusted if more property taxes are needed. Either way those homeowners that left the state would pay property taxes as well property appreciation opportunity cost. Also, with the mass exodus that so many speak about, wouldn’t it be foolish to hold onto a home so you don’t have to pay the 10% tax yet you have no one left to rent to because EvErYoNe left? The state has vast taxing ability and they are… Read more »
More taxes to feed those with their snout in the publicly funded trough is always the solution. Never considered is the option of eliminating some of the many layers of a bloated, taxpayer pension funded system. A good start would be closing the nearly vacant CHI schools operating at less than 25% capacity and eliminating all of their publicly funded pensions. Pigs. Paid. First.
More taxes to pay the bills that the state already contractually agreed to pay. Cut wherever you want that is legally allowed. Can’t steal from pensioners. Sorry that upsets you but deal with it.
PPF, you should find a legislator to propose that 10% tax. See how it goes. Good luck.
I don’t think it would fly politically but I was at least providing a solution that was legally allowable. Unlike most of the “solutions” offered up by many people here. Perhaps you should take your own advice Mark and find those legislators to take up your amendment. You’ve been beating that drum for quite awhile to no avail. Good Luck to you! “Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations with other State expenditures became problematic. One alternative, identified at the hearing on Public Act 98-599, would have been to… Read more »
“Remember, increasing taxes is less drastic than stealing from pensioners.”
So what seems “less drastic” depends only on how each measure would affect public pensioners. Funny how that works.
Once again you don’t understand. Less drastic than violating a contract. You and others here want to violate contracts that impact public employees because you don’t care for them. I guess it’s funny to people with low comprehension of the issue.
Mark- Look how many people in Illinois are on public aid or Medicaid.
https://wisevoter.com/state-rankings/welfare-recipients-by-state/
How many even know about the pension deficits or even care one bit. They live day to day. None of this is taught in school except for Khan Academy.
https://www.khanacademy.org/humanities/us-government-and-civics/american-civics-parent/american-civics/v/illinois-pension-obligations
Taxing the ones that elected the politicians that didn’t fund the pensions is a great idea! Best I have heard yet.
Not only that RB, the people hurt most by this tax would be the ones that are taking their ball and leaving Illinois. They don’t vote and their opinion should be virtually meaningless to politicians that want to get re-elected. The state gets more revenue while those leaving for greener pasture can pony up some money one last time.
That thought has been expressed here a few times over the recent years but rightly rebuffed. You you can’t “decrease or diminish” an IL public employee retiree’s retirement check as you may, or may not, know already. Where its taxed is occurs in the retiree’s place of residence rather than where that check or electronic equivalence originated. Its a reasonable thought on your part on a superficial level at least, but legally its a non-starter.
Let me amend my statement. If you’d choose to dream up a tax that affects literally all IL retirees who move out of state, then maybe you’re basic idea would be legally acceptable. If you intend to tax only IL public employee retirees that’s where its clearly illegal since by defining your target so narrowowly you’re clearly trying to skirt that “decrease or diminish” clause in the IL Constitution’s public employees’ pension rights clause.
“If you’d choose to dream up a tax that affects literally all IL retirees who move out of state, then maybe you’re basic idea would be legally acceptable.” I like where your heads at James as you are trying to instill basic fairness but even if they taxed all retirees who move out of state it would be illegal under federal law. This law was passed in 1996 and it bars states from doing exactly what was suggested above. “Public Law 104-95 prospectively prohibits this practice, providing that “No State may impose an income tax on any retirement income of… Read more »
Yes, I’m aware of that side of it. But, I don’t necessarily think he was thinking solely about an ongoing IL income tax or any surrogate of it. As long as any one-time tax or “service charge” is imposed prior to the IL resident’s actual move—however the the law might have to define that—perhaps its legal as long as its not imposed on such a narrowly defined set of residents such as stating it applies only to IL public employee retirees. As you surely known, that’s been discussed sometimes here generally as an “exit tax.”
Illinois taxpayers, you are paying for the woke progressive agenda. The only way to avoid it is to leave.
Yup, and no one gives a rats tail (including PPF) about how heavy the yoke gets. In IL, it’s a ‘Let them eat cake’ attitude among the unions and Democrats. So if you stay, you’re the sucker.
You’ve reminded me of what the Kingfish (Amos ‘n’ Andy show) said at least once in the early 1950’s TV show: “Andy, you the stuckee”.
Amen.
Those that stay are condoning this corruption by paying & funding it.