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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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Way back in the day, when airline employees were forbidden to strike and threatened with firing, they developed novel strategies: line up outside public bathrooms at airports so that travelers could not get in to use them. Those who are outside the golden umbrella of public-pension-entitlements-$60,000-per-year-age-55-after-only-20-years-working-plus-free-health-insurance-plus-3%orhigherCOLA are starting to understand that novel strategies are their only available survival option in Illinois. The most striking example is medical professionals. Should the public pension entitlement class 55-ys-olds really believe in the ‘heartfelt compassion’ of that 62-yr-old nurse who paid 6.2% into social security for all her work-years (which were 2X the hours… Read more »
I always kinda thought that Illinois was required, by law, to have a balanced budget. Then again it is against the law to shoot people in Chicago. What do laws mean in Illinois anyway?
I’ve commented on this in the past. It all depends on the definition of balanced budget. In Illinois, expenditures for the year shall not exceed funds “available” for the year. That is not the same as expenditures shall not exceed “revenue” collected. On top of that pension expenditures authorized by the state are the statutory contributions and not actuarial contributions. Nothing requires the state to make actuarial payments for pensions. The Edgar pension ramp ensured that we would not have a true balanced budget for many years. So like it or not, our constitution is balanced by Illinois standards. Indiana… Read more »
So When is the Bankruptcy? Or is this a severe Death Spiral?
States can’t declare bankruptcy Doug. Shorting pensions via the Edgar pension ramp is also not new. State law shows that pensions will continue to be shorting the actuarial payment for another 10 years. If you want that to stop then full actuarial payments need to be made just as the Commercial Club of Chicago has outlined. Until then the debt will continue to grow and pension checks will continue to be sent out.
Well PPF there’s a first for everything. Image that Illinois reverts back to a Territory and loses congressional representation due to fiscal malfeasance. In his 2nd term President DeSantis appoints a Territorial Governor with the power to abrogate municipal employee contracts.
This would be a bankruptcy of sorts and a good lesson to other prolifigate blue states. The alternative is to bankrupt the country. Think the Weimar Republic. Yes, Germany continued to exist afterwards but the currency was history. The guy that took over and promised to fix it is a subject for another day.
Old Joe, that’s one of the more comical things you’ve said on this site. The state is nowhere near going bankrupt. They bring in over $50 billion per year in revenue and have options to cut spending and raise taxes. You can play pretend that somehow the state of Illinois loses its statehood status but that’s just not realistic. On top of that you predict it will happen in the next 10 years. Too funny. Have you even read the constitution Joe? What clause allows a state to lose statehood for “fiscal malfeasance”? lol. No Joe. Pensions will continue to… Read more »
Since my first humble job, I’ve been contributing to social security.
When my first check arrives, it will not be welfare, it will be a small percentage of the hundreds of thousands that Uncle Sam has taken from me and my employer.
“Welfare” is an unearned entitlement; I worked for those future social security benefits.
You have paid social security taxes since your first humble job. You are not contractually entitled to those benefits. You do not receive a direct benefit from your taxes. If you paid double the social security taxes do you get double social security benefit? No. That’s because it’s a welfare program designed to provide poor people with a greater check as compared to the taxes they have paid. If it was truly an earned benefit then future congress couldn’t take away or reduce your checks. It would also be paid out proportionally to how much you paid into it. Congress… Read more »
SS is a sacred cow of government. Touch it and you are a goner. Much better than a contract with a broke state.
No doubt. It’s very hard to take away welfare when so many people are eating from the trough. Like pensions, they will just need to tax more.
IMO Taxistan will be forced eventually to tax golden pensions over say $50K.
So da public sector pensioners will pay taxes and SS welfare beneficiaries will not.
That is an interesting comment I am fully in agreement with. However go try and tell some of individuals collecting SS that they are on welfare. I personally am not brave enough to do it.
I did once tell someone that Medicare was a welfare program after they had two artificial hip and one artificial knee put in. There was quite an uproar from them about how they paid for Medicare with no regard to how those surgeries and equipment cost way beyond what they paid into the system…
Of course they don’t want to hear it. Many of these people hate “welfare queens” and don’t want to be lumped in with the very same people they hate. SS and Medicare are still so strong among the public because they believe the lie that they “paid” for it.
You’re right as most people would see it. But, it’s not literally a contract you have and really a gratuity in the legal sense, subject to governmental whims. If one believes the periodic reports that Social Security “must” be cut something like 27% in the early 2030s barring additional funding beyond its normal income stream you’ll see some version of it. That’s not likely to be much of a cut, if any, in the sense of it enraging the public who will remember such things when voting. So, your “entitlement” doesn’t have the force of a contract, but because of… Read more »
The very first social security recipient paid $24.75 in social security taxes for 3 years but received $22,882.92 during her lifetime. She didn’t earn that benefit but was gifted it by the US government. Forbes had the best analogy of social security a few years back. Social security works much like subsidized housing for low income people. You pay something for what you get but you’re not paying the full amount. On top of that, the money that everyone paid didn’t go into some investment vehicle that earned any type of interest. Instead it was used to pay out old… Read more »
Yes, I do remember reading about all those issues at one time or another. I agree with your representation of it.
There was no “pension pick-up” for us, was there? We actually paid our required contribution.
You paid your required tax and didn’t contribute to any pension. That’s because its an old age welfare program. Pensioners pay their required contribution. If their local district picks up their portion then it was negotiated fairly in their contract. See, that’s the difference. Pensions are an actual contract while SS is just welfare with no contractual rights.
Since the taxpayers do not seem to care, they must all be planning on moving or dying before the tab comes due. What is going on now is totally unsustainable.
The public could care less otherwise there would have been a public outcry for the data. The Illinois motto is “laugh and we will all laugh together” that the politicians pander to knowing fully that the Illinois voter is more concerned about sports scores rather than what the financial situation the State is in.
Soon the budget will only have one line and that will be for pension contributions. Revenue will decline as more and more people flee the state. Pension spending is exploding and will far exceed revenue in due time. Something will have to happen, most likely all services will be cut to a minimum and pensions will be paid in full. As a result the people who stay (few) will have the quality of life diminished by the overly generous pensions being paid for 30 to 40 years with 3% increases every year. A lot of this pension money will go… Read more »
Pension liabilities are increasing, but I don’t foresee them exceeding state revenue. What most foresee is that pension obligations will squeeze out the provision of many government services, including those that many view as essential. I do agree that quality of life will be diminished, and that Illinois will have an outmigration problem, due not only to pensions but also due to factors such as crime and high property taxes.
I believe the last report I read shows that statutory pension contributions will increase to $14 billion in 2034 and $18 billion per year by 2045. In 2046 the contribution would drop to less than $4 billion per year. It will indeed squeeze out other spending unless taxes are increased. Eventually the voters will be faced with cutting services or raising taxes. Increasing taxes won’t be popular but that’s most likely what will happen until the voters actually get on board with less services. Most likely will see a plan for “re-amortizing” the debt and push out the 90% funding… Read more »
The carrying costs of amortization will be expensive. But if their credit rating can support it. the politicians will borrow rather than make tough choices.