I’ve warned many times about the catastrophic state of many city and state pension funds. Particularly (but not only) in Democrat-controlled areas, many of them are underfunded, overdrawn, and not in a fit state to pay out the demands that will, according to actuarial calculations, be made upon them. I’ve predicted several times that efforts will be made to foist their pension debt onto the backs of all US taxpayers, in the form of a federal government bailout of insolvent pension funds. Back in May, I highlighted an underhanded attempt to use federal funds to bail out multiemployer (read: union) pension funds, and ultimately to write off their arrears. I’m sure there’ll be more such attempts.
Now comes word that the new Mayor of Chicago is trying to shed her city’s monumental pension debt onto the backs of state taxpayers. If she succeeds, I guarantee that the next step will be for the state to demand a federal government bailout, because it can’t afford to pay its now-expanded pension obligations (not that it can afford those it has at present, anyway).
According to knowledgeable sources in Chicago and Springfield, after weeks of preliminary maneuvering the mayor is pitching nothing less than a state takeover of the city’s cash-short pension funds, which under current law will require upward of $1 billion in new city tax hikes over the next three years to reach a path to full actuarial funding. Her proposal would consolidate city pension money with smaller downstate and suburban pension funds in a new statewide system. In some cases, those non-Chicago funds are even worse off than the city’s.
Insiders say Chicago might be willing to forgo some revenue it now gets from the state in exchange for relinquishing responsibility for the funds, which now are about $28 billion short of the assets they’ll eventually need to pay promised benefits. To pay the cost, Lightfoot reportedly supports state legislation to tax retirement income of better-off seniors—taxing income above $100,000 a year would net roughly $1 billion annually, according to the Civic Federation—or extending the sales tax to cover high-end services such as accounting and legal advice.
. . .
[Illinois Governor] Pritzker has been talking about pension fund consolidation, but in a different sense. The governor has a task force examining how much money could be saved by combining into one, more efficient fund hundreds of small funds, mostly for police and firefighters, that now are scattered across the state.
Lightfoot’s move somewhat echoes what happened last year with Chicago Public Schools’ pension fund. It still is separate from the state system that covers all other Illinois school districts, but now the state is picking up an increasing share of the cost.
. . .
Should the state pick up part or even all of those [pension] costs? “Yes,” said [Chicago Civic Federation president Laurence] Msall, arguing that the state sets pension rules and has limited how the city and other communities can deal with the problem. “The state needs to help manage the financial liability.”
There’s more at the link.
This is typical of the tax-and-spend mentality. Squeeze all the taxes you can out of people; spend them all, and borrow even more when tax revenues are not enough; short-change pension funds of their annual required contributions so that you can spend the money you’ve “saved” on buying more votes and keeping your constituents happy; and then shuffle off the resulting debts onto someone else’s shoulders, leaving you with a clean balance sheet (on the strength of which you can immediately borrow more money, and get into the same hole all over again).
In a just world, I’d look for every politician who does this to expire of an immediate heart attack (or, if I were less merciful, more slowly of some painful, loathsome disease). Chicago is only the bellwether for dozens of other major US cities who are in the same funding mess. They’ll follow its example, sure as we’re standing here; and their states will all try to shuffle off their fiscal shortfalls (caused by their own fiscal irresponsibility and mismanagement) onto the federal government. I hope and pray that President Trump, and Republican representatives and senators, will have the courage of their (alleged) convictions, and vote down and/or veto any and all such attempts; but sooner or later, we’re going to have a change of administration – and who knows what the next president will do? Furthermore, if the Democratic Party ever gets a stranglehold on both the House and the Senate, you know full well they’re going to pass such a bailout on the grounds of “It’s for the chiiiiiilllldren!” or some such siren SJW song.
Chicago is probably beyond redemption by now. As I mentioned some time ago, its politicians exhibit incredible contempt for its residents. The latest property tax hikes have already sparked a wave of emigration . . . but those people will get less for their properties as a result of the higher taxes. Don’t wait until it’s too late. If you live in Illinois in general, and Chicago in particular, leave now, and take with you everything that you can. If you don’t, it’ll be sucked into the rapacious maw of the tax-and-spend politicians who govern you. I guarantee it. On the basis of their previous behavior, it’s a certainty.
Yep, and California is eagerly watching… They are in as bad a shape both city and state pensions are in the toilet.
"To pay the cost, Lightfoot reportedly supports state legislation to tax retirement income of better-off seniors"
Are they so stupid that they cannot realize this will simply drive those seniors to migrate elsewhere?
Illinois used to be a fine rural conservative state for the most part. I was born there. But harsh winters and the never ending drain of rapacious taxes and lack of services as state resources always favor the black hole of Chicago's demanding voters, why on Earth would anyone who possibly could not consider moving to a warmer and less greedy state?
Some of these dolts who vote stupidly are probably moving to Texas.
How did this happen? Simple. UNION dues were used to elect UNION-FRIENDLY corruptocrats who increased UNION pensions thus gathering more money from UNION members and UNION dues.
Most of these UNION members are on 30-and-out (or even 20-and-out) plans allowing them 75% of their highest-paid years' earnings as their pension–so you'll find most or all of them happily accruing vast overtime hours as they get into the 'golden zone' of earnings -base.
They also usually enjoy fully paid health insurance until death and/or Medicare-supplement payments. SOME of them have "spouses, too" plans so that their pension is passed on to their surviving spouse until death.
Oh, yes, it's quite a racket.
Chicago is trying to annex all of IL, in effect.
CA won't see this, because most all muni union pensions are already part of CALPERS, so when that car falls over, the whole state just crashes. No need to do what Chicongo's doing, because Califrutopia is already there.
The greater point is that neither CA, IL, nor 37 other states with unfunded pension obligations greater than their annual GDP can print money to get out of this, unlike the feds.
The best thing to do nationally is let them all go bankrupt, cross your arms, and refuse to vote a penny to help.
You can't teach people anything until it hurts when they're this stupid, so let the stupid come, and eat everything.
It's the only way to get idiot voters smart enough to stop voting in tax-and-spend like the bill is never coming due.
And put your assets, as much as you possibly can, where the gaping maw and probing snout of government can't get at them. Or they're going to be hoovered up and squandered when you're not looking, and be gone forever.
Whenever you have money to save, buy bullets, long term survival assets and REAL skills training. Get ready, that which cannot continue will not continue. Unfortunately, the same dolts who poisoned their liberal states with short term voting decisions will do the same to their new home state. It happened in Colorado, New Mexico and others. It's gonna happen everywhere in CONUS if the status quo limps on long enough.
What percentage of those retirees of >$100K income are Chicago city pensions? I would assume at least double digits, maybe 25%. Whatever the percentage, if Lightfoot succeeds, I expect those pension retirees will cry foul. And they do carry political weight.
Left 5 years ago, cost $90,000 loss on house sale price. Worth every penny as where we moved to I've seen that much appreciation. Get out now, don't be a tax slave to Illannoys.
This is just a symptom. The real problem is the financialization of the economy at all levels. Today most of the people making money are making it from various kinds of "rent". The financial industry is spending vast amounts of money teaching people to "save" and "invest" in their houses of mirrors.
The real problem isn't financialization. The real problem is cultural decay. Every organism eventually dies and rots… Even social organisms. Pass on culturally sound values and the wisdom you've gained to the next generations.
@The Lab Manager: They move to Red areas to escape the consequences of policies enacted by "D" and then… continue to vote for "D" and wonder why their taxes go up, and up, and up. I see this here in my NH home. 🙁
@Aesop: That's the best hope – but you know, with all those electoral votes (and pissed off people) at stake, there will be a hue and cry on the part of every "D" at the federal level to ENABLE this kind of behavior.
As Peter and my others, including myself*, have noted: It's coming. Politicians have leveraged the incomes of tomorrow to buy votes today… not to mention feathering their nests.
Should understand Chicago was the "center-mass" of the Democratic Party for a long time, and they were who swung the election for JFK and also got Obama elected. Chicago has long been the steering position for all of Illinois and the corruption of the democratic party.
However you should not look at Illinois anymore , the Democratic party's center-mass has swung all the way to California . They are trying to win the next election with Kamala Harris.
However the real battle ground and therefore the actual center-mass is Texas. Who wins Texas wins the next election. It will mean the same in 2024.