Entitlements

Flee Chicago By The End Of 2015?

April 7, 2015.

That’s the date of the next Municipal Runoff and Supplementary Aldermanic Election in the wake of the February 24, 2015, Municipal General Election in the city of Chicago, Illinois.

And that would be the ideal deadline for moving out of the “Windy City” if I still lived there due to the likelihood of fees, fines, and taxes being hiked (even more than they already have) shortly thereafter, along with additional government “belt-tightening.”

If not April 7, definitely by the end of the year. Hal Dardick reported on the Chicago Tribune website right before the weekend:

Mayor Rahm Emanuel and aldermen won’t grapple this fall with the financial reckoning the city faces over its underfunded police and fire pension systems, budget officials acknowledged Thursday.

Instead, the Emanuel administration plans to take advantage of a state law that gives it until December 2015 to decide to make changes to its property tax levy. For years, both the current and former mayor have been saying property taxes would have to be hiked or services drastically cut to come up with the extra $550 million.

By the end of next year, the February city elections and any potential April runoffs will be history. Delaying a decision also will buy the city more time to get the General Assembly to enact pension changes that could significantly reduce the required payments to the two retirement funds..

(Editor’s note: Bold added for emphasis)

Fine. So the Illinois General Assembly votes to allow the City of Chicago to “kick the can down the road” on its pension fund payments. The well-publicized crisis isn’t going anywhere, as the public sector retirees are still owed their money.

(Editor’s note: Check out this graphic on the Tribune website showing Chicago’s pension debt rank compared to the 25 largest U.S. cities and Puerto Rico. It’s disturbing.)

And how about that “Sword of Damocles” hanging over the city’s head in the form of long-term debt it’s on the hook for? Fran Spielman reported on the Chicago Sun-Times website on July 26, 2013:

The new round of borrowing brings Chicago’s total long-term debt to nearly $29 billion. That’s $10,780 for every one of the city’s nearly 2.69 million residents. More than a decade ago, the debt load was $9.6 billion or $3,338 per resident.

(Editor’s note: Bold added for emphasis)

Remember- those figures were from a year ago. Updated numbers should be out shortly.

Yep. If I hadn’t departed the city like I did last year, I’d be making plans to leave Chicago by the end of 2015 at the latest.

But that’s me. I understand individual circumstances vary, and there are residents who can’t leave or choose not to.

Despite what others may think, I have an idea this group can still weather the coming storm if they’re really up to the task. I’m guessing it will be somewhat harder though residing in a city already burdened with significant financial problems when challenging times arrive.

More about this in future posts…

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

Sources:

Dardick, Hal. “Chicago’s day of reckoning over pensions delayed.” Chicago Tribune. 1 Aug. 2014. (http://www.chicagotribune.com/news/watchdog/ct-rahm-emanuel-budget-hole-met-0801-20140801-story.html). 5 Aug. 2014.

Spielman, Fran. “City of Chicago’s cash cushion plummets, debt triples, arrests drop, water use rises.” Chicago Sun-Times. 26 July 2013. (http://www.suntimes.com/21552920-761/city-by-the-numbers-cash-cushion-plummets-debt-triples-arrests-drop-water-use-rises.html). 5 Aug. 2014.

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Cook County Homeowners Could See Property Tax Hike To Pay For Pension ‘Reform’

Last week, I blogged about the possibility of property and/or sales taxes going up soon in Cook County, Illinois. Dave McKinney and Brian Slodysko reported on the Chicago Sun-Times website on May 13 the hikes might occur as part of a pension “reform” bill.

Hal Dardick and Monique Garcia added on the Chicago Tribune website tonight:

Cook County Board President Toni Preckwinkle hit Springfield Thursday to try to build support for changes to the county pension plan that she says would halt its ongoing decline toward insolvency.

She met with Senate President John Cullerton House Speaker Michael Madigan, both Chicago Democrats, and also Republican legislative leaders. “I think she’s got a good chance to pass this bill,” Madigan said afterward…

Although Preckwinkle has not identified how she would pay for her plan, it calls for the county to put $144 million a year into the pension fund. If funded with property taxes, that would cost the average homeowner up to $65 more a year, starting in 2017, according to one internal county document the Tribune obtained.

Preckwinkle, however, said Wednesday that she has closed even larger budget gaps through cuts and other, smaller scale tax and fee increases without raising property taxes — while also lowering the county sales tax by a half-cent on the dollar…

(Editor’s note: Bold added for emphasis)

Yet, McKinney and Slodysko wrote last week:

County officials do not believe they can cut enough from the budget to cover the cost, the source said…

(Editor’s note: Bold added for emphasis)

Stay tuned. It’s only a matter of time before Chicago and Cook County politicians get around to raising property taxes on a regular basis, if you ask me.

What’s that line I keep repeating on this blog?

Higher fees, fines, and taxes. Less government services.

As much as I hate saying it, that’s what Chicago and Cook County residents should be preparing themselves for down the road.

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

Source:

Dardick, Hal and Garcia, Monique. “Preckwinkle hits Springfield on pension plan.” Chicago Tribune. 22 May 2014. (http://www.chicagotribune.com/news/politics/clout/chi-preckwinkle-hits-springfield-on-pension-plan-20140522,0,4698464.story). 22 May 2014.

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Thursday, May 22nd, 2014 Entitlements, Fiscal Policy, Government, Taxes No Comments

Cook County Property, Sales Tax Hikes Coming Soon?

Property and/or sales taxes could be going up soon in Cook County, Illinois, as part of a pension “fix.” Dave McKinney and Brian Slodysko reported on the Chicago Sun-Times website last night:

Officials are putting the finishing touches on a Cook County worker pension reform bill that is soon expected to emerge in Springfield, the Chicago Sun-Times has learned.

The bill will cut retiree benefits and require workers to pay more toward their pension funds. But it will not address an estimated $144 million in new annual revenue that’s needed to fully fund the pension accounts in 20 years, a source with knowledge of plan said Tuesday.

That decision would be made by the Cook County Board following November’s gubernatorial election, officials with knowledge of the plan said.

But the money will likely be raised through a tax hike — either a sales tax hike, a property tax hike, or a combination of the two — in Cook County, the source said.

That’s because county officials do not believe they can cut enough from the budget to cover the cost, the source said…

(Editor’s note: Bold added for emphasis)

Survival And Prosperity readers shouldn’t be surprised to hear this. I blogged back on April 10:

For a while now (last time being earlier this week), I told my girlfriend we were lucky to have escaped the fiscal debacle and revenue grab going on in the city of Chicago.

At the same time, I pointed out that as Cook County residents we’re still on the hook for the same type of nonsense.

Brian Slodysko reported on the Chicago Sun-Times website yesterday afternoon:

Hoping to ward off another credit rating downgrade, Cook County Board President Toni Preckwinkle said Wednesday that she will soon present a plan to reform the county’s underfunded pension system.

And she’s leaving the door open to hiking property, sales and other taxes.

When asked repeatedly about the possibility of tax increases, Preckwinkle responded: “We’re looking at all the options. Everything is on the table.”

(Editor’s note: Bold added for emphasis)

Slodysko and McKinney were the only ones talking about the proposed pension “fix” on the local news sites I visited this morning.

Which is kind of sad, if you ask me.

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

Source:

McKinney, Dave and Slodysko, Brian. “County pension reform headed to Springfield.” Chicago Sun-Times. 13 May 2014. (http://politics.suntimes.com/article/springfield/county-pension-reform-headed-springfield/tue-05132014-714pm). 14 May 2014.

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Wednesday, May 14th, 2014 Entitlements, Fiscal Policy, Government, Taxes No Comments

CBO: Updated 2014-2024 Budget Projections Show Substantially Rising Budget Shorfalls, Federal Debt

That idea that the U.S. could someday resemble a “banana republic” might not be too far off the mark. From the non-partisan Congressional Budget Office website today:

As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year…

Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. CBO expects that cumulative deficits during that decade will equal $7.6 trillion if current laws remain unchanged. As a share of GDP, deficits are projected to rise from 2.6 percent in 2015 to about 4 percent near the end of the 10-year period. By comparison, the deficit averaged 3.1 percent of GDP over the past 40 years and 2.3 percent in the 40 years before fiscal year 2008, when the most recent recession began. From 2015 through 2024, both revenues and outlays are projected to be greater than their 40-year averages as a percentage of GDP (see the figure below)…

In CBO’s baseline projections, federal debt held by the public reaches 78 percent of GDP by 2024, up from 72 percent at the end of 2013 and twice the 39 percent average of the past four decades (see the figure below). As recently as the end of 2007, federal debt equaled just 35 percent of GDP

Such high and rising debt would have serious negative consequences. Federal spending on interest payments would increase considerably when interest rates rose to more typical levels. Moreover, because federal borrowing would eventually raise the cost of investment by businesses and other entities, the capital stock would be smaller, and productivity and wages lower, than if federal borrowing was more limited. In addition, high debt means that lawmakers would have less flexibility than they otherwise would to use tax and spending policies to respond to unexpected challenges. Finally, high debt increases the risk of a fiscal crisis in which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates…

(Editor’s note: Bold added for emphasis)

You can read the entire assessment and view the complete document on the CBO website here.

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

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85% Of Public Pension Funds To Fail In 30 Years?

Caught the following yesterday on the USA Today website regarding a looming national public pension crisis. Matt Krantz reported Wednesday:

Influential and well-regarded hedge fund Bridgewater Associates Wednesday warns public pensions are likely to achieve 4% returns on their assets, or worse. If Bridgewater is right, that means 85% of public pension funds will be going bankrupt in three decades

Public pensions have just $3 trillion in assets to invest to cover future retirement payments of $10 trillion over the next many decades, Bridgewater says. An investment return of roughly 9% a year is needed to meet those onerous obligations…

(Editor’s note: Bold added for emphasis)

Westport, Connecticut-based Bridgewater was founded in 1975, and “manages approximately $150 billion in global investments for a wide array of institutional clients, including foreign governments and central banks, corporate and public pension funds, university endowments and charitable foundations,” according to their website.”

I don’t want to steal USA Today’s thunder here, so you can read the entire story on their website here.

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

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Friday, April 11th, 2014 Bankruptcy, Entitlements, Retirement No Comments

Cook County Residents To Get Hit With Tax Hikes Soon?

For a while now (last time being earlier this week), I told my girlfriend we were lucky to have escaped the fiscal debacle and revenue grab going on in the city of Chicago.

At the same time, I pointed out that as Cook County residents we’re still on the hook for the same type of nonsense.

Brian Slodysko reported on the Chicago Sun-Times website yesterday afternoon:

Hoping to ward off another credit rating downgrade, Cook County Board President Toni Preckwinkle said Wednesday that she will soon present a plan to reform the county’s underfunded pension system.

And she’s leaving the door open to hiking property, sales and other taxes.

When asked repeatedly about the possibility of tax increases, Preckwinkle responded: “We’re looking at all the options. Everything is on the table.”

(Editor’s note: Bold added for emphasis)

Slodysko added later in the piece:

Preckwinkle declined to discuss specifics, but she did say that any plan that goes before the Legislature will not have property tax increase language written into the bill

(Editor’s note: Bold added for emphasis)

Okaaay… so that means Preckwinkle’s not “leaving the door open” to hiking property taxes?

Regardless, based on what I see coming down the line for us, it’s only a matter of time.

Last summer, Cook County saw its bond rating lowered by one of the major credit rating agencies supposedly due to its public pension liabilities. I blogged on August 20, 2013:

In the wake of significantly downgrading the City of Chicago’s credit rating, bond credit rating giant Moody’s Investor Service lowered Cook County’s bond rating a notch last Friday. In a news release from the Moody’s website right before the weekend:

New York, August 16, 2013 — Moody’s Investors Service has downgraded the rating on Cook County’s (IL) general obligation (GO) debt to A1 from Aa3, affecting $3.7 billion of general obligation debt. The outlook remains negative.

SUMMARY RATING RATIONALE

The downgrade of the GO rating reflects Cook County’s growing pension liabilities…

(Editor’s note: Bold added for emphasis)

Stay tuned…

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

Source:

Slodysko, Brian. “Preckwinkle won’t rule out tax increase to strike pension deal.” Chicago Sun-Times. 9 Apr. 2014. (http://politics.suntimes.com/article/chicago/preckwinkle-wont-rule-out-tax-increase-strike-pension-deal/wed-04092014-523pm). 10 Apr. 2014.

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Chicago Public Pension Crisis Latest

Last Tuesday, I blogged about Chicago Mayor Rahm Emanuel’s attempt to address some of the City’s public pension woes via larger contributions by City employees and $50 million tax increases for five straight years- beginning next year and continuing through 2019- for Chicago property owners.

There’s been a lot of chatter regarding this proposal and other pension “reform” activity today. Karen Pierog reported on the Reuters website:

Legislation to ease funding shortfalls in two of Chicago’s four retirement systems is a modestly positive credit step but not a permanent fix, Moody’s Investors Service said on Monday

Moody’s said that if enacted into law, the measure would immediately reduce the unfunded liabilities in the two funds.

“However, we expect that the (liability) would then escalate for a number of years before declining. Accrued liabilities would exceed plan assets for years to come, and if annual investment returns fall short of the assumed 7.5 percent, the risk of plan insolvency may well reappear,” the credit rating agency said in a report…

After breezing through an Illinois House committee on April 2, the bill has stalled. Moody’s said that even if the bill makes it out of the legislature, Governor Pat Quinn must sign it. The law would then face potential challenges to its legality under the Illinois constitution, which prohibits the impairment of retirement benefits for public sector workers…

(Editor’s note: Bold added for emphasis)

So will the Illinois Governor and fellow Chicago Democrat sign off on Mayor Emanuel’s proposed legislation?

John Byrne and Monique Garcia reported on the Chicago Tribune website this afternoon:

Gov. Pat Quinn today came out against Mayor Rahm Emanuel’s plan to raise Chicago property taxes and cut retirement benefits as a way to shore up some of Chicago’s government worker pension systems.

The re-election seeking Democratic governor called the bill floating around Springfield “a sketch” that “kept changing by the hour” and blasted the property tax as a “lousy tax” because it is not based on the ability to pay…

“I don’t think that’s a good way to go,” Quinn said of hiking property taxes. “And I say it today and I’ll say it tomorrow, they’ve got to come up with a much better comprehensive approach to deal with this issue. But if they just think they are going to gouge property tax owners, no can do. We’re not going to go that way.”

(Editor’s note: Bold added for emphasis)

Now, as I pointed out in last week’s post about Chicago’s public pension crisis:

There’s still a state-required $600 million contribution due next year from the City to stabilize police and fire pension funds that this proposed property tax hike doesn’t address and has to be dealt with…

(Editor’s note: Bold added for emphasis)

Plus, I read the following this morning by Chacour Koop on the website of The State Journal-Register (Springfield):

After addressing Illinois’ own employee pension crisis, lawmakers now face an equally challenging task with the state’s cities, as mayors demand help with underfunded police and firefighter pensions before the growing cost “chokes” budgets and forces local tax increases.

The nine largest cities in Illinois after Chicago have a combined $1.5 billion in unfunded debt to public safety workers’ pension systems. Police and fire retirement funds for cities statewide have an average of just 55 percent of the money needed to meet current obligations to workers and retirees…

The problems — a history of underfunding, the expansion of job benefits and the prospect of crushing future payments — mirror those that Chicago Mayor Rahm Emanuel warned about when he asked the legislature for relief last week.

In 2016, state law requires cities to make required contribution increases — in some cases, more than an additional $1 million annually — so they’ll reach 90 percent funding by 2040. If they don’t, the state will begin doing it for them, diverting grant money now used by cities elsewhere directly into the pension funds…

(Editor’s note: Bold added for emphasis)

Just like the Illinois General Assembly- dominated by Democrats- barely passed legislation on December 3, 2013, that was touted as a “fix” for the state’s $100 billion public pension crisis (it isn’t), something tells me an accommodation may be reached with fellow Democrats running the City of Chicago so they don’t have to pay the full amount of the state-required $600 million contribution due next year to stabilize police and fire pension funds.

That goes for those large Illinois communities as well.

Watch all the back-patting go on should that “fix” materialize as well.

And the inevitable “blowback” down the road.

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

UPDATE: From Fran Spielman over on the Chicago Sun-Times website early Tuesday morning:

Mayor Rahm Emanuel and House Speaker Michael Madigan Monday stripped out controversial language from city pension legislation that had authorized the City Council to impose a property-tax hike, putting the stalled measure back on the fast-track at the state Capitol.

Madigan, D-Chicago, filed an amendment to Senate Bill 1922 after the House adjourned Monday without taking any action on the stalled legislation. Sources now expect the legislation to be voted upon as early as Tuesday.

(Editor’s note: Bold added for emphasis)

Sources:

Pierog, Karen. “UPDATE 1-Proposed Chicago pension changes positive step but no fix -Moody’s.” Reuters. 7 Apr. 2014. (http://www.reuters.com/article/2014/04/07/usa-chicago-moodys-idUSL2N0MZ1AP20140407). 7 Apr. 2014.

Byrne, John and Garcia, Monique. “Quinn blasts Emanuel’s property tax hike for pensions.” Chicago Tribune. 7 Apr. 2014. (http://www.chicagotribune.com/news/politics/clout/chi-quinn-blasts-emanuels-property-tax-hike-for-pensions-20140407,0,5432729.story). 7 Apr. 2014.

Koop, Chacour. “Illinois’ next pension issue: Police, firefighter funds.” Associated Press. 6 Apr. 2014. (http://www.sj-r.com/article/20140406/NEWS/140409562/-1/json/?tag=1). 7 Apr. 2014.

Spielman, Fran. “Analysis: Rahm’s pension bill revisions solve—and create—problems.” Chicago Sun-Times. 8 Apr. 2014. (http://politics.suntimes.com/article/chicago/analysis-rahm%E2%80%99s-pension-bill-revisions-solve%E2%80%94and-create%E2%80%94problems/mon-04072014-728pm). 8 Apr. 2014.

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Chicago Wakes To Proposed Property Tax Hike On April Fool’s Day

Many Chicagoans probably wish what’s being widely-reported in the local news this morning about a proposed property tax hike is just a silly April Fool’s joke.

It’s not.

Fran Spielman wrote on the Chicago Sun-Times website last night:

Chicago property owners will face $250 million in property tax increases over five years while city employees make increased pension contributions that will cost them at least $300 more a year, under landmark reforms unveiled Monday…

The new revenue the mayor had promised only after pension reform will come in the form of $50 million property tax increases for five straight years, beginning next year and continuing through 2019.

Top mayoral aides estimate that would cost the owner of a home valued at $250,000 with an annual property tax bill of $4,000 roughly $58 more or $290 over the five-year period. That’s on top of expected increases for the Chicago Board of Education and Chicago Park District…

(Editor’s note: Bold added for emphasis)

A couple of thoughts here:

First off, is anyone really surprised this is happening?

Regular readers of this blog shouldn’t be.

Higher fees, fines, and taxes. Less government services.

I’ve been squawking this for quite some time now.


“Black Dynamite- Who saw that coming?”
YouTube Video

Second, a $250,000 home? When discussing a Chicago Board of Education property tax hike last August, I blogged:

$230,000? You’d be hard-pressed to find a home for that little money in my former stomping grounds on the Northwest Side.

The same holds true for a $250,000 one (especially if it’s a property big enough for a family and doesn’t require a ton of work).

Which means many of my old neighbors will be coughing up significantly more than just $58 annually/$290 over five years as a result of this proposed hike.

And they already pay a big chunk of change to the City’s coffers.

Third, Spielman added last night:

The bottom line, according to Emanuel, is a plan that spreads the burden between employees, retirees and homeowners without raising property taxes so high that it triggers a mass exodus to the suburbs…

“Mass” being the key word here, because an exodus has already started. Former Chicago residents who have awakened to the “writing on the wall” are moving to the suburbs (yours truly included), leaving Cook County, and departing the state.

The push to make “temporary” personal and corporate income tax hikes permanent and the pursuit of class warfare in the form of a proposed millionaire tax hike by the ruling political party in the city, county, and state certainly don’t help the situation either.

Fourth, I can’t stand when tax hikes are proposed despite the lack of significant belt-tightening. Think the City of Chicago is as lean-and-mean as it possibly can be with its operations and set-up?

As long as 50 aldermanic wards exist, I’d argue no.

Fifth, as it stands right now, there’s still a state-required $600 million contribution due next year from the City to stabilize police and fire pension funds that this proposed property tax hike doesn’t address and has to be dealt with. Hal Dardick an Bill Ruthhart reported on the Chicago Tribune website this morning:

But the proposal the mayor and his top aides outlined late Monday would not address huge pension shortfalls for Chicago police, firefighters and teachers. Nor would it deal with the city’s most immediate, pressing financial problem: a state requirement to pay a whopping $600 million more toward police and fire pensions next year, a provision that could lead to a combination of tax increases, service cuts and borrowing

(Editor’s note: Bold added for emphasis)

You read right. Possibly more “tax increases, service cuts and borrowing” coming down the line shortly for Chicago residents.

Stay tuned…

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

Sources:

Spielman, Fran. “Pension deal pinches city workers and taxpayers.” Chicago Sun-Times. 31 Mar. 2014. (http://politics.suntimes.com/article/chicago/exclusive-pension-deal-pinches-city-workers-and-taxpayers/mon-03312014-821pm). 1 Apr. 2014.

Dardick, Hal and Ruthhart, Bill. “Emanuel’s pension fix: Shrink benefits, raise taxes.” Chicago Tribune. 1 Apr. 2014. (http://www.chicagotribune.com/news/local/ct-rahm-emanuel-pension-property-tax-increase-met–20140401,0,1662095,full.story). 1 Apr. 2014.

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Wisconsin Cuts Taxes While Illinois Looks To Make 2011 ‘Temporary’ Tax Hikes Permanent

Throughout the years, I’ve known/met a number of Illinois residents who can’t stand Wisconsin. Mostly from the Chicago area, they equate Wisconsin and its residents as being unsophisticated clowns.

I wonder if they haven’t noticed by now that the only circus around is in the “Land of Lincoln.”

While Illinois falls deeper into an economic abyss (public pension fix my butt), Wisconsin seems to have gotten their finances under control and look to be on the path to prosperity.

So much so they’re cutting taxes. Again.

Patrick Marley and Jason Stein reported on the Milwaukee Journal Sentinel website Monday afternoon:

Lowering taxes for the third time in less than a year, Gov. Scott Walker signed his $541 million tax cut bill in a ceremony Monday at a farm in Cecil as he travels through central and northern Wisconsin touting it.

Speaking at Horsens Homestead Farms, about 35 miles northwest of Green Bay, Walker called it a great day for Wisconsin taxpayers and a sign of the state’s shifting financial fortunes in recent years.

“Now, instead of billion dollar budget deficits, we have a surplus — and today that money is on its way to the workers, parents, seniors, property owners, veterans, job creators and others. You deserve to keep as much of your hard-earned money as possible — because after all, it is your money,” Walker said.

With growing tax collections now expected to give the state a $1 billion budget surplus in June 2015, Walker’s tax proposal will cut property and income taxes for families and businesses, and zero out all income taxes for manufacturers in the state.

Though the state’s tax revenue is increasing, GOP lawmakers and Walker are trimming state spending slightly for the next three years rather than increasing it

(Editor’s note: Italics added for emphasis)

Meanwhile, across the Cheddar Curtain in Illinois there’s this on the website of The State Journal-Register (Springfield). Doug Finke reported Friday:

Hundreds of employees would be laid off, state facilities would be closed and thousands of prison inmates released without supervision, state agency directors told senators Friday during a hearing to gauge the effect of possibly severe spending cuts next year.

During a more than three-hour joint hearing of the two Senate Appropriations committees, agency after agency warned of drastic consequences should they be forced to cut their current budgets by 20 percent.

“There would be extreme consequences for the economy across Illinois,” warned Ben Winick of Gov. Pat Quinn’s budget office. “Over a dozen state facilities would have to close. Thousands of state employees would have to be laid off.”

The hearing occurred just days before Quinn is scheduled to finally deliver his budget outline for the fiscal year that starts July 1…

Translated? Illinois residents, this is what will happen if you don’t support making the Democrat-led temporary 67 percent personal income tax hike and 46 percent corporate income tax hike implemented in January 2011 permanent next year.

I hear Governor Quinn will be delivering his budget plan tomorrow.

Instead of ridiculing Wisconsin, us FIBs (F***ing Illinois Bastards as we’re known by up there) might want to start emulating our neighbors to the north in certain respects before we completely destroy Illinois.

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

Sources:

Marley, Patrick and Stein, Jacob. “Scott Walker signs tax cut legislation.” Milwaukee Journal Sentinel. 24 Mar. 2014. (http://www.jsonline.com/news/statepolitics/scott-walker-set-to-sign-tax-cut-legislation-b99231851z1-251936261.html). 24 Mar. 2014.

Finke, Doug. “State agencies outline cuts if forced to make 20% reductions.” The State Journal-Register. 21 Mar. 2014. (http://www.sj-r.com/article/20140321/NEWS/140329821). 24 Mar. 2014.

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State Of Illinois Deficit Grew By $49 Million Over Last Fiscal Year

The deficit for the State of Illinois is approaching $45 billion. And tucked inside a news release on Illinois Comptroller Judy Baar Topinka’s website yesterday was the following which showed the deficit widened over the last fiscal year. From “Topinka announces earliest state financial report release since 2006”:

The State of Illinois’ net position was reported as a deficit of $44.799 billion as of June 30, 2013. That represents a $49 million decrease in net position compared to the deficit of $44.750 billion at June 30, 2012. The State’s assets increased $3.762 billion from the prior year, offset by an increase in liabilities of $3.811 billion. The increases in liabilities resulted mainly from increases in the State’s net pension obligation of $1.720 billion and net other postemployment benefit obligations of $1.753 billion

You can read the entire news release on the State of Illinois Comptroller’s website here.

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

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Chicago, The Writing Is On The Wall

The city of Chicago is in for some tough times down the road.

“The Machine” keeps putting a positive spin on the city’s deteriorating financial condition, but the numbers don’t lie. I’ve rattled them off time and time again, the most recent being Tuesday. The Chicago press (sans Fran Spielman over at the Chicago Sun-Times and a few others) has even caught on, publishing articles with more frequency these days that reveal just how ugly the city’s finances truly are. Case in point, a Chicago Tribune editorial entitled “Chicago is on the road to Detroit” that appeared on their website yesterday. From the piece:

By the most recent numbers, Mayor Rahm Emanuel’s government owes $13.9 billion in general obligation bond debt, plus $19.5 billion in unfunded pension obligations. Add in Chicago Public Schools and City Hall’s other “sister agencies” and you’re talking billions more in debts that Chicago taxpayers owe. Yet here we are on a Wednesday when the mayor probably will get approval from a derelict City Council to issue another up-to-$900 million in bonds backed by property taxes — and to double, to $1 billion, the amount of short-term bank money his administration can borrow to raise cash…

(Editor’s note: Italics added for emphasis)

By the way, Mayor Emanuel got that approval. Fran Spielman reported on the Chicago Sun-Times website Wednesday morning:

Without a word of debate, the City Council on Wednesday blindly added $1.9 billion to Chicago’s mountain of debt even though aldermen have no idea how the money will be spent.

The vote was 43-to-4. “No” votes were cast by Aldermen Bob Fioretti (2nd), Scott Waguespack (32nd), Brendan Reilly (42nd) and John Arena (45th)…

Now, I’ve heard/read some Chicagoans say something along the lines of don’t worry about the city’s finances, Governor Quinn and the State of Illinois or President Barack Obama and the federal government will ride to the rescue of their fellow Democrats in control of the “Windy City.”

To which I say, I’m not so sure. Is there anyone in America who doesn’t know how much of an economic basket case the “Land of Lincoln” is? A $100.5 billion public pension debt and the worst credit rating of all 50 U.S. states routinely make headlines across the country. As for the federal government, I keep encountering the words “insolvent” and “bankrupt” more and more these days to describe the nation’s finances. And don’t think for a second other economically-challenged cities across the country won’t cry foul to the Oval Office and their elected representatives if Chicago is bailed out. I find it hard to believe the State of Illinois or the Feds could come to Chicago’s rescue without there being serious financial and political repercussions.

Chicago, the writing is on the wall. By the looks of things, that great city where I was born and from which I recently just left is now past the proverbial point of no return, no longer looking capable of effectively navigating the growing financial crisis.

While I don’t foresee the city’s death, I do envision a continuation of its already gradual decline until a point of fiscal implosion is reached. Will it be Detroit-esque in its bottoming out? I don’t know. But it sure as hell won’t be pretty.

Faced with such a scenario, will Chicagoans choose to stay and contend with the almost certain prospect of much higher taxes and fees in conjunction with curtailed city services (public safety comes to mind here), or will they depart the “Second City” like I did?

One might think the latter (going), but I’m sure there will be plenty of the former (staying).

In the interests of surviving and prospering, which is the better choice?

I don’t think the answer is as clear-cut as many readers might think. And it’s something I’ll be exploring and blogging about more in the coming days.

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

Sources:

“Chicago is on the road to Detroit.” Chicago Tribune. 5 Feb. 2014. (http://www.chicagotribune.com/news/opinion/editorials/ct-chicago-debt-edit-0205-20140205,0,3757189.story). 6 Feb. 2014.

Spielman, Fran. “City Council OKs going $1.9 billion deeper into debt.” Chicago Sun-Times. 5 Feb. 2014. (http://www.suntimes.com/25398572-761/city-council-oks-going-19-billion-deeper-into-debt.html). 6 Feb. 2014.

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Growing Illinois Fiscal Fiasco Makes Wisconsin Relocation More Attractive

Regular readers of Survival And Prosperity may recall me blogging from time to time that as things stand, Wisconsin- not Illinois- looks to be my primary state of residence down the road. For example, I wrote back on January 29 of last year:

By the time I started this blog back in November 2010, I already had a pretty good idea I’d eventually be leaving the city of Chicago to reside someplace else. And every once in a while, I’d query the “best places” to live in America- should TSHTF or not. While the area of southeastern Wisconsin I’m looking at moving to in a few years is probably not “ideal” (even less so the suburbs of Chicago) from a prepper’s perspective, practitioners of modern survivalism would probably see more positives than negatives with the location. Keeping in mind that not only do I envision a certain lifestyle for myself down the road, but I also think I have a pretty good idea of what will be required to “survive and prosper” in America in the coming years, this part of the Midwest really appears to be a nice fit not only for me but my girlfriend as well. Here’s hoping it is…

Sure, certain Wisconsin taxes tend to be higher than in the “Land of Lincoln.” But at least it’s not a fiscal basket case, where I can envision Illinois one day leapfrogging our neighbors to the north when it comes to levels of revenue collection.

Chicago Tribune columnist Dennis Byrne reminded the paper’s readers just how precarious our financial situation has gotten here in Illinois… in addition to suggesting a state we might want to consider emulating. He wrote on the Tribune website on January 28:

Illinois is a stinking mess.

A steaming heap of suffocating debt, endless greed, blind self-interest and numbing incompetence. How we’ve been able to survive this long without plunging into the abyss is beyond me, and all reason.

No need here to document all of the state’s failures. Way behind on its bills. The nation’s worst credit rating. Higher unemployment than the nation. Business wanting to scram, fed up with an unfriendly entrepreneurial climate. Crushing pension obligations so far into the future that no one alive today, even if they ponied up every cent they made (after taxes, of course), will ever see the end of it.

Illinois is run by a self-renewing, power-hungry, piggish oligarchy so impervious to change (I hesitate to use the word reform, because true reform is as rare in Illinois as is the sight of Pike’s Peak) that it makes feudalism look good.

Don’t try to argue that a recent package of minor changes to the public employees’ pension system, grudgingly enacted by the serfs in the state legislature, is reform. Even if it were, it’s going nowhere because it will be dead on arrival in Illinois’ courts. That’s because the hoggish public employee unions were able, at the last minute, to ram into the state constitution a provision that guarantees their cupidity will be fed, well, forever.

What makes it all so vexing is how close the answer to our problems is: Wisconsin.

While Illinois is circling the drain, Wisconsin has saved itself from a similar fate and, in the aftermath of the longest-lasting recession since Amelia Earhart became the first woman to fly solo across the Atlantic Ocean, is actually doing OK, if not prospering…

“Prospering.”

It’s been a long time since I’ve heard/seen that word associated with Illinois.

Which is too bad, because I really do love this state and my fellow Illinoisans.

But seeing as my goal remains not only to survive but prosper as the times become more tumultuous, Byrne’s observation further convinces me my future still lies up north.

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

Source:

Byrne, Dennis. “Illinois Should Look To Wisconsin.” Chicago Tribune. 28 Jan. 2014. (http://www.chicagotribune.com/site/ct-oped-byrne-0128-20140128,0,5528813.column). 3 Feb. 2014.

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Chicago’s Finances A Mess For 2014 And Beyond

The beginning of the new year is always a popular time for predictions.

Here’s one I’ve heard being uttered with more regularity lately:

“Chicago’s the next Detroit”

You may recall that back on December 3, the City of Detroit officially became the largest municipality in U.S. history to enter Chapter 9 bankruptcy.

I’m guessing those making that comment presume the “Windy City” is going to be bankrupt too.

I just got done reading another comparison to Detroit being made again. This time it’s from TheStreet.com, the U.S. financial news and services website co-founded by Jim Cramer, host of CNBC’s Mad Money. Jonathan Yates wrote on December 30:

A recent report by the Economist Intelligence Unit rated Chicago one of the top 10 cities in the world for its ability to “attract capital, business, talent and tourists.”

Although that certainly will focus global attention on “The Second City,” Chicago’s precarious financial condition could result in it becoming even more well known — for going broke…

At least Detroit had an excuse with the collapse of the automobile industry.

The major reason for Chicago’s financial woes is mismanagement. The city’s employee costs, especially for pensions, are unsustainable…

Yates, a contributor to TheStreet.com, suggests investors avoid Chicago bonds. He pointed out later in his piece:

Chicago is a great city with great restaurants, great museums and great architecture.

But those are not reasons to buy its bonds, because Chicago’s finances are a mess, and that won’t change anytime soon…

“Chicago’s finances are a mess, and that won’t change anytime soon…”

Sadly, I agree with him there.

Now, Yates mentioned Chicago’s public pension crisis. Back on August 5, The New York Times highlighted just how serious a threat it is to the city’s well-being. Monica Davey and Mary Williams Walsh reported on the Times website:

Corporations are moving in, and housing prices are looking better across the region. There has been a slight uptick in population. But a crushing problem lurks beneath the signs of economic recovery in Chicago: one of the most poorly funded pension systems among the nation’s major cities. Its plight threatens to upend the finances of President Obama’s hometown, now run by his former chief of staff, Rahm Emanuel.

The pension fund for retired Chicago teachers stands at risk of collapse. The city’s four funds for other retired city workers are short by $19.5 billion. At least one of the funds is in peril of running out of money in less than a decade. And starting in 2015, the city will be required by the state to make far larger contributions to the funds, which could leave it hundreds of millions of dollars in the red — as much as it would cost to pay 4,300 police officers to patrol the streets for a year

(Editor’s note: Italics added for emphasis)

Rick Lyman of the Times added on December 4:

Under state law, the city must increase its contributions to its workers’ pension funds by $590 million in 2015, to a total annual contribution of $1.4 billion for current and future retirees. If no pension deal can be reached by November of next year, when the city will draft its next budget, the city will either have to raise taxes or cut services or some combination of both

(Editor’s note: Italics added for emphasis)

City Hall and their supporters can spin Chicago’s growing financial crisis as much as they want. But at the end of the day, they’ve got all the above problems to contend with as well as a long-term debt that’s now up to nearly $29 billion, or $10,780 for every city resident, according to the latest City of Chicago official audit.

I became aware of the extent of Chicago’s financial woes a couple of years back.

It’s a big reason why my girlfriend and I moved out of the city when we did.

I’ve been warning about this debacle for some time now on this blog. I can only hope my Chicago-based readers have taken note of it and are at least thinking about how they might minimize their exposure to the coming mess.

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

Sources:

Yates, Jonathan. “Avoid Chicago’s Bonds; It Could Be the Next Detroit.” TheStreet.com. 30 Dec. 2013. (http://www.thestreet.com/story/12188473/1/avoid-chicagos-bonds-it-could-be-the-next-detroit.html). 3 Jan. 2014.

Davey, Monica and Walsh, Mary Williams. “Chicago Sees Pension Crisis Drawing Near.” The New York Times. 5 Aug. 2013. (http://www.nytimes.com/2013/08/06/us/chicago-sees-pension-crisis-drawing-near.html?pagewanted=1&_r=0&src=me). 3 Jan. 2014.

Lyman, Rick. “Chicago Pursues Deal to Change Pension Funding.” The New York Times. 4 Dec. 2013. (http://www.nytimes.com/2013/12/05/us/chicago-pursues-deal-to-change-pension-funding.html?_r=0). 3 Jan 2014.

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Welfare Recipient: ‘Can You Really Blame Us? I Mean, I Get To Sit Home, I Get To Go Visit My Friends All Day, I Even Get To Smoke Weed’

“The point is these programs are not typically hammocks for people to just lie back and relax. These programs are almost always temporary means for hardworking people to stay afloat while they try to find a new job or go into school to retrain themselves for the jobs that are out there, or sometimes just to cope with a bout of bad luck. Progressives should be open to reforms that actually strengthen these programs and make them more responsive to a 21st century economy.”

-U.S. President Barack Obama, remarking on economic mobility, December 4, 2013

And then there’s “Lucy,” calling in to KLBJ radio station in Austin, Texas, in October. This alleged welfare recipient told listeners:

I just wanted to say while workers out there- people like you that are preaching morality at people like me who are living on welfare- can you really blame us? I mean, I get to sit home, I get to go visit my friends all day, I even get to smoke weed. Me, and people that I know that are illegal immigrants that don’t contribute to society- we still gonna get paid. Our checks are going to come in the mail every month, and it’s going to be on time. And we get subsidized housing. We even get presents delivered to our kids for Christmas. Why should I work?

Personally, I think there may be a lot more “Lucy’s” out there than President Obama’s remarks would have you believe.


“Welfare Recipient: ‘I Get to Sit Home… I Get to Smoke Weed… We Still Gonna Get Paid'”
YouTube Video

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

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Thoughts On Illinois State Lawmakers Passing Public Pension ‘Fix’

The Illinois General Assembly barely passed legislation yesterday that’s been touted to “fix” the state’s $100 billion public pension crisis.

Illinois Governor Pat Quinn, who has promised to sign SB0001, declared in a press release Tuesday:

Since I took the oath of office, I’ve pushed relentlessly for a comprehensive pension reform solution that would erase a $100 billion liability and restore fiscal stability to Illinois.

Today, we have won. The people of Illinois have won.

Not so fast, big guy.

First off, as I blogged yesterday, the Wall Street Journal recently picked apart the legislative “fix,” and concluded not only was it “fake” but:

Even under the most optimistic forecasts, these nips and tucks would only slim the state’s pension liability down to $80 billion- which is where it was after Governor Quinn signed de minimis fixes in spring 2010 to get him past that year’s election…

Second, this legislation is almost certainly headed to court, as in the Illinois Supreme Court. As I noted on December 1, a provision of the 1970 Illinois Constitution defines public pension benefits as “an enforceable contractual relationship” that “shall not be diminished or impaired.”

Even the top-ranking Democrat in the Illinois Senate wonders if SB0001 can pass legal muster. Ray Long and Monique Garcia reported on the Chicago Tribune website this morning:

Senate President John Cullerton, whose earlier union-backed plan to curb pension spending was stymied by House Speaker Michael Madigan, said he remained concerned that the package passed by lawmakers violated a state constitutional ban on diminishing or impairing public pension benefits.

Cullerton, whose Senate Democrats had been viewed as closer to the unions than Madigan’s House majority, said he viewed it important to get something before the courts to decide whether the approach is legal.

“I think the bill has serious constitutional problems, I’ve made that clear from the start, but now it’s in front of the court and they can decide,” Cullerton said.

And decide they will, meaning this supposed “fix” for the state’s public pension crisis might eventually amount to nothing.

I thought Mark Brown of the Chicago Sun-Times summed it all up well. Brown wrote on the Sun-Times website yesterday afternoon from Springfield:

Oh, how I wish I could tell you that the long fight to fix Illinois’ grossly underfunded public pension plans was at an end with Tuesday’s historic votes by the state Legislature.

But that wouldn’t be true.

First, there will be a court challenge — or more likely challenges — brought by state workers, teachers and their retirees, along with the unions that represent them.

And before those cases can even work their way through the system, state lawmakers will have to decide in early 2014 how they are going to handle Chicago’s pension problems — beginning with those of city teachers.

Other local officials, including Cook County Board President Toni Preckwinkle are clamoring for pension relief as well, which will combine with Mayor Rahm Emanuel’s priorities to keep the issue on the front burner.

If the courts strike down the pension reform plan approved Tuesday on narrow votes by both chambers, or even if they rule out parts of it, we could be back here within a year or two to start over.

(Editor’s note: Italics added for emphasis)

What transpired Tuesday in the Illinois General Assembly might be a first step in “fixing” the state’s public pension crisis, but much more work and sacrifice will eventually be required to arrive at a real solution.

Question is, is the will even there among Illinoisans and their elected state officials to do this?

I kind of doubt it.

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

Sources:

Garcia, Monique and Long, Ray. “Unions vow legal fight as lawmakers OK pension overhaul.” Chicago Tribune. 4 Dec. 2013. (http://www.chicagotribune.com/news/chi-illinois-pension-vote-20131203,0,5070497.story). 4 Dec. 2013.

Brown, Mike. “Brown: State’s financial problems far from over.” Chicago Sun-Times. 3 Dec. 2013. (http://www.suntimes.com/24156150-761/brown-states-financial-problems-far-from-over.html). 4 Dec. 2013.

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Christopher E. Hill, Editor
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