Ted joined Shaun Thompson to talk about about the Chicago Teachers Union’s absurd new contract demands, why so many Chicago teachers are chronically absent, and Brandon Johnson’s failed first year as mayor.
What a representation of Chicago’s plight.
The bill passed despite their votes in response to certain incidents where local prosecutors are thought to have been too lenient with non-citizens assaulting cops.
The Wall Street Journal Editorial Board cited Wirepoints’ analysis of Chicago student proficiency data in their latest piece condemning the Chicago Teachers Union’s outrageous contract demands…all while a vast majority of Chicago’s children graduate unable to read at grade level.
Ted joined Tom Miller of WJPF to talk about the details of Gov. Pritzker’s proposed $52 billion budget, why the state is struggling now that federal covid dollars have run out, the controversy surrounding Tier 2 government pensions, why Illinois’ expensive education system fails to teach children to read, the outrageous demands of the Chicago Teachers Union, and more.
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‘The buyout offers retirees accelerated payments in lieu of pension benefits or in exchange for reduced cost-of-living increases.’
How is this a ‘buyout’?
They’re exchanging 3% compounded COLA for 1.5% simple COLA and an upfront payment on a % of the present value of the difference. That payment goes into an annuity where, technically, it’s possible you could earn a better return and, if you die early, you can pass it down through your estate.
Basically, if you are of poor health, don’t have survivor benefits, or have unpaid debts to the mob, it might make sense to take the buyout. Anyone else wouldn’t touch it with a 100 foot pension pole.
I want to look at this from different perspective and how this affects me. As Freddy Q. Taxpayer/resident how am I directly affected by someone else’s pension and the pension deficit? I ask myself what services from Illinois am I not getting? I am not getting nor will I get Medicaid/food stamps/child care/unemployment and most everything many but not all people get and expect. So if the funding for these is shifted from one program to another it does not affect me that I am aware of. What affects me and others directly is that I pay thru pension pickups… Read more »
What a novel concept, “borrow your way out of debt.”
Until somebody puts up a serious actuarial analysis of this, showing assumptions and all, nobody should presume that this helps the state much at all. A couple years ago, we asked and asked for such an analysis, which Pritzker claims he had. We got nothing, even after repeated FOIA requests. I have an open mind, and maybe something has changed, but supporters need to put up — put up the analysis. I don’t know why Bloomberg would say that it reduces liabilities without increasing bond debt. It clearly does increase bond debt, the proceeds of which are used to pay… Read more »
Mark–what a scam. Your comment is more than enough for a Quikpoint
NB, we will take a shot again at asking if somebody has a credible analysis, then write about it again. So much to do around here!
Pritzker keeps you busy! Unfortunately.
Thanks for being here for the citizens of this once great state. Hopefully your efforts aren’t in vain.
That alleged $1.4B in savings is entirely dependent on the mortality rate of the people taking the buyout. Presumably, those annuitants will have shorten lifespans than their counterparts. I’d like to know how they’re calculating this.
Yes, but surely you do know that the recipients receive something like only 70% of the PRESENT VALUE of the benefits projected for an average lifespan. That likely generally more than evens out the actual payout values on average when considering the lower life expectancies of retirees more inclined to take it. Otherwise the state wouldn’t be offering it. Capiche?
At least two issues are in play. First is “adverse selection” by those whose life expectancy is below the assumed life expectancy used by the actuary. Those who have chronic or other conditions that foretell an early death will be more likely to take the buyout which deprives the system of an “actuarial gain.” Second is the possibility that a “discount rate” will be used that inflates the nominal “present value” so that the 70% figure is higher than it would be using more realistic interest rates. Rising interest rates would warrant lower lump sums currently. I’m not saying you… Read more »
I didn’t mean to suggest a 70% immediate buyout based on the present value of a governmental retiree’s expected total annuity payout is a perfect figure mathematically, but presumably it was determined primarily actuarially and politically to a lesser extent. It is somewhat unknown what that percentage should be when offered in advance as was the case here. Although I didn’t use the term adverse selection even while knowing it that was the thought that motivated my remarks. Its a well known concept that people who are more likely to benefit from making a particular financial decision are more likely… Read more »
I wouldn’t bet on Pritzker & Co. stacking anything against public employees and retirees. The unions are too smart. But time, that ever-rolling stream, will tell. I seem to recall these buy-outs aren’t going to be funded from system assets but rather from newly issued bonds. Thus, the state and its taxpayers will go further into debt while the system funds will not be reduced. Thus, fewer claimants against the unreduced pot of assets. Further, the buy-out participants will presumably sign binding releases so the system liabilities will be reduced. I don’t know whether the buy-out addresses lifetime health care… Read more »
I don’t know that there is a great difference between the overall liability of the state for paying the public employee pensions by addding this buyout scheme. Sure, you borrow money in the form of bond sales for doing that, but you reduce the liability in other places, the pension systems’ assets. The overall result is the same, isn’t it, except for the likely pre-planned tilting of the result to favor the state’s financial position in that ploy. Otherwise, why would the state even do it?
One reason for all of these bond schemes is to increase the assets that a trust holds for pensioners and employees. Those assets generally can’t be reached by other creditors in bankruptcy. Everything points toward bankruptcy except as Illinois politicians fail to authorize it. In Detroit, bond proceeds were put into a pension trust under allegedly false pretenses. Bondholders sued to get the money back and the court held that once it was in the trust it couldn’t be touched EVEN THOUGH bond sales may have been induced by fraud. Similar considerations (promises!) pertain when municipalities try to turn over… Read more »
I didn’t respond to your remarks re the discount rate. I do know the concept reasonably well conceptually and agree that’s part of the gamble being made by the IL government here. But, the real reason I didn’t reply is simply the obvious: no one can predict the long-term future whether layman or expert. As is the case with any other bet you (IL govt. and its tax payers) pay your money and are forced to accept the risks involved.
You speak as if the Illinois government and the taxpayers are on the same side. I believe that to be a very tenuous proposition.
Well, we have lots of people who believe differently as your second sentence states. I am not going to try probing the motivators of every legislator who decides how to vote, but its probably safe to say that they are most concerned with their own life’s welfare and less concerned about that of others. That’s how humans generally think, isn’t it? There are exceptions, one can only hope.
Once again, we must rely on circumstantial evidence when it comes to politicians … Republican or Democrat. Politicians are a species of human, of course, and many of us look out for old #1. I’d say self-interest is a presumption and that the burden of proof should change once self-interest is established. Of course, some have gone to jail when a jury presumed a motive. I’d be satisfied if we simply threw the bums out.