Survival And Prosperity

Cook County Public Pension Crisis Worsens

Back on April 9, 2012, I blogged about the public pension crisis in Cook County, Illinois. From that post:

Chicago, Cook County, and Illinois- a trifecta of serious financial concerns.

Hal Dardick talked about all three entities and their growing pension problems early this morning on the Chicago Tribune website:

Cook County’s pension fund will go broke in 26 years without changes that could include an increase in employee contributions and later retirement ages, according to a new analysis.

The report, done under the direction of county Commissioner Bridget Gainer in her role as chairwoman of the board’s pension-oversight panel, shows that it’s not just state and city pension funds that have perilous futures.

Even if the county fund generally is in better shape, Gainer said, that doesn’t mean the county can continue to ignore a funding gap that had grown to $5.2 billion by the end of 2010. That’s seven times the size it was a decade earlier…

(Editor’s note: Italics added for emphasis)

The public pension crisis in the country’s second most populous county has grown worse since I posted that, with the funding gap now having reached $6.79 billion. Paul Merrion revealed on the Crain’s Chicago Business website Wednesday:

Solvency of Cook County’s pension funds deteriorated in the last fiscal year, according to a new report, and county commissioners are pressing anew for reforms.

The county’s main Employees’ Annuity and Benefit Fund saw its pension debt grow to $6.79 billion, up $969.5 million last year and an increase of $1.6 billion in the gap between assets and liabilities since 2010. The plan is only 53.5 percent funded, down from 57.5 percent in fiscal 2011, and the fund is projected to be insolvent by 2034.

(Editor’s note: Italics added for emphasis)

I anticipate Cook County’s financial woes will make themselves known well before that 2034 date. County residents and businesses should plan accordingly.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Merrion, Paul. “Cook County pension woes worsen.” Crain’s Chicago Business. 8 May 2013. (http://www.chicagobusiness.com/article/20130508/NEWS02/130509769/cook-county-pension-woes-worsenwww.sj-r.com). 10 May 2013.

Tags: Bridget Gainer, Cook County, Employees' Annuity and Benefit Fund, Illinois, local government, public pensions

State Of Illinois Bankrupt By 2015?

While it’s “business as usual” for Illinois politicians, two influential groups grow increasingly-wary of the state’s financial situation. Paul Merrion reported on the Crain’s Chicago Business website back on April 22:

Most wealthy Chicago-area investors are optimistic about the global and national economic outlook, but many fear a downturn in the Illinois economy this year, a new survey finds.

The state’s financial well-being has 76 percent of local investors “very concerned,” while only 46 percent feel that way about the prospects for the U.S. economy, according to a survey by Morgan Stanley Smith Barney LLC. A bit more than half (52 percent) said the state’s pension crisis was their top concern, and 58 percent foresee that the Illinois economy will get worse by year-end.

Speaking of the state’s public pension crisis, a pro-Illinois taxpayer group is warning it has the potential to bankrupt the State of Illinois. John Cody reported on the CBS Chicago website Tuesday:

A conservative watchdog group is warning of dark days ahead for the entire state unless Illinois mends it’s financial ways, and soon.

Taxpayers United President Jim Tobin, is essentially blaming Democrats with a two house super-majority for failing to act on pension reform reform.

“Illinois will be the first state to go bankrupt, unless pension reforms are implemented,” said Tobin.

And Tobin’s numbers suggest it’ll be sooner rather than later.

“Yeah, 2015 is about right,” said Tobin.

And yet, state lawmakers continue to fiddle (waste time on more trivial issues) while Illinois burns.

My prediction? Illinois residents should prepare themselves for a combination of more fees, taxes, and belt-tightening from and by the State. Most likely, sooner rather than later.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Merrion, Paul. “Rich Chicagoans fret about Illinois economy: survey.” Crain’s Chicago Business. 22 Apr. 2013. (http://www.chicagobusiness.com/article/20130422/NEWS02/130419726/rich-chicagoans-fret-about-illinois-economy-survey). 3 May 2013.

Cody, John. “Conservative Watch Dog: Pensions Could Bankrupt Illinois By 2015.” CBS Chicago. 30 Apr. 2013. (http://chicago.cbslocal.com/2013/04/30/conservative-watch-dog-pensions-could-bankrupt-illinois-by-2015/). 3 May 2013.

Tags: Chicago, Democrats, fee hikes, fees, Illinois, Illinois economy, Illinois pension crisis, Jim Tobin, Morgan Stanley Smith Barney, pension reform, public pensions, state government, State of Illinois, tax hikes, Taxpayers United of America

City Of Chicago On Review For ‘Possible Downgrade’ By Moody’s

“We still have a very strong bond rating. Our fiscal position is getting better every year and we are aggressively managing our liabilities and obligations.”

-City of Chicago Comptroller Amer Ahmad, July 20, 2012, as noted in a July 22, 2012, Chicago Sun-Times article

I’ve been warning Survival And Prosperity readers for some time that the City of Chicago’s finances are not as peachy keen as City Hall would like outsiders to believe.

So much so, the City’s credit rating is on review for a possible downgrade by Moody’s Investors Service. From the Moody’s website earlier today:

Moody’s has announced its final approach to the way it will analyze and adjust pension liabilities as part of its credit analysis of state and local governments. These changes reflect the rating agency’s view that pension obligations are a significant source of credit pressure for governments and warrant a more conservative view of the potential size of the obligations. As a result of this new approach, Moody’s has also placed the general obligation ratings of the cities of Chicago, Cincinnati, Minneapolis, and Portland, OR, and of 25 other US local governments and school districts on review for possible downgrade. The entities whose ratings have been placed on review have large adjusted net pension liabilities relative to their rating category…

Moody’s rates over 8,000 local governments in the United States. Less than 1% of those with general obligation or equivalent ratings have been placed under review because of the new pension adjustments.

(Editor’s note: Italics added for emphasis)

Great. Chicago is in another “select group” it really doesn’t want to belong to these days.

You can read the entire announcement on the Moody’s website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Tags: Amer Ahmad, Chicago, City of Chicago, credit ratings, Illinois, local government, Moody's, pensions, public pensions

Illinois Public Pension Funding Gap Now Over $100 Billion?

It’s been depressing to watch the public pension funding gap keep growing here in Illinois.

The last time I blogged about the subject (March 4), the unfunded debt to the five state pension systems amounted to $96.8 billion.

When I first reported on the public pension crisis on April 28, 2011, state employee pensions were underfunded by more than $80 billion.

And this weekend, I saw on the Crain’s Chicago Business website that the pension shortfall has now passed the $100 billion mark. Paul Merrion wrote this weekend:

Sometime this month, Illinois probably exceeded $100 billion in pension debt, a sorry milestone in the state’s long slog to fiscal hell.

Illinois would be only the second state to reach the 12-digit mark. But California, the previous epic fail, has a much larger tax base and is on the mend.

Pension statistics tend to make eyes glaze over, and the $100 billion moment is an unofficial, back-of-the-envelope calculation. But it’s an undeniably big and potentially symbolic number as state legislators wrestle with the shortfall in money owed to current and future retired teachers, judges, state workers and even lawmakers themselves.

(Editor’s note: Italics added for emphasis)

“A sorry milestone in the state’s long slog to fiscal hell.”

Nicely-worded. And something the state’s residents really need to digest, seeing that “every man, woman and child living in Illinois” is on the hook for $7,767 for this debt according to Merrion.

I’ll tell you one thing. Hearing this latest fiscal faux pas makes me question the wisdom of buying a home in the state this spring considering what looks to be coming down the pipeline. Which sucks, because rents are astronomical for suitable property in the areas where my girlfriend and I prefer to live.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Merrion, Paul. “Illinois hits a sorry milestone.” Crain’s Chicago Business. 25 Mar. 2013. (http://www.chicagobusiness.com/article/20130323/ISSUE01/303239976/illinois-hits-a-sorry-milestone). 25 March. 2013.

Tags: Illinois, pensions, public pensions, rental prices, renting, state government, State of Illinois

Illinois Governor’s Spokesperson: ‘We’re Facing The Worst Recession Since The Great Depression’

Reading the Chicago Tribune website last night I saw that Governor Pat Quinn will be proposing a $30 billion-plus budget this week for the State of Illinois.

The Tribune’s Ray Long provided some of the latest figures showing just how precarious the state’s financial situation really is these days:

• $96.8 billion in unfunded debt to five state pension systems
• $9.7 billion in unpaid bills
• 8.7 percent unemployment in December, almost a percentage point higher than the national unemployment rate
• $6.1 billion annual pension payment in the next budget year- $900 million more than in the current one

One word comes to mind. Fugly.

Then there’s this from Long’s piece:

“When you’re the chief executive, you face challenges from the outside that are not of your making,” said Quinn spokeswoman Brooke Anderson. “The governor’s job is to control the things he can and manage the elements that are outside his control. But I’d say that we’ve been in a perfect storm since the moment Gov. Quinn got here. We’re facing the worst recession since the Great Depression, decades of financial mismanagement that has been culminating in the pension crisis and unpaid bills. And you have to deal with that.”

“We’re facing the worst recession since the Great Depression”

What about that economic recovery Governor Quinn said was taking place here in the “Land of Lincoln?” From a February 6 article on the Tribune website:

“Do we want, in the years to come, a prosperous Illinois where working people continue to have good jobs, where businesses thrive, and where all our children have a world-class education?” Quinn told the House and Senate. “Or do we want to stop the progress and watch our economic recovery stall?”

(Editor’s note: Italics added for emphasis)

Let me guess. That bit about the recession is only the opinion of Quinn’s “mouthpiece.” And she’s trying to shield her boss from some blame.

Fair enough. But the thing is, Ms. Anderson- either knowingly or unknowingly- is on to something. We may not technically be in a recession these days, but for many Illinois residents it probably doesn’t feel like much of a recovery either.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Long, Ray. “Gov. Pat Quinn to unveil $30 billion-plus Illinois budget.” Chicago Tribune. 3 Mar. 2013. (http://www.chicagotribune.com/news/local/ct-met-quinn-budget-20130304,0,7431041,full.story). 3 Mar. 2013.

Garcia, Monique, Long, Ray, and Guerrero, Rafael. “Quinn wants minimum wage hike, assault weapons ban.” Chicago Tribune. 6 Feb. 2013. (http://articles.chicagotribune.com/2013-02-06/news/chi-quinn-to-call-for-minimum-wage-increase-to-10-an-hour-20130206_1_assault-weapons-minimum-wage-pat-quinn-today). 3 Mar. 2013.

Tags: biils, Brooke Anderson, Great Recession, Illinois, Illinois pension crisis, Pat Quinn, pensions, public pensions, state government, State of Illinois, unemployment, unemployment rate

GAO: ObamaCare Could Add $6.2 Trillion To Long-Term Federal Deficit

Here’s another headline-worthy story you may not hear/ready about in the mainstream media. Andrew Stiles reported on the National Review blog The Corner earlier this week:

Obamacare will increase the long-term federal deficit by $6.2 trillion, according to a Government Accountability Office (GAO) report released today.

Senator Jeff Sessions (R., Ala.), who requested the report, revealed the findings this morning at a Senate Budget Committee hearing. The report, he said, “confirms everything critics and Republicans were saying about the faults of this bill,” and “dramatically proves that the promises made assuring the nation that the largest new entitlement program in history would not add one dime to the deficit were false.”

President Obama and other Democrats attempted to win support for the health-care bill by touting it as a fiscally responsible enterprise. “I will not sign a plan that adds one dime to our deficits — either now or in the future,” Obama told a joint-session of Congress in September 2009. “I will not sign it if it adds one dime to the deficit, now or in the future, period.”

You can read Stiles’s entire February 26 post on his blog here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Tags: Affordable Care Act, Barack Obama, Democrats, federal deficits, GAO, Government Accountability Office, healthcare, Jeff Sessions, ObamaCare, Republicans

VP Biden Says Chicago-Area Democratic Primary Result Sends ‘Clear Unequivocal Signal’ To NRA And Politicians

Before I move away from the topic of firearms and gun rights, U.S. Vice President Joe Biden decided to weigh-in on the victory of pro-gun “control” candidate Robin Kelly in the U.S. Congressional 2nd District (Chicago south suburbs plus more) Democratic primary this past Tuesday. According to Reuters’ Roberta Rampton yesterday, Biden told a group of state attorney generals:

For the first time since Newtown, voters sent a clear unequivocal signal… The voters sent a message last night, not just to the NRA, but to the politicians all around the country. There will be a moral price as well as a political price to be paid for inaction.

I’m going to disagree with the VP here. I’d guess that many observers familiar with “The Chicago Way” interpreted the primary as once again demonstrating that race, gobs of money, and having the blessing of “The Machine” wins elections here in the Chicagoland area. And local politicians screaming about the need for more gun “control” is just one more attempt to distract the masses from the crappy economy and huge financial mess these guys have gotten us into ($9 billion in unpaid bills and a $96 billion pension funding gap in Illinois from what I read yesterday).

By the way, going back to that post I published last week about the Vice President answering gun “control” questions at a Parents magazine event and telling one Facebook user they didn’t need an AR-15 for self-defense, get a shotgun instead…

“Buy A Shotgun Joe Biden Lying AR-15”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Rampton, Roberta. “Biden says Chicago vote a sign that voters want action on guns.” Reuters. 27 Feb. 2013. (http://www.reuters.com/article/2013/02/27/us-usa-guns-biden-idUSBRE91Q11N20130227). 27 Feb. 2013.

Tags: AR-15, Chicago, Chicago Democrats, Democrats, gun control, Illinois, Illinois Democrats, Joe Biden, local government, National Rifle Association, NRA, pension crisis, public pensions, rifles, Robin Kelly, shotguns, state government, State of Illinois, The Machine, U.S. Congressional 2nd District

Illinois Could Have Nearly $22 Billion In Unpaid Bills By FY 2018

It’s been a while since I last blogged about the Civic Federation, an independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois. In late September 2011, the Chicago-based organization had just released its analysis of the enacted FY 2012 State of Illinois budget, and noted the financially-challenged state was expected to end the year with over $8 billion in unpaid bills from vendors, local governments, and others (related to business tax refunds, employee and retiree health care and Medicaid).

Over $8 billion in unpaid bills.

Fast forward to today. From a Civic Federation press release Monday:

Illinois’ Unpaid Bill Backlog Projected to Reach $22 Billion by FY2018

State urgently needs long-term plan to address rising pension and Medicaid costs, loss of income tax revenues

(CHICAGO) – An analysis released today by the Civic Federation’s Institute for Illinois’ Fiscal Sustainability shows the State of Illinois is on track to accumulate nearly $22 billion in unpaid bills by FY2018 unless action is taken to curb rising pension costs and plan for increases in the Medicaid program…

“Nearly $22 billion in unpaid bills.”

Illinois residents, get ready to bust out your wallets.

You can read the entire Civic Federation press release here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Tags: Civic Federation, health insurance, Illinois, income taxes, Institute for Illinois’ Fiscal Sustainability, Medicaid, pension crisis, pensions, state government, State of Illinois

Chicago Sees ‘Most Violent January In More Than A Decade’

I have a pretty good idea what a number of you will be thinking as you read this post:

How’s that gun “control” working out for you, Chicago?

From John Byrne, David Heinzmann, and Bob Secter on the Chicago Tribune website late last night:

Following the most violent January in more than a decade and the high-profile slaying of a 15-year-old high school band majorette, Mayor Rahm Emanuel and his police chief moved closer than ever Thursday to reintroducing the very police strategy they dumped when they took over in 2011.

Emanuel said he would move 200 officers off desk duty to bolster the size of roving teams aimed at suppressing outbreaks of murderous violence that have been on the rise in the city for more than a year.

“The most violent January in more than a decade.”

According to the Crime in Chicago blog yesterday, 44 people were murdered and 160 were shot in the city last month.

Now, back on New Year’s Eve, I noted that at the end of a year in which Chicago surpassed 500 murders (534 according to CIC), the number of beat cops was less than before Rahm Emanuel became mayor.

So, why not just hire more police officers then?

Byrne, Heinzmann, and Secter (sounds like a law firm) added:

The head of the police union said retirements and a lack of new hiring amid tight budget years has reduced the size of the force well below what is needed to keep the streets safe.

“No matter how City Hall slices the numbers or spins this issue, the fact remains we have less officers on the street now than when the mayor was elected,” said Mike Shields, head of the Fraternal Order of Police.

At the news conference announcing his new plans, Emanuel said “you don’t ask the taxpayers to pay for additional cops until you make sure you’re using every cop on the payroll today effectively.”

Personally, I think City Hall is well-aware of the significant, fast-approaching fiscal challenges that are in store for Chicago, so basically “what you see is what you get” could be the case for Chicago Police Department manpower. As things stand, taxes will be going up- significantly- but one has to wonder how much of it will be earmarked for the following, which I blogged about back on August 1:

The “Windy City” has a $25 billion pension crisis that will require property taxes to be doubled by 2015 (from an anticipated $476 million this year to $1.2 billion in 2015) if no changes are made to both retirement benefits and City of Chicago employee contributions.

Remember that $2.98 billion the city received when the Chicago Skyway and parking meters were privatized under former Mayor Richard M. Daley? Only $623 million remains.

The analysis comes on the heels of year-end audit findings that show Chicago is in the midst of a debt crisis, adding $465 million of debt in 2011 to a total long-term debt that’s sitting at just over $27 billion.

(Editor’s note: Italics added for emphasis)

Chicagoans- be prepared to bust out those wallets very shortly.

To wrap things up, one sentence in that Tribune piece really stood out for me. Byrne, Heinzmann, and Secter wrote:

But the events of this week show that tragedy can strike anywhere, and calibrating how and where to stretch those resources is difficult in a city with a deeply entrenched culture of violence.

(Editor’s note: Italics added for emphasis)

“Culture of violence?”

Sounds like Second City Cop wasn’t too far off the mark with that “Culture of Death” comment the other day.

Watch your six, Chicago.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Byrne, John, Heinzmann, David and Secter, Bob. “Street violence spurs shift in police strategy.” Chicago Tribune. 31 Jan. 2013. (http://www.chicagotribune.com/news/local/ct-met-emanuel-mccarthy-officers-reassigned-20130201,0,7276684,full.story). 1 Feb. 2013.

Tags: Chicago, Chicago parking meters, Chicago Police Department, Chicago Skyway, City of Chicago, CPD, Crime in Chicago, FOP, Fraternal Order of Police, Garry McCarthy, gun control, Illinois, local government, Mike Shields, murders, pension crisis, pensions, police, property taxes, public pensions, public sector retirees, Rahm Emanuel, Richard M. Daley, Second City Cop

Illinois’ Total Unfunded Liabilities: $275 Billion

The following bit about Illinois’ total unfunded liabilities from a January 28 Investor’s Business Daily editorial was so depressing to read that I originally planned to blog about it much earlier this morning- but needed to step away. From the IBD website:

A recent release by the Illinois Policy Institute shows this [$96.8 billion unfunded debt to five state pension systems] is only the tip of the iceberg and when you add in other liabilities such as $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds that Gov. Pat Quinn and his immediate predecessor, former Gov. Rod Blagojevich, issued to avoid pension reform, Illinois’ total unfunded liabilities amount to $275 billion, or $58,000 in debt for each and every household in the state.

(Editor’s note: Italics added for emphasis)

So what’s it going to be, Illinois? Since a booming economy seems unlikely to return anytime soon, will the Democrat-dominated Illinois General Assembly finally enact significant spending cuts? Raise fees and taxes through the roof? Throw public sector retirees “under the bus?”

They’re going to have to do something real quick.

Or watch the whole thing unravel.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

“Obama’s Illinois Downgrade Makes It America’s Greece.” Investor’s Business Daily. 28 Jan. 2013. (http://news.investors.com/ibd-editorials/012813-642237-credit-downgrade-illinois-standard-poors-worst.htm). 31 Jan. 2013.

Tags: Democrats, fee hikes, fees, health insurance, Illinois, Illinois Democrats, Illinois General Assembly, Illinois Policy Institute, Pat Quinn, pension bonds, pensions, public pensions, public sector retirees, Rod Blagojevich, spending cuts, state government, State of Illinois, tax hikes, total unfunded liabilities, unfunded liabilities