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By: Mark Glennon*

The latest op-ed on pensions that has us scratching our heads is from a new face on the scene.

That’s Amanda Kass, writing in Crain’s. Her advice:

The best course of action for the near term is for both Illinois and Chicago to make the payments required under current law. Only after the downward trend in the pension systems’ finances has been reversed should lawmakers even consider extending the repayment schedules and/or lowering the funding targets.

That may seem harmless, but hold on. What would it mean to continue making payments required under current law until pensions get to treadwater status – when “the downward trend in our pensions reverses”?

Let’s take Chicago’s pensions first. That won’t happen until 2033, even assuming Chicago can somehow figure out how to fund the up-ramp in taxpayer contributions required under current law. By then, annual taxpayer contributions for unfunded pension liabilities will have doubled to $2.6 billion from this year’s $1.3 billion and the unfunded pension liability will have increased another $4 billion.

Those are the city’s own numbers for its four pensions combined, contained in its most recent Annual Financial Analysis. That means the numbers are overly optimistic, built on the usual phony assumptions and accounting, which invariably prove wrong resulting in never-ending downward adjustments. And the numbers don’t include Chicago’s other overlapping pensions for the school district, water reclamation district, Cook County and Forest Preserve, which are in the same boat.

Mayor Lightfoot is already floundering for solutions to meet near-term scheduled contributions, first asking for a state bailout and now perhaps a sales tax on services. The unfunded liability is already nearly $30 billion. Yet Chicago should just pay more and more into the pensions even as the hole deepens?

It’s a similar story for the state’s pensions. Under current law, the state says its pensions wouldn’t get to treadwater status until 2028. By then, taxpayer contributions will have had to jump by another $2.4 billion and unfunded liabilities will be up another $6 billion. Current state contributions of $9.2 billion already consume almost a quarter of the budget, driving out spending for other purposes. Unfunded pension liabilities already have the state’s credit rated near junk.

And what about the state’s pensioner healthcare costs, which Kass doesn’t mention? Today, it’s a staggering $73 billion, which increases the true pension hole by about 50%. It’s entirely unfunded so it just grows and grows. It will never reach the reversal Kass wants to see before changing course.

How does Kass propose we pay for the increased pension contributions needed to get to treadwater status? She doesn’t say.

What’s the reasoning behind her proposed course of action? Well, it’s not something that should be called a “crisis,” she says, and that’s “because pension systems’ finances are in constant flux, and unfunded liabilities represent a long-term form of debt. As such their financial condition is not something to be ‘solved.’”

Got that? Long-term debt is nothing to worry about. You don’t “solve” it. It’s been “in flux,” which apparently helps make it OK. Never mind that it’s in flux only in the sense of worsening every year.

And what does Kass suggest we do when the pensions get to treadwater status, assuming we could do it? Then, it would be alright for lawmakers to “consider extending the repayment schedules and/or lowering the funding targets.” In other words, kick the can again! There’s no mention of any other pension reform in the article. Nor have I seen her elsewhere propose any material pension reform other than putting more money into them sooner.

Kass’s article is a short version of an academic paper she published recently along with two co-authors, Robert Bruno and David Merriman. Aggressively pro-union, they are regular authors of research papers purporting to back up standard talking points of Illinois public unions. Read through that paper’s academic jargon if you want, but it says little more than Kass’s Crain’s article.

Amanda Kass

Kass is the new go-to source for folks who defend the current pension system and deny the severity of the crisis. Columnist Rich Miller, for example, wrote “If Amanda Kass is part of a study, you know it’s good,” referring to that aforesaid paper.

Formerly with the Center for Tax and Budget Accountability, Kass is now with the Government Finance Research Center at the University of Illinois at Chicago’s College of Urban Planning & Public Affairs. Those two co-authors are also with taxpayer-supported Illinois universities. Aren’t you happy to know what your tax dollars are supporting?

A pension actuary writing in Forbes this week said exactly what we, too, have long said:

I can only repeat again and again: There is no solution to the woefully underfunded pensions in Chicago and in Illinois that does not involve benefit cuts subsequent to a 2020 constitutional amendment or municipal bankruptcy.  And the sooner Pritzker and Lightfoot figure that out, the better off we’ll all be.

They haven’t had to figure that out because voters haven’t figured that out. And voters haven’t figured that out thanks, in part, to what they’re reading in op-eds by authors who haven’t figured that out.

*Mark Glennon is founder of Wirepoints.

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Downstate_downtrodden

Looks like the Capitol Fax crowd found this article. Downvotes won’t erase the sad truth, folks.

world with end

Such a confident smile to accompany such dubious advice reminds me of the saying: “often wrong; never in doubt.”

steve tanton

Amanda Kass ain’t no John Kass.

“I don’t understand why we don’t actually address the problems that’s driving our costs here, which is that our pensions with the compounding COLA are actually mathematically unsustainable at any tax rate.” – State Rep. Margo McDermed, R-Frankfort

S and P 500

This reminds me of “zeno’s paradox”, where a tortoise and a runner have a race. If the tortoise has a head start then the runner can never catch up to the tortoise, because by the time the runner reaches where the tortoise was, the tortoise will have advanced to some point A. By the time the runner reaches pt. A, the tortoise will have advanced to point B. And so on ad infinitum, Kass says pensions are always in a state of flux so the fund can never run dry, or I guess that’s her reasoning.

Mr_Common_Sense

Why didn’t Amanda Kass, (former Geologist turned State and local Pension expert) address the scariest fact that Illinois is facing right now? And that’s RAPID DEPOPULATION! Just in the last 4 years, Illinois’s population has dropped by nearly 160,000 people. And it’s a common sense prediction that Illinois will continue to RAPIDLY lose population in the coming years. …”Treadwater status by 2028″…What’s Illinois’s population gonna be in 2028? In literal terms, It’s quite possible that Illinois could lose over 500,000 people by 2028. What is the State of Illinois going to do then? More, and more taxes? Last time I… Read more »

Banksy

I wish the the Inspector General would open an investigation for the misuse of time by State employees, and using State resources to spend all day beefing on Cap Fax Blog?

riverbender

I have always wondered that myself; however maybe the Inspector General is one of the posters there.

debtsor

My guess is that he’s the guy from Oswego who posts prolifically.

Evan

The system can not blow up fast enough.

temp

I must say I strongly disagree with this piece in alot of ways. First one of the greatest goals of socialists and democrats is to make the law say whatever they want, whenever they want, to whomever they want it to. Reducing benefits not only destroys contract law(a huge win for democrats/socialists) but also gets them off the hook for being retarded. Thus allowing them to be more retarded in the future and/or else where. Benefits MUST NOT be reduced they need to be forced to look at the mess they created and suffer for it. Second, they can easily… Read more »

StvOh

Can you restate your comment clearly and succinctly? Please do.

Mr_Common_Sense

Is your column meant as a joke?

Rick

Ultimately Illinois will be bailed out when the socialist democratics get elected. The cat was out of the bag with “too big to fail” bailouts for GM and banks. No socialist is going to let all these pensioners flounder with the precident of government bailing out corporations still in people’s memories, right? Ultimately that is what Illinois and chicGo will count on as Illinois becomes the seed of socialism for everyone. Count on it.

Hank Scorpio

I hope your’e wrong but I suspect your’e right. I can’t even begin to imagine the contagion effects this would cause, everyone will be running to the federal trough. And I wouldn’t be surprised to see some states attempt to secede.

Mr_Common_Sense

I don’t see taxpayers from other States wanting to pay for multi million dollar teacher pensions.

I do see Congress implementing some sort of bankruptcy law for States, something similar to Puerto Rico.

Freddy

With all the talk of reparations lately when will the taxpayers receive property tax reparations. We pay and pay and it is never enough. Money appropriated to pensions via property and other tax’s then are diverted to somewhere else other than the intended purpose and they come back to us for more. Definition of reparations is “The making of amends for a wrong one has done” and homeowners / taxpayers have been wronged for a long time by a redistribution of wealth and misappropriations of our money. It seems that when public employees are hired taxpayers are required to take… Read more »

robt nevelle

Does anyone else believe it’s possible Amanda is enrolled in the State Universities Retirement System?

Or that SURS pays the highest pension in the State of Illinois, who’s deserving recipient is currently collecting $600,000.00/yr

Of course that couldn’t possibly influence her or her colleagues at the Government Finance Research Center of the University of Illinois at Chicago’s College of Urban Planning & Public Affairs’ conclusions.

nixit

SURS members have their own PAC: SUAACTION / State Universities Annuitants Assn Action Committee

https://www.elections.il.gov/CampaignDisclosure/CommitteeDetail.aspx?ID=UblI3DMmT%2feXTENOXee3Bg%3d%3d

Lynn

Looked up Ms. Kass’s CV. Her undergrad major was Geology, her MA was Geology, and she is seeking a PhD in Urban Planning. Where is her expertise to be writing about pensions and government finances? Oh yeah, she worked for Ralph Martiere at CTBA and drank the kool aid.

debtsor

Rich Miller is delusional. Not sure why that guy gets unlimited ink to write his columns. I don’t even bother to read his crap any more.

riverbender

Simple answer; his readership is based in AFSME members. I forget the numbers but once he posted a large number of his paid memberships come from the Statehouse itself. Don’t forget there are a lot of AFSME members in the State and combined with the members of “The Free Stuff Army” are a formidable voting block; check the election results for more details.

debtsor

And the comment sections on capitol fax is awful. They shout down and ban anyone with a conservative point of view and regularly post bigoted, racist and hateful remarks about Republicans and downstaters. So much hate, so much hate.

State Pension Millionaires

As per usual Mark, you are totally correct. Ms. Kass is routinely widely off-track. Thank you! “Remember…. a promise is not a promise, in the absence of honest dealings”.

Joan

Devastating. Mark, this is why Proft calls you the most dangerous man in Illinois.

NB-Chicago

Mark–great articale, are Kass and her crew U of I state employees, U of I professors? If so, wonder what union they are in? Or are they just a non for profit affiliated with U of I?

Blair Garber

State Universities Retirement System

FYI SURS pays the highest pension in the State of Illinois of $600,000.00/yr +3%/yr

nixit

Robert Bruno and David Merriman are professors at UIC and UIUC, respectively. Pretty sure Amanda is staff at UIC. The union at is the IFT affiliate “UIC United Faculty”.

NB-Chicago

Thanks. But for gov union backers, setting up a think tank hooked into u of i university is a brilliant move not only to legitimize there views but to crank out partisan studies fighting privitization, justifying higher benifites, etc. Kass & her crew are also young/attractive and easier on the eyez than martire, Wttw & npr gooble it up. Meanwhile, for our side there are no universities in illinois backing up the conservative view– the once uber conservative u of c, like all the other univs, are trippen over themselfs to out pc each other. Dont here much from northwestern.… Read more »

nixit

You nailed it. We’ve embedded our state tax policy research in institutions reliant on state taxes. Add the benefit of built-in brand recognition that “legitimizes” the findings.

NB-Chicago

Probably if a illinois univ would take on wp, tia, ipi as legitimize think tank they would be worried about there state funding and having endless on campus pc protest (drummed up by who knows who) condeming us as nazi’s. Its a war, but for dullard illinios voter/tax payers its easy to trot out cuttie kass on wttw w don’t worry be happy bs.

Mark m

I read Bruno and Merriman’s piece. I am no longer in the habit of reading peer reviewed articles, but I found it odd, more of an armchair pop political science piece than a serious economic article. Ok, they encourage us to avoid calling the situation a crisis, presumably because doing so eclipses serious thought, a proposition which seems incapable of proof. They then remind us that the massive pension debt shortfall needs to be seen in the context of political will, laughingly driving by the mystery of how electing the same Democratic Party apparatchiks (which has been the case for… Read more »

m.

keep funding the corrupt parasites

nixit

I just got my property tax bill. Can I tell Cook County to extend my repayment schedule and/or lower their funding targets?

Bross

At least extend it until you can sell your house and get a UHaul.