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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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here’s super lib left Reader/Ben Joravsky show & Blockclub Mick Dumke talking about Andrew Biggs article (they never heard of him), public sec pensions and there opinion of IPI, actually Mick Dumkie respects IPI. Approx min 4:00 to Min 22:00. (https://art19.com/shows/the-ben-joravsky-show/episodes/31b6d89e-f95c-4924-ae10-6a96ea586d3c)
If a Mick Dumke is main stream Chicago press, this interview exposes how far left they are. Very much listening to but hard to take.
Oh this is too hilarious. They are just now noticing? Instead read, we can’t ignore the problem any longer without looking like complete incompetent morons. SO let’s pay some lip service to it, so when the crap finally hits the fan, we have some cover. What’s wrong? Hilarious. What’s right?
What’s the matter with Chicago? Corruption and crime. And indifference to corruption and crime. That sums it up nicely.
The wrong list is very long. Start with a list of what is Right, much shorter list.
I remember the mantra of the Left many years ago that it was essential for Whites not to govern in these major cities. Time non-Whites, particularly Negroes, take over.
They have!
As our current Judicial System stands, bondholders aren’t going to stand a chance against the government.
One hopes that Trump and Congress can put a stop to the bailouts of multi-employer plans and prevent bailout of government plans. Then perhaps inflation can be arrested and interest rates lowered to assist the housing market. Lower interest rates should increase pension liabilities and accordingly reduce the funded level of public plans. Under that scenario, what looks bad now will look worse and government employers will be pressured to increase pension funding. The better pensions are funded, the more retirees will continue to drain the funds — perhaps retiring early to get what they can before the bust. The… Read more »
Social security just lost about 10 years off it’s projected insolvency since adding public employees to Social Security, I’m glad I receive a private pension through RRB.
Maybe this is far fetched, but this paranoid Chicago chumbalone is throwing out this idea for discussion anyway. Realizing what I’m proposing is way more complicated…….. But, all the apparatchiks in the machine from CTU/Brandon to Martwick to JB all realizes the end is near, the pension math is impossible, one recession and especially a Chicago’s kaputt. So, is the Kifowit/ Martwick TIER II pension fix bill that’s going to be introduced in lame duck in a week and would essentially replace TIER II with something similar to TIER I in reality simply an attempt by machine to get all… Read more »
The scale of the insolvency in IL is unique – it’s massive. So to assume prior collapses are similar I think is well, risky. It’ll be ugly and pensioners, current and future, are in the crosshairs. But the motto of IL is ‘What, me worry?’
I’m sure the machines realizes NOW in lame duck is last chance Illinois has to sneak thru TIER II “fix” (screw the math & taxpayers)before expiring ARPA-COVID $bucks that have propped the sinking ship up for past couple yrs exposes how horrible the Chicago/ Illinois situation truly is.
Fascinating how Democrats and their unionists think bondholders will role over. Can anyone say junk bonds?
I don’t think anyone thinks bondholders will roll over but past bankruptcies such as Puerto Rico demonstrate that they will bear most of the cuts while pensions will be largely protected. I don’t believe the author is a democrat or pro public employees. He was recently discussing the recent Social Security legislation and how it was an unfair windfall for public employees. He was involved with the PR bankruptcy and is providing key insights as to the future of Chicago if they don’t get their fiscal house in order. If not massive cuts to bondholders and non-essential services and maybe… Read more »
RNUG, just to be sure you are aware, we do not care about protecting existing bondholders. We’ve written clearly on that before. They assumed the risk they now face, including the preferential treatment of pensions over bonds that you refer to. So, if the result of insolvency is that the courts hit bondholders harder than pensioners, those are the breaks, in my view.
No one in their right mind would buy Chicago bonds. The risk of default is very high.
“Chicago can most likely keep the pension checks flowing by suspending payments to bondholders” ”Judging by the experience of places such as Detroit and Puerto Rico, where I serve on a federally appointed board overseeing the island governments bankruptcy, pensions would largely be protected in the event of fiscal chaos, followed by core government operations. Nonessential government services would be reduced, and bondholders would receive what remains.” Yes math always wins and Andrew Biggs has provided the formula. Pensions left largely untouched and bondholders getting what’s left. I could see small cuts such as reduced COLA but nothing major. This… Read more »
RNUG, relatively minor pension changes were needed in Detroit and Puerto Rico. I would challenge you to sketch out any numbers showing that similar small changes would make any difference for Chicago. Chicago numbers are far worse here and there are fewer unencumbered assets to work with.
RNUG is a bought and paid for Rich Miller union stooge. His pension will be majorly cut. Major cuts are what Illinois will get because there is no other way. Math always wins.
No. He’s not. Smart and reasonable. I enjoy his contributions there and am so happy to see him posting here.
Maybe you should ask that question to the author. The city currently has around 2.1 billion that’s allocated towards annual debt payments. It appears Andrew believes that this money would be used towards pensions. Yes, much of Chicago’s debt is tied to revenue-backed bonds but PR revenue-backed bonds ultimately didn’t have priority. I’m guessing that Andrew, having been through that experience, believes the same would happen in Chicago. From his experience pensions are largely protected.
We’ve written before saying just what he said about pensions being largely protected in other proceedings. And I certainly agree that the first thing they would stop paying would be bonds. But what I am saying is ask what’s next using the math the city has. It’s dismal. I am all ears if somebody can show a reorganization pro forma that doesn’t hit pensions, but nobody ever has. Also, if you are really confident that pensions would be mostly untouched, why not proceed with the reorg?
Once bonds are hit no one will give Chicago money anymore without promised changes to pensions, which only dooms the pensions to deeper cuts. Chicago is in terrible shape. Major cuts will have to happen, including to bloated pensions.
True. I think anybody with experience in workouts and insolvencies would say that the first step to getting action is to stop paying the bonds, or at lest stop paying interest thereon, for just the reason you say.
Years ago, relatively minor pension changes could have also put Chicago and Illinois on a better financial footing. Instead, we got unions digging in and refusing to budge even a centimeter. Constitutional amendment and all that. They will reap the consequences of that arrogance.
Mark – the encumbered assets are a problem. Those liens the bond issuers hold are property rights. This makes Chicago appear in sharp contrast to Puerto Rico. Now, a judge could look past property rights and the law to protect pensioners (unsecured creditors), but the bond issuers with liens won’t give up easily. They will for example insist they can legally grab every penny of sales tax proceeds sent to Chicago from the State. I don’t share RNUG’s optimism. The numbers are daunting and there is only so much cash to play with.
Agreed. One good thing in a formal bankruptcy is there would be a good case for voiding the parking meter deal. It was not a sale but a contract with continuing obligations on both sides, making it voidable in a formal bankruptcy. https://wirepoints.org/could-a-bankruptcy-court-cancel-chicagos-hated-parking-meter-deal-maybe-wp-original/
My statements shouldn’t be interpreted as optimism but rather realism based on the PR bankruptcy. Just like Andrew Biggs, I don’t have a Chicago pension nor do I live in Chicago so my opinion isn’t based on hope or positive thinking. The US court of appeals for the first circuit ruled that revenue-backed bonds were payable solely from amounts deposited with the indenture trustee with zero rights to the revenue post bankruptcy. I’m sure the bondholders will sue just as they did with PR but there is a decent chance that revenue isn’t as protected as once believed. This also… Read more »
IL can never go back from Tier 2 to Tier 1 as its debt would be junk the second it happened. It also is completely unaffordable to do so and would doom the pensions to cuts that much sooner. Also, you do have a Chicago pension. You are a liar. You wouldn’t be arguing over something that you aren’t benefiting from. You are easily seen through. Enjoy the permanent pension cut.
How do you know he has a Chicago pension? I do not know who he is and what he has. Have I missed something?
He let it slip once that he has a pension on Cap Fax. RNUG is a total liar, and I would guess is actually PPF, just without the insults. You can’t believe a word anyone on these boards say about who they are. The fact is he argues for Chicago pensions all the time, both here and on Cap Fax. He wouldn’t do that if he didn’t get one, even without the fact he admitted he had a pension on Cap Fax. He didn’t say a Chicago pension, but I would say it is one since he argues for them… Read more »
I don’t know whether he is the same as RNUG on Cap Fax or just took his name. RNUG, maybe you can tell us.
It’s the same one. I can tell by how he posts. He will most likely lie and say no. You are a bit too trusting on comment boards, Mark.
I think RNUG is really George Santos. Just kidding. Happy New Year and Good Health to everyone and the entire staff and families at Wirepoints. I hope we can continue to have lively discussions in the coming year and beyond. Take Care!!!
Sure, you missed the vile that tends to accompany real or imagined envy, and you’re the winner in your psychological health by comparison.
I do not have a Chicago pension so I don’t know where all this anger is coming from. People can discuss topics around pensions even if they don’t have one. I’m guessing you don’t have one either but here you are name calling and getting so upset over something you don’t even have. I’m also guessing from your name you really hate pensions and want to see the people that receive them suffer. Are you this mad because you believe my opinion has merit and you don’t like it that I could be right? Not sure why the opinion from… Read more »
RNUG, I certainly agree with your bottom line that future revenue supposedly encumbered for bondholders “isn’t as protected as once believed.” But it’s worth noting that there’s a new decision out of Puerto Rico in November where the 1st Circuit upheld the lien on future revenues. The fight continues and a rehearing has been requested. See https://www.sanjuandailystar.com/post/prepa-bondholders-rip-fiscal-board-s-court-battles-propose-settlement and easy to find other legal articles on it. The new decision addressed different Puerto Rico bonds than in the earlier decision you mentioned. I know this is all obscure for most other readers, but it’s a huge issue in municipal finance, and… Read more »
Thanks for sharing Mark. I’ll have to check it out.
RNUG,– just want to say, I think your comments are a great addition to WP. WP comments needs more diversity of views not less, especially nuanced views as you provide. Who care if your a Illinois public sec employee or not. I don’t know what happened to PPF but I think he added a ton to WP comments as well. But back to State & Chicago pushing to “reinstating full pension payments” (essentially gutting TIER II for TIER I), the Kifowits bills (in reality spearheaded by Martwick) are already to go and be voted on in lame duck in a… Read more »
“WP comments needs more diversity of views not less, especially nuanced views as you provide.” I totally agree. We welcome all viewpoints here. The more robust the marketplaces of ideas the better.
Using Detroit and Puerto Rico as your reference points only shows the depth of destruction public unions are willing to inflict rather than accept any change.
I use them as a reference point because it’s the closest thing we have that provides us insight. I also referenced it because it was discussed in the article. With the paywall, maybe you didn’t read the article but you are off as far as my motive. Andrew didn’t mention them because he wants destruction but rather to educate the reader as to what would most likely happen. I’m not a union member and either is Andrew. Ignore his opinions if you choose but he seems very well versed in the subject. I realize this may upset readers that don’t… Read more »
I’m not trying to shoot the messenger. Just pointing out that it is unreasonable to point to Detroit as a role model for what may happen with pensions, as if that is OK, while ignoring the other consequences for the city and its non-union inhabitants.
I very much look forward to Chicago’s inevitable bankruptcy. Math always wins.
Chicago is corrupt, bloated and rotten to the core, just like IL. That’s the problem.
Chicago has always been corrupt, that’s nothing new. What changed is that Chicago is now lead and run by incompetent morons. In the past, when Chicago was lead by idiots like Byrne or Bilandic, the city at least had semi-competent bureaucracies of lifers. The machine ran Chicago, but as corrupt as it was, it worked. The machine has been long replaced with a bureaucracy driven by what can best be described as an informal racial quota or spoils system. As we know, Brandon has the largest and most expensive city government ever filled with DEI hires that exist to grift… Read more »
The unions may get by in the short term with their bloated, absolutely undeserved pensions, but as the city loses all its major employers and population (read Detroit) and inevitably dies, it will cost them a lot. I did not think this could happen in my lifetime.
Pete, writing as an ex Detroiter I didn’t think it could happen there either. It took about 7 years to nail the coffin shut on Detroit. It will happen much faster here.
I think Chicago’s collapse will look a bit different than Detroit’s. Detroit lost its taxing paying population due to, quite frankly, white flight, and then it’s job base when the US auto industry collapsed. Detroit continued as a zombie for a couple of decades before ultimately collapsing to bankruptcy. This is of course the broadest outline of the course of events leading to Detroit’s insolvency. Chicago right now isn’t losing its population as much as it’s being replaced; the blacks are fleeing the south side and the whites the northwest side as hispanics take over neighborhoods block by block. These… Read more »
You’re probably gonna want to rethink that last part. Per Wikipedia, the largest employers in Chicago are Federal, State and local government. And it’s not even close .
#1: The Federal government – 50k employees
#2: Chicago Public Schools – 39k employees
#3: City of Chicago – 30k employees
#4: Cook County government – 21k employees
#5: Advocate Health System – 18k employees
In fact, 5 of the top ten employers in Chicago are government entities.
Politicians taxing their constituents in order to redistribute said funds to government job holders isn’t a recipe for success.
https://en.m.wikipedia.org/wiki/Economy_of_Chicago