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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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And nobody knows what going to happen to state and local S&P ratings or pension ramp when in fall veto session legislature makes whatever changes to TIER II pensions they are going to make? At minimum, change to meet “safe harbor” one would assume? or possibly a total re-do or getting ride of TIER II altogether?….and of course how to fund it all
The unions have gamed the system and as a result destroyed the quality of 95% of the other residents. People are now voting with their feet.
Any want to set an “Over / Under” target date for some type of BK?
People should not be surprised that doctors and nurses flee this economic sinkhole. While teachers are given: *200-400% of social security entitlements after 10-20 years working (early retirement, pension spiking are contractual entitlements): Age 55-58 retirement entitlements ~$60,000 ( nurses must be 67 to start getting ~$30000) *Zero-to-2% of salary withholding rather than nurse/doc mandatory 6.2% social security withholding …and social security begins ~10 years later than teachers begin drawing pension entitlements. * ZERO personal liability for malpractice (imagine if teachers were sued by students who were passed but can’t read or do math?) *FREE health insurance age 55 early… Read more »
The State of Illinois wants you to believe that one of the highest taxed states in the nation is going broke, or can’t afford to pay for pensions. Use some common sense people, its a manufactured crisis.
Agreed Frank. The state could cut spending elsewhere or they can always raise more taxes. Truly a manufactured crisis. They could fix this anytime they want.
Yes, but as doctors like to say, the cure is worse than the disease. The massive amounts of taxation required to actually ‘fix’ the pensions is so absurdly high, it would likely kill the state instead of saving it. I don’t buy your analysis that a few % points in income tax hike, plus tax on services and taxes on retirement income is going to be enough to fix the problem. The pension bomb is in the billions, the worst in the country. By the time there’s a 10% tax on services, a 10% income tax, and we’ve scared away… Read more »
Yet these are the same people to argue that pension income should not be taxed. These are unserious people making unserious arguments and are not interested in a fix – they just bloviate, like their boy Pritzker.
Then why don’t they? The pols are not worried about this since no one lost a dime by not getting their checks. As long everyone gets paid this year they don’t worry about it. They are elected and in power. The pols will not make any changes they don’t have to. Health care is also on a year to year basis and I believe with no assets so funding % does not matter. Next election cycle the pols will promise whatever it takes to stay in office or get elected to the largest voting base but will deliver next to… Read more »
You’re right that pensioners shouldn’t worry as they will be paid either way. You’re also right that politicians won’t do anything until the voters demand it and unfortunately the voters are uneducated on this matter. See, you’re not always wrong. However, if we wait to fund pensions we will pay even more later. Oh well. That’s what the voters want.
Why do you think that “one of the highest taxed states in the nation” is an argument against going broke? I don’t follow that logic. Could you please elaborate?
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 year and erase the unfunded pension liability 7 years. The State… Read more »
Thank you for the data and the source. Really appreciated.
There is absolutely nothing to suggest Pritzker and Democrats wish to reduce spending to pay for pensions – just to the contrary.
When people learn they have been snookered, and that property taxes are legal but unlawful, the State won’t have a choice. “All taxes are commercial, they have to be. Or else you couldn’t have property ownership in the U.S. The legislature could just willy-nilly grant themselves a taxable interest in any property they want. And then they could move the rate or the tax around as much as they want. They could tax you out of your property. And that’s not how this country was set up to work. To believe that the system they are using is legitimate, here… Read more »
All I see is deficit spending. It worked for the state because we were in an interest rate declining environment. The same premise that allowed people to leverage up and buy more or several homes before the 2007/8 crash. The Fed has now said higher for longer and the state can no longer refinance debt and “save” money. The bills come due and investments dont perform as expected and this manufactured crises becomes real very quickly. Also, please explain where this state could cut $20b in spending? Fatboy limited (550 MILLION if you call that limited) giving money to illegal… Read more »
The same people who lauded the ratings agencies upgrading Illinois’ credit ratings will now discount the opinion of this ratings agency.
“It’s just so stressful that all of the progress made in the last few years just continues to get dumped on.” – actual comment from Capital Fax, it’s a good site if you want some laughs.
What a grim report from S & P.
“Dear Governor Pritzker, as regards your Balanced Budget,
Illinois needs to tax everybody a whole lot more and add all of that to what they’re already taxed and do nothing with all that tax money but pay for public employee pensions and health care.
Your Friends at S & P
PS
Met Fitch and Moody’s for lunch yesterday. We’re all working on your updated bond ratings.
Have a nice day.”
Either cut spending elsewhere or more tax dollars are certainly needed. Either pay more now or pay a lot more later. Pension will be paid first.
Love all the downvotes. It truly shows that people here don’t want to hear the truth. It’s just too painful to admit I guess.
You are admitting the situation created by your boy Pritzker is not working, and can’t work, in large part because many are not ‘paying their fair share’ – in particular union members. When will you start to demand union members pay their fair share for their pensions? Paying ‘your fair share’ also means clawing back from those who have gouged the system and are taking out way more than their fair share. Start talking about actual reforms of the broken system and you may get up votes.
Union members have been paying their fair share the entire time according to their contract. The state has not been paying its share. There is nothing to change and I’m not looking for upvotes. Telling the truth is usually not popular.
They haven’t paid near enough – otherwise the funding shortfall wouldn’t be so bad. Admit it, you support a failed system and refuse to fix it.
They have paid enough according to their contract. The state, aka taxpayers, haven’t paid enough. That’s the only failure in the system. The pension system is working just fine and isn’t a failure. Pensioners are paid each and every time they are owed and their checks go up 3% every January. Works just fine for them. Just because you don’t want to pay taxes doesn’t make it a failure.
Now the states budgeting process has been a complete failure. All who live and work in Illinois are supporting this failure. Pensioners and bond holders will continue to be paid.
Your boy Pritzker just cut short the actuarial payment by +$2B to declare a ‘balanced budget’ and not one union boss or Democrat uttered a complaint. You are not serious.
He cut it short by over 4 billion and he is not my boy. He’s following the Republican pension ramp, aka your guy. You’re not even aware of the true shorting of pensions. Time to educate yourself.
Respectfully I need to understand that the state employees paid enough according to their contract but the state aka taxpayers haven’t paid enough. There are so many variables I don’t know where to start but I’ll try. Many teacher contracts have all or partial pension contribution paid mostly by taxpayers. So if we pay approx 60% of the taxes via property taxes that payment is totally covered by the property tax bill. Now when the state pays any district their share of 30% is the pension pickup if in the contract say 100% also paid of 9.58% in addition to… Read more »
“Many teacher contracts have all or partial pension contribution paid mostly by taxpayers.” So instead of receiving that money in salary they received money to be paid towards their pension. Per their contract they have paid their “fair share”. It doesn’t matter that the money is paid by local taxpayers as additional salary would also be paid by local taxpayers. It’s simply the cost of hiring and retaining employees. Keep in mind it’s a defined benefit system that is made up from employee/employer contributions, state contributions, and investment returns. The employee/employer contributions have been paid every time. Investment returns have… Read more »
Seems there maybe a breach of contract which could render the contract null and void and exposed to arbitration or renegotiation. Odd how the unions havent gone on strike over this breach of benefits. I also assume that the retired Union members have been cashing their checks, thereby accepting the altered contract.
No contract has been breached. Pensioners have been paid on time every time. Their contract only relates to being paid not having the pensions funded at a healthy percentage. Unions found this out through the courts when they pressed for actuarial payments. Pension funding levels is more of a report card on state finances. Pay more now or pay more later.
You think Pritzker created the pension mess? That’s adorable.
As to pensions, this whole issue predates Pritzker by decades. So understand that reality. And believe me I can not stand Pritzker. But reality is reality and I don’t want to join the Leftists who try to deflect and obfuscate
The Illinois public pensioner has unknowningly sold their soul to the progressive left. Both of you are as popular as Joe Biden and will soon go down in flames. Hippies and Haight Ashbury were popular for about a decade (70’s) before the greed and conservatism of the (80’s) took charge. Changes are coming and changes will be made.
Changes are coming. More taxes now or even more later.
Yup, more taxes – tax pension income progressively.
I am against progressive taxes but I understand their appeal. It’s a classic political tool to make the other “rich” guy pay but not me. But the Illinois voters don’t want a progressive income tax so we will just increase the flat tax for all. Of course, retirees are a coveted voting block so without the ability to tax progressively, they appear safe. With that said, pensions, 401k withdrawals, and social security should all be taxed the same as any other income. Why should two retirees with pensions pay nothing while the family of 4 making 50k per year needs… Read more »
Imputed income also needs to be taxed.
Get to work on that. Let everyone know that you want to start taxing their health insurance, life insurance, 401k match and every other benefit they receive from their employer. People really loved that idea when Obamacare was discussed.
Imputed income on a pension is different – it’s part of the total.
Who says you have to cut spending? Redirect money from operational expenses to the pension system. Redirect EBF dollars to TRS. After all, a teacher’s retirement is the cost of education.
Let me know when you get people on board with that. Johnson just won the mayors office by promising even more spending. JB wants all day kindergarten and to pay for illegal’s healthcare. Somehow I think tax increases are much more likely.
There it is, plain business speak from experts. IL/CHI driven into a ditch by out CIG (corrupt; incompetent; greedy) politicians. Lavish public pensions/medical must be paid, and your homes serve as collateral (via unlimited property taxes) to ensure that happens. Also, our CIG politicians also do not allow municipalities to declare bankruptcy because of these lunatic public retirement benefits. Plus we have rampant crime..bogus public schools….out migration by people with money and businesses…etc. A sword of Damocles over our heads, even tho our tax burden is among the highest in the country. Definitely we have the most CIG politicians of… Read more »
Illinois, in it’s current capacity, is in a death spiral. Our young professionals are fleeing and the state’s liabilities continue to grow faster then we can raise revenue. Bankruptcy is like the Grim Reaper swirling overhead waiting to attack.
JB thinks he can take his governing model to the Whitehouse. Rich and stupid is dangerous.
Payouts have to come into line with actual funding – IOU’s will do. Common practice for the state of IL.
Poor funding is only part of the problem
It’s also the fraud of letting pensioners collect 3 different pensions – all based on an inflated salary on their last day of employment
I read a story years ago about greedy pensioneers that pertained to their last day of employment; it was not Illinois but nevertheless typical.
A fireman would tell his boss the day he was going to turn in his retirement papers. His boss would call in sick that day so the employee would fill in for his boss. Then the guy would retire based upon the salary of his boss. This was SOP throughout the department.
Could you look at yourself in the mirror after screwing your neighbors like that?