Speaking of Budget problems: Illinois Pension problem gets worse

[Exterous]

Lead by a link in an article about the 9% Cloud tax Chicago is now charging I spiraled down the hole that is the ever worsening Chicago pension problem.

I missed it earlier this year but the Illinois Supreme Court struck down the 2013 attempt to reform pensions by stopping Cost of Living Adjustments, higher retirement age and a change in salary based payout calculations.

Unfortunately this does seem like the correct ruling as the state has it enshrined in their constitution that worker retirement benefits cannot be reduced

http://www.bloomberg.com/news/articles/2015-05-08/illinois-pension-reform-legislation-overturned-by-state-court-i9fs4sid

Even more unfortunately the various unions and pensions seem uninterested in trying to fix the issue:

Encouraged by a recent Supreme Court ruling that broadly protects pension benefits, the police and fire unions have refused to negotiate higher worker contributions to shore up their pension funds.

They are also counting on revenue from a Chicago casino. The bill just passed by the House and Senate would direct profits from a Chicago casino to the police and fire pension funds. Note, of course, that there is no Chicago casino, nor has the General Assembly authorized one.

http://www.chicagotribune.com/news/opinion/editorials/ct-edit-pension-0607-20150605-story.html

Meanwhile Chicago Public Schools are being faced with oppressive pension payments that they were only able to balance by making some assumptions about how the rest of the world views their situation (bond ratings) and borrowing more money (kicking the can down the road)

Although the pension payment was built into a school budget balanced by an accounting sleight of hand, CPS is now facing a liquidity crisis that would make the payment difficult to make.


When the CPS bond rating dropped to junk status, the district was forced to renegotiate $220 million in outstanding swap agreements and pay penalties and higher interest rates on a massive refinancing.

That made a cash crunch that was bad enough — with a $1.1 billion budget shortfall — infinitely worse.

“How they meet payroll and make the pension payment at the same time is the magic question. That’s what they’re trying to figure out,” said a mayoral confidant, who asked not to be named.

the district had to borrow money to make a $634 million pension payment.Jesse Ruiz said Tuesday in a statement that the district must make $200 million in cuts.

http://wgntv.com/2015/06/30/madigan-chicago-public-schools-to-make-full-634m-pension-payment/

Not that the Unions expect anything other than the payment to be made:

Whether the heat gets turned up outside Chicago, one thing is certain: a Chicago Teachers Union that went on strike in 2012 and has threatened to walk out again this year expects the $634 million pension payment to be made on time.

“There is no option. The Illinois Supreme Court said these are vested benefits. They must make the payment. Under the Illinois Constitution they must honor the law,” said CTU spokeswoman Stephanie Gadlin.

http://www.chicagotribune.com/news/local/politics/ct-chicago-schools-pension-payment-met-0702-20150701-story.html

For now it seems CPS has (barely) made their pension payments - by borrowing more money, cutting education programs and cutting 1,400 jobs.

The Mayor is also calling for an increased property tax to help pay for the pensions if the teachers agree to pay more

Emanuel also proposed a $175 million property tax increase to help pay for teacher pensions but only if the state and Chicago's teachers chip in as part of what the mayor described as a "grand bargain" to put an end to the district's perennial money woes.

But the Union seems pissed that teachers might have to pay more than 22% of their required pension contribution

The union also is upset over Emanuel's proposal to end the practice of having the city pick up all but 2 percent of the 9 percent pension contribution required of teachers

Can't leave out the state mistreating Chicago

Chicago teachers, Chicago taxpayers and Chicago kids are being treated as second-class citizens by the state of Illinois," Emanuel said.

And are demanding more help from the state. I mean, its not like Illinois as a state is facing the largest budget shortfall of any state or anything

http://www.rebootillinois.com/2015/05/11/editors-picks/caitlinwilson/illinois-is-the-worst-of-22-states-with-budget-deficits/37698/

But they made the payments and kicked the can down the road (extending funding goals out to 2055 instead of 2040). Surely we've learned from this right?

Or maybe not:

One day after using borrowed money and savings generated by 1,400 layoffs to make a $634 million payment to the teachers pension fund, Mayor Rahm Emanuel’s administration is asking the pension fund for a five-month, $500 million loan.

All we’re asking for is cash-flow relief. And in fact, we’re saying because we understand how important the funds are to you, part of this agreement includes a 7.75 percent return

Because that is a totally safe assumption... and this move only kicks the can down the road by a year:

The city wants to lay out only $180 million for 2016, followed by $500 million more in 2017. But that will collide with CPS’ already-scheduled $700 million pension payment for 2017. In a single year, then, CPS will owe the Chicago Teachers Pension Fund fund roughly $1.2 billion. In yet another sign of just how bad things are, the pension fund is on board with the idea.

http://chicago.suntimes.com/editorials-opinion/7/71/737847/editorial-23

The real kicker of this all is that Illinois Public Pensioners don't pay into SS so they have no safety net. Exact percentages are debatable but both sides are culpable for this mess but the unions don't seem to have any desire to make any changes to how things work. Sure the law protects them but something is going to break eventually and without a SS net they stand to lose a whole heck of a lot. Yeah I get what you were promised but demanding it now is going to cause a whole shit load of problems later. And we are likely talking about in their lifetime - so its not even like it's the next guy's problem. Nope - this will be Future You's problem. My wife and I went through this with her pension changes and I would absolutely rather deal with this now when the pain and cuts will be less than when the bottom falls out

 

[Darwin333]

They are going to drive it straight into the ground and eventually the pension checks are not going to get cut because there will be no money. Math doesn't lie.

 

[piasabird]

The reason why public employees who live in Illinois don't pay SS is because the state does not want to pay the employer's matching funds for the Employer's part of the SS payments. This actually saves the state money in the long run.

Even though I may get a pension, where I work I pay about 8% into a pension plan and the college/state is suppose to matches my savings 100%. This is always subject to change. Many people have cashed out their retirement because they feared possible changes that the state tried to implement. Half of my pension is the money I earned.

The same problem may exist also on the federal level with your social security which you may never receive but are paying anyway. If the Federal Government goes into default good luck with that also.

 

[glenn1]

Sucks to be Illinois. I only wish the state and city could transfer the liabilities onto the personal balance sheets of the residents so even if they moved to another city or state they'd still own the liability. You shouldn't be allowed to vote for policies that bankrupt where you live and then move somewhere else when the bill comes due to avoid paying it.

 

[cubby1223]

Remember the massive Chicago teachers strike just a few years ago and the grand victory they won with higher salaries and greater benefits? Expect even more charter schools to open up in the city along with more public school closings. The thing I really like about Rahm Emanuel is he is very practical and hasn't been playing the stereotypical liberal political favorites with his attempts to right the failures of the city.

 

[K1052]

The unions think they are ultimately protected by the state constitution no matter what happens so they give zero fucks about anybody else or the reality of the situation. This is not a position garnering a lot of sympathy among the voters since the union just wants the government to raise property taxes an enormous amount to cover the gap.

With the state government nearly paralyzed by personality conflicts and power struggles the city has increasingly limited options at it's disposal to stave off a CPS bankruptcy. I don't think anyone in the city or CPS wanted to borrow more just to buy time but there are no options left. The city and state definitely fucked up also by not addressing the predictable pension funding shortfall years ago and also cutting costs across the board as enrollments fell.

 

[cubby1223]

Sucks to be Illinois. I only wish the state and city could transfer the liabilities onto the personal balance sheets of the residents so even if they moved to another city or state they'd still own the liability. You shouldn't be allowed to vote for policies that bankrupt where you live and then move somewhere else when the bill comes due to avoid paying it.

That's part of the reason funds are being used to keep the wealthy within Chicago, rather than diverted to other projects to help the poorer neighborhoods. The city is stuck, analyze the past decisions how you like, the city today must cater to the wealthy moving forward, it's the only option.

The city also puts a lot of money into developing downtown further, again rather than the poorer neighborhoods, it's because the city needs tourist dollars coming in, they cannot lose that revenue.

 

[K1052]

Remember the massive Chicago teachers strike just a few years ago and the grand victory they won with higher salaries and greater benefits? Expect even more charter schools to open up in the city along with more public school closings. The thing I really like about Rahm Emanuel is he is very practical and hasn't been playing the stereotypical liberal political favorites with his attempts to right the failures of the city.

One of Daley's greatest failings is that he bought labor peace and political power at the expense of the city's long term finances. Some people blame Rahm for actually having to make the tough decisions that were decades in the coming. The problems were there long before he ever took office.

The last go around the union got their raises but ultimately had to consent to shrinking CPS by closing and combining under-enrolled schools that were hemorrhaging cash to little effect. They acted surprised/outraged when it happened for the media but they knew where the money was coming from since CPS was already broke as per usual...

 

[Jaskalas]

There's a level of CA state employee that retires at 90% peak income. Large six digit figures, and it's a revolving door rotating through seniority as they are about to retire.

Illinois and other places are just ticking time bombs, with no chance in hell of ever affording their looting.

 

[Exterous]

The same problem may exist also on the federal level with your social security which you may never receive but are paying anyway. If the Federal Government goes into default good luck with that also.

The SS balance sheet is in far (far) greater shape than Illinois not to mention the larger difficulty involved in the Federal Government defaulting

The unions think they are ultimately protected by the state constitution no matter what happens so they give zero fucks about anybody else or the reality of the situation. This is not a position garnering a lot of sympathy among the voters since the union just wants the government to raise property taxes an enormous amount to cover the gap.

From what I can see they are also damaging their reputation with a lot of pro-union types as well. I hear a lot of 'they're giving us bad names' directed towards Chicago and a few other cities.

I will admit I was shocked to see that they only pay 2% for their pensions and were upset that might increase. Their calculations are generous as well 2.2% x FAS x YOS. Michigan gets 1.5% x FAS x YOS with the teachers contributing 7% yet I saw quotes saying how limited their (Chicago) pension benefits are and how terrible the cuts would be. 😵

 

[waggy]

One of Daley's greatest failings is that he bought labor peace and political power at the expense of the city's long term finances. Some people blame Rahm for actually having to make the tough decisions that were decades in the coming. The problems were there long before he ever took office.

The last go around the union got their raises but ultimately had to consent to shrinking CPS by closing and combining under-enrolled schools that were hemorrhaging cash to little effect. They acted surprised/outraged when it happened for the media but they knew where the money was coming from since CPS was already broke as per usual...

I dislike Rahm. BUT the pension trouble is not his doing. He is finally trying to do what needs to be done. though it's not going to be pretty.

I do not want my tax's to go up to pay for it either.

fucking CPS is a joke

 

[BoberFett]

LOL, Chicago and Illinois. Republican economics at work.

 

[piasabird]

I would rather cut welfare than cut pensions. At least people worked for their pensions.

What happened in Detroit is still weighing on people's minds.

How my pension works is I pay in half of my pension from my own paycheck. We also pay for retirement medical benefits every month also.

I work at a community college.

 

[unokitty]

Chicago SunTimes

The Chicago Board of Education didn’t contribute any money at all to the pension fund for administrators, teachers and other CPS employees for a full 10 years between 1995 and 2005.

In state government, the situation grew so dire that the federal Securities and Exchange Commission in 2013 charged Illinois with securities fraud, accusing the state in the mid-1990s of enacting a pension-funding plan that “structurally underfunded the state’s pension obligations and backloaded the majority of pension contributions far into the future.”

What could possibly go wrong?

Uno

 

[CPA]

part of this agreement includes a 7.75 percent return

I about spit out my smoothie when I read this. Not sure what rules are in place for Chicago government investments, but if it's anything like the Feds (ie, Social Security), there's no way in hell he's going to get close to that rate.

 

[boomerang]

Some state will be first, maybe it's going to be Illinois. Others will follow. The pyramid scheme cannot be sustained. Pensions in the private sector are bad enough. In the public sector it's insanity. State and City pensions, Social Security, Medicare it's all coming crashing down. It's just a matter of when.

This is the biggest issue with the progressive/liberal agenda. The math does not work and cannot work. But there is a continual stream of fresh minds that are easily convinced that it will. Look at the support Bernie Sanders is getting. This nation has an enormous capacity to produce people with little to no common sense. Repeating the mistakes of history is something that should never occur if logic and common sense were prevalent. They are obviously not and we are destined to repeat the worst that history has to offer.

 

[sm625]

It wont be long before the Fed is purchasing chitcago bonds. You just wait. As soon as the big banks can acquire enough of them for at most 60 cents on the dollar, they will offload them to the Fed and pocket hundreds of billions more in profits. And the dumbed down masses will not stop what is an obvious racket. They will however, gladly pay the $6 a gallon gas and $9 a pound ground beef that will result after the currency dilutitive effects from this racket take hold.

 

[chucky2]

I dislike Rahm. BUT the pension trouble is not his doing. He is finally trying to do what needs to be done. though it's not going to be pretty.

I do not want my tax's to go up to pay for it either.

fucking CPS is a joke

I don't really trust Rahm is doing any more than doing what Rahm needs to do to make Rahm look good. If that's constantly crow about all the awesomeness he's doing for Chicago and how that's going to benefit Chicago, or pretending to really reign in the Chicago machine (corruption, union control ((which is really just legalized corruption)), then that's what Rahm will do. Rahm is about Rahm first and foremost, not about the long term welfare of Chicago.

All that said, I agree with you - this was all happening before Rahm got brought on to replace Daley. If you're in Crook Co., you can be assured that your taxes are going to go up, one way or the other. We literally cannot move out of this 1.) county and 2.) preferably state soon enough.

 

[unokitty]

State of Illinois operating without a budget

"We don't know. We don't know. We have a meeting at 4 p.m. today, and we are going to know what happens then," Sanchez said.
BUSINESS AS USUAL IN ILLINOIS?

On Wednesday, the governor borrowed $454 million from special state funds to manage Illinois' cash flow and avoid late penalty payments. While state business continued and public parks and driver's license facilities remain open, it isn't clear if workers will receive complete paychecks on their next pay day.

Illinois State Police continue to patrol.

However, the Illinois Department of Human Services is reducing Child Care Assistance Program benefits...

12 million people in Illinois. 11 million people in Greece.

After the Greek referendum, there may be some unemployed Greek politicians.

Experienced with spending money they don't have. Experienced with promising people services that they can't afford...

Not very often Illinois politicians get a chance to hire consultants with so much relevant experience....

Win, win, situation anyone?

Uno

 

[cubby1223]

I'm liking Bruce Rauner so far.

The legislature is doing what they always do - nothing - because by doing as little as possible their re-election is assured, because, what is Illinois going to do, vote Republican?

Previous governor Quinn passed the legislature's budget with a line item veto on legislature salaries. Bold move, but found unconstitutional, no progress made.

Rauner refused all but education in the budget, it's about time the Democrats get with the program and do something useful for Illinois. I'm not holding my breath, though.

 

[chucky2]

Worst thing to happen to Illinois is Rauner. Fucking stupid move to get elected...

 

[jae]

Maybe Chicago public employees don't pay into SS, but Illinois public employees do.

 

[rudder]

Some state will be first, maybe it's going to be Illinois. Others will follow. The pyramid scheme cannot be sustained. Pensions in the private sector are bad enough. In the public sector it's insanity. State and City pensions, Social Security, Medicare it's all coming crashing down. It's just a matter of when.

This is the biggest issue with the progressive/liberal agenda. The math does not work and cannot work. But there is a continual stream of fresh minds that are easily convinced that it will. Look at the support Bernie Sanders is getting. This nation has an enormous capacity to produce people with little to no common sense. Repeating the mistakes of history is something that should never occur if logic and common sense were prevalent. They are obviously not and we are destined to repeat the worst that history has to offer.

Connecticut is trying to fix the issue by raising taxes about $1.1 billion. Which is on the backs of the private sector...

http://www.nationalreview.com/artic...-over-democrats-tax-hikes-mark-antonio-wright

How much further can Illinois raise taxes?

 

[michal1980]

LOL, Chicago and Illinois. Republican economics at work.

you missed the /s tag there.


Illinois is a mixed bag of poor leadership.

Chicago however should be a liberal paradise. High taxes, High benefits. They keep saying that will lead to everyone being happy, supper well educated, low crime and balanced budgets.


HA.

 

[Spungo]

I don't understand how a government pension could be underfunded. Liberals assured me that government pensions are not ponzi schemes. There's some kind of "trust fund" where that money sits, and we just need to give that money to the retired people. Saying that pensions need to be cut due to a lack of suckers new investors would only be true if it were a ponzi scheme.

America, this is your future:

http://news.yahoo.com/greek-pensioners-besiege-banks-grab-cash-115048128.html