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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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“The Bank of North Dakota (BND), the nation’s only state-owned bank, has had record profits every year for the last 13 years, with a return on equity in 2016 of 16.6%, twice the national average. Illinois could follow North Dakota’s lead. Looking again at the Illinois CAFR (page 45), the amount paid out for pension benefits in 2016 was only $1.833 billion, or less than 2% of the $94.6 billion pool. An Illinois state bank could generate that much in profit, even after paying off the state’s outstanding budget deficit. Assume Illinois guaranteed its pension payouts, as Baker recommends, then… Read more »
Sorry, Frank, but that’s nuts. A bank run by Illinois politicians? And the current annual (and indadequate) contribution to state pensions is over 11 billion, not 1.8. That bank in ND (one of the few properly run states) only makes about 200 million/year. Multiply that by 20 to adjust for Illinois size if you want, and you still get nothing close to what would be needed to fund the pensions. Having pensioners rely on profits from a bank run by our politicians is, I’m sorry to say, the worst idea yet.
Looks like you might be confusing pension contributions with “the amount paid out for pension benefits”. Where did you get the 11 billion number? I am looking at the 2022 Illinois CAFR, the latest report available.
No, more recent numbers on total contributions to pensions appears in many places, and it’s around 10% of the budget. One place is here for 2023. 2024 not yet complete here:https://illinoiscomptroller.gov/financial-reports-data/expenditures-state-spending/pension-system. You might also want to look at the new GOMB budget projections, which show about 10B, but that’s only contributions from the General Fund. Some further contributions come from other funds. https://budget.illinois.gov/content/dam/soi/en/web/budget/documents/economic-and-fiscal-policy-reports/Economic_and_Fiscal_Policy_Report_FY25_FINAL_11.1.24.pdf
Ellen Brown was talking about fund outflow ($1.833 billion) and not inflow(contributions), listed on page 45 of the 2016 CAFR as “Change in net position restricted for pension benefits”. On page 43 the 2022 CAFR, this number is listed as ($4.388 billion). I assume the bank would be run by relatively apolitical bankers and not politicians. The Bank of North Dakota could probably offer some advice in this regard.
Remember the one about a Federally run bank for the currency exchange crowd operating through the USPS? That’s one Dem pipe dream that I’m relieved never came true.
I’ll admit it was frustrating to watch the multiple credit rating increases over the past few years when both Illinois and Chicago had done absolutely nothing to warrant them. Listening to JB Blowhard crow about his great skill in fixing Illinois fiscal nightmare when all he did was hold out his swollen meat hooks to take free billions from Uncle Sam was difficult. Of course everyone should have known that he wasn’t capable of really accomplishing anything, since his claim to fame is being a slovenly trust fund baby. And just as quickly that rooster has come home to roost.… Read more »
The Bond rating agencies are a joke and I don’t understand how they aren’t liable to investors for their almost fraudulent ratings. They are supposed to be unbiased and accurate observers of risk in the bond market. Instead they list nearly all bonds as some degree of investment grade and understate the risk. It’s not unlike CPS simply giving passing grades to all students and moving them through the system. After the 2009 mortgage bonds collapse I’d hoped that all of the rating agencies would have been sued by investors into oblivion and their replacements would act and rate accurately… Read more »
And who down votes a common sense comment like this? BJ? Is that you??
Chicago’s rating is already BBB+ . All a downgrade means is the city will pay more for loans and such.. But the city doesn’t care about repayment anyway, so this is no threat. Besides below BBB+ are 18 more levels before the bottom. If you read what each rating means it’s a joke. For instance BBB+ means “An obligor has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.” We all know Chicago is much worse than what is described so the… Read more »
“the city doesn’t care about repayment anyway”
Undoubtedly, it’s clear as day that the political policies of Illionois are: extended and pretend, till there’s nothing but default.
The City should have been downgraded last year, and probably a year before that as well. It was clear back then that all the feds’ Covid relief money was going to be frittered away to cover annual operating expenses, so why is it a surprise to anyone that the 2025 budget is as disaster. Well, don’t forget that the City pays S&P and the other rating agencies the six figure annual rating fees. So maybe they are a little bit slow to tell the truth about their client and bite that hand that feeds them.
Bingo, Old Spartan. There is absolutely nothing new in the city’s dismal financial numbers that wasn’t apparent long ago. All that changed is that budget time came around and reality had to be faced. Shame on the rating agencies.