Illinois is the nation’s extreme outlier. We have the largest pension debt burden. The worst population losses. The highest property tax rates. The worst political corruption. And we’re the ‘least tax-friendly state’ in the nation, according to Kiplinger. More tax hikes will only make those problems worse. Illinois needs pension reform instead. Number of half-empty Chicago public schools doubles, yet lawmakers want to extend school closing moratorium – Wirepoints
April 19, 2024
17 Comments
A set of state lawmakers want to extend CPS’ current school closing moratorium to February 1, 2027 – the same year CPS is set to transition to a fully-elected school board. That means schools like Manley High School, with capacity for more than 1,000 students but enrollment of just 78, can’t be closed for anther three years. The school spends $45,000 per student, but just 2.4% of students read at grade level.
Hopefully, all media will get the message, in Illinois, too.
Ted joined Tom Miller of WJPF to talk about Illinois’ highest-in-the-nation property taxes, why lawmakers don’t want to touch the tax’s cost drivers, just how much Illinoisans’ tax burden has grown over the decades, why Gov. Pritzker failed to meet his promise to reform property taxes, and more.
Politicians caused the pension problems by putting young workers on the pension to reduce their work force. It was an outrage then and now.
Touché! Wirepoints’ Ted, John and Mark are telling the truth! I’d say a good, actual discount interest rate is close to halfway between 7.0% and 4.1%, which is 5.5%. It’s the “slightly on the conservative side” of the net (after all expenses paid from the trust funds) return on assets, given a trust fund invested prudently. Sure the net return MIGHT be 6 or 7%, but it’s safer and more prudent to assume 5.5%. That’s what I assume when doing projections for how much can be spent for MY own retirement assumptions, and the basis for my book to dispel… Read more »
The proponents of the progressive income tax are like the owner of a boat with a hole in it. Instead of closing the hole, he demands bigger buckets to bail with. If given the tax, they’d just blow it like they’ve blown all the other increases.
Since I get a pension from the Illinois Municipal Retirement Fund, I eagerly read your article. My pension fund is 91% funded! I paid larger amounts for my salary into my fund as did the public libraries I worked for. I do NOT get any kind of insurance benefit. I deserve and have earned my pension. To lump a well managed and well funded fund in with some of these others is irresponsible and just plain WRONG. I don’t want MY well run fund looted by you or anyone else trying to take it away. What do you want small… Read more »
Don’t forget, too, the IMRF is funded by the municipalities that participate, not the State of Illinois
No one here is proposing, and have never heard of a proposal, to loot the IMRF or any pension fund (take money out of the fund and divert it to another purpose). IMRF is in the article simply because it is one of the public sector pension funds in Illinois. There are many possible scenarios that can occur which would cause one to receive less than 100% of a public sector pension payout in the future though, even without the government “looting” the fund. Many of events are outside any politician’s direct control, such as a prolonged recession, depression, stock… Read more »
“Many of events are outside any politician’s direct control, such as a prolonged recession, depression, stock market crash, bond market crash, mass exodus out of Illinois, investment returns less than projected, etc.” You are making the common mistake believing that the level of pension funding has anything to do with pensioners receiving their checks. The way it is currently set up the funds can run completely dry and the state is on the hook for making the pension payments. If the funds run dry bondholders and pensioners are first in line to collect payment before other “necessary” expenditures. There is… Read more »
Also, someone (you?) mentioned a week or two ago that the general assumption most here make is that only public employee and pensioners would be hurt in a state bankruptcy if it were allowed. That’s only an assumption and not likely the case. It would also put in jeopardy the secuirty of those receiving income from IL bonds and those of its lower-level units. It might well also cause a reduction in any other contractual situation the state has created with any business whatsoever, and there are lots of those that would negatively affect the public at large one way… Read more »
I made no such “common mistake” assumption.
The point was there is no guarantee the State of Illinois will honor the “state guarantee” in the state constitution, due to many possible scenarios.
No one can predict the future with 100% certainty.
Your common mistake was conflating actuarial assumptions with the states requirement to pay. You referenced a depression, stock market decline, bond market decline, investment returns less than expected, etc… This comment makes it appear that if the funding of her pension goes down because of the things you mentioned then she may get less than 100% of her pension. That is not the case. Until the state can no longer increase their total tax revenue, Joy will continue to get her pension at 100%. The moment the state loses so many taxpayers that they can’t collect more revenue to cover… Read more »
I already stated the State has no plans to loot any pension fund.
So you are making the point that if the fund depletes its assets, the state will convert to pay as you go, as long as it is able to do so?
If so there is that clarification.
Obviously if it gets to that point its because actuarial assumptions were not met.
I don’t think your opinion is far off the mark at all but might have thought so a couple of years ago in tamer times. But, we live in strange time now and probably to the detriment of many such things formerly considered absolutely assured. No one can predict the future with nearly any certainty at the present time. All it takes is a few “slick willy” lawyers to read and promote laws in a new, unique way and what’s “promised” disappears overnight. That’s how it is in the current era of Pres. Trump and AG Barr apparently at the… Read more »
How many years did the state fail to pay its share of pension costs? How much did the state borrow from TRS and not pay back? Reform is needed but there is a lot of background not covered by charts and graphs. Where were the fiscal people when the state said they would pay the local district share of pension money and salaries started climbing?
That comes next week. You’ll find out then that Illinois’ problem has never really been about Illinois failing to pay, its been about politicians’ overpromising.
It’s nice to see Wirepoints getting back to it’s primary message and away from the current covid distraction. Wirepoints in a followup will undoubtedly explain how Illinois can fix the mess. Whatever the fix is, it doesn’t matter, because liberal/democrat voters prefer to be ignorant and will never support anyone presenting reality. For those of you still on the fence about leaving Illinois, consider all 50 states as competing businesses. There will be winners and losers. That’s the nature of competition. The stock price of Illinois is in a free fall while states like Texas are seeing their stock price… Read more »
While this focuses on what discount rate the pension systems should use, what about our pension systems using an investment rate of return that is equal to the discount rate? I thought the target funding percentage was dependent on those two rates and, if equal, 100% should be the target funding level. Our pension systems target funding is 90%. There are others who are pushing 70% or 80%. But none of those targets jive with our discount and investment rates.
I thought that’s how pension accounting works. Maybe some pension experts here can chime in.
be nice if this was sharable
keep informing all the people, great job!!!!!!
Well done Wirepoints! This is extremely thorough, and thoroughly depressing…maybe it will open some eyes.
President Trump and Senator Micth McConnell should draft legislation for States to file federal bankruptcy. This would be a States’ choice, and not a mandate.
I know more is coming, but perhaps adding in a proforma on Pritzker and Madigan’s tax hike(s) could crystalize things a little better. I give the tax hike at least a 50/50 chance – many people who would vote ‘NO’ have left the state.
Does the debt per household take into account the percentage of state and local retirement debt allocated to commercial, industrial, railroad etc properties?
The debt isn’t really allocated to those properties. They are just part of the tax base.
Well the point I was getting at wais absent a disclaimer the retirement debt debt per household metric then leaves the average person with the wrong impression since corporations etc. also pay taxes.
Ah, I see. But it is important to remember that businesses ultimately pay no taxes. People end up bearing them — business owners, employees, suppliers and customers. Yes, some of that gets exported out of the city, but some gets imported, too, so we think the fair way to picture it is per household.
So the the IDOR Business Income Tax Rate, policies, and state laws result in the State receiving revenue from business.
Some of that business income tax revenue will be used to reduce retirement debt which will reduce the amount of debt per household.
Yet the businesses ultimately pay no taxes.
https://www2.illinois.gov/rev/research/taxrates/Pages/income.aspx
The per household metric implicitly highlights a key fact. Only a small portion of taxpayers – perhaps those at 200k a year and over – are capable of paying any additional taxes in amounts that could even put a small dent in the debt. And while I agree that we should not ignore taxes businesses and corporations pay, in the face of rising taxes, corporations will always find a way to defer or avoid taxes, with levers to pull that average wage earners cannot utilize (this from the ate Martin Ginsburg, my tax professor and spouse of our current Supreme… Read more »
The point was to make it clear that business are not included in the per household metric.
If the people are getting taxed to death and the business and corporations are largely spared as evident through net income or whatever measure(s), one would think sooner or later people will get so angry that there will be some sort of revolt, regardless of how many lobbyists the corporations employ.
Perhaps this is one reason the left is becoming more radical.
After all, it’s people that end up paying all taxes.
I know this piece is setting the background for further articles , but reading it one is immediately taken with what is to be done ? There are but two answers : hope for a Biden administration and D Congress to federalize the mess or some form of ‘bankruptcy’. There are no other alternatives : State led reform is never going to happen there are too many oxen to be gored in any state level reform. So the answer will have to come from elsewhere. BTW as bad as the economic fallout from the shutdown is/was, it does not seem… Read more »
The problem appears to be too large to be corrected by a federal bailout, assuming that Illinois would only receive a population-adjusted proportion of federal funds set aside for a state pension bailout.
“Biden administration and D Congress to federalize the mess or some form of ‘bankruptcy’. There are no other alternatives : State led reform is never going to happen”
Even if the federal government allowed some form of bankruptcy it would require the state of Illinois to initiate that bankruptcy. No such federal power is available to force a state into bankruptcy. If the states not on board then reform will never happen. You will need to win the hearts and minds of the voters of Illinois to change how business is done in this state.
I think Federal bailouts are a dead issue for Illinois given that Pritzker and Madigan have not shown any concern to fix the fiscal mess they created. Other states cut back on spending immediately – Pritzker increased spending!. Pritzker also owns the statewide lockdown – it was unwarranted and illegal. No, the rest of America doesn’t owe Illinois a thin dime.