Taxes
Civic Federation: Funding Continues To Decline For Chicago-Area Public Employee Pension Funds
The Chicago-based Civic Federation is out with a new report about the health of Chicago-area public employee pension funds. The independent, non-partisan government research organization that provides analysis and recommendations on government finance issues for the Chicago region and State of Illinois put out the following news release this morning:
Aggregate Unfunded Liability for Chicago-area Public Pension Funds Increased by $4.6 Billion in FY2011
(CHICAGO) A Civic Federation report released today examines the continued funding decline of Chicago-area public employee pension funds. Unfunded liabilities for the ten funds analyzed in the report increased to $32.0 billion in fiscal year 2011 from $27.4 billion in fiscal year 2010, an increase of 16.7% according to the most recent audited data available. For all pension funds supported by the taxes of Chicago residents, including statewide funds, the total unfunded liabilities reached $16,914 per Chicago resident in FY2011.
“Without comprehensive reforms, this staggering level of pension obligations will soon mean dramatic tax increases, significant service cuts or both for Chicago residents,” said Civic Federation President Laurence Msall. “Illinois and local lawmakers owe it to taxpayers and public employees to agree on reforms that will significantly reduce pension costs for our state and local governments and ensure that the funds remain solvent for current and future public employees.” In the report, the Federation urges local governments to develop pension reform frameworks suited to their own employee population, statutory provisions and funding levels. The report cites Cook County Commissioner Bridget Gainer’s OpenPensions.org site as an example of transparently advocating for changes tailored to the needs of the County’s pension fund.
Each of the ten funds analyzed in the report experienced sharp funding declines in the last decade. On average, the ten funds had an actuarial funding level of 50.8% in FY2011, down from 80.3% in FY2002. All ten funds are now funded below 65%, ranging from a low of 28.3% for the Fire Fund to a high of 64.9% for the Laborers’ Fund.
The declining health of Chicago-area public pension funds is due in large part to inadequate employer contributions over a sustained period and recent investment losses. All of the local funds analyzed received their statutorily required employer contributions in FY2011. However, the employer contribution level set by State statute was approximately $1.6 billion short of the $2.5 billion level necessary to cover current costs for the funds and reduce their unfunded liabilities over a 30-year timeframe.
Adequate funding levels are likely to be even more difficult to attain in the future because the funds have fewer employees to support a rising number of beneficiaries. In FY2011 the ten funds had 1.16 active employees for every beneficiary, down from 1.65 actives per beneficiary in FY2002. Six of the ten funds – the Police, Laborers’, MWRD, Forest Preserve, CTA and Park District Funds – had more beneficiaries than active employees in FY2011.
The Federation’s analysis reviews the FY2011 actuarial valuation reports and financial statements for the City of Chicago’s Police, Fire, Municipal and Laborers’ Funds, the Chicago Teachers’ Pension Fund and the pension funds of Cook County, Forest Preserve District of Cook County, Chicago Park District, Metropolitan Water Reclamation District and the Chicago Transit Authority. FY2011 data is the most recent audited data available for all ten funds.
The full 79-page report, available at www.civicfed.org, is intended to provide policymakers, pension trustees, pension fund members and taxpayers with the resources to make informed decisions regarding public employee retirement benefits.
(Editor’s note: Italics added for emphasis)
Even though I’ll be moving out of Chicago very soon, I’ll still be living in Cook County. As such, I won’t be surprised to get hit with more fees and taxes, in conjunction with less government services, as financial challenges grow at the county and state level.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
CEO Survey: Illinois 3rd Worst State In Which To Do Business
Last week, Chief Executive magazine announced the results of its 9th annual survey regarding the best and worst states in which to do business. From their website:
In its ninth annual survey of CEO opinion about the best and worst states in which to do business, 736 CEOs—the highest response on record—rendered their verdict. Business leaders were asked to grade states with which they are familiar on a variety of competitive metrics that CEOs themselves regard as critical. These include: 1) taxation and regulation; 2) quality of workforce; and 3) living environment. The tax and regulatory grade includes a measure of how CEOs grade a state’s attitude toward business, a key indicator.
The best states in which to do business?
1. Texas (9 consecutive years now)
2. Florida
3. North Carolina
4. Tennessee
5. Indiana
Nice job Indiana!
The “Top 5” were unchanged from last year.
And the worst states in which to do business?
1. California
2. New York
3. Illinois
4. Massachusetts
5. New Jersey
Nice going Illinois. Second year in a row in that position.
The faster Illinois residents dump incompetent and ill-intentioned lawmakers, the sooner the state will be able to make headway on a number of real issues. Avoiding insolvency (somewhat of a stretch at this point) and job retention/attraction readily come to mind here.
By the way, our neighbors to the north- Wisconsin- climbed three spots in this latest survey to number 17. JP Donlon wrote on May 6:
More and more states are getting the pro-growth message. Wisconsin governor Scott Walker’s position is typical of this new thinking. “I’ve never seen a store get more customers by raising its prices, but I’ve seen customers knock down doors when they cut prices,” he says.
You can view the rankings of all 50 U.S. states on the Chief Executive website here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Donlon, JP. “States More Aggressive in Competing With One Another.” Chief Executive. 6 May 2013. (http://chiefexecutive.net/states-more-aggressive-in-competing-with-one-another-2013). 13 May 2013.
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.
Quote For The Week
Elections should be held on April 16th- the day after we pay our income taxes. That is one of the few things that might discourage politicians from being big spenders.
-Thomas Sowell (American economist, social theorist, political philosopher and author. 1930- )
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Lake County Paper Ridicules Cook County Gun ‘Control’
Going forward, I’ve got to remember to read the Lake County News-Sun’s “Talk of the County” section more often. From the website of the Waukegan, Illinois-based paper last Friday:
Cook County
Cook County has added another tax to penalize legal gun buyers while the criminals continue to break any and all gun control laws.
Yep. Our neighbors to the north pretty much nailed it on the head.
And how about this gem:
Haw, haw
This has to be the grandest April fool joke that the world has ever heard of, or someone is going nuts beyond remedy. President Obama has declared April as National Financial Capability month. Unbelievable! Haw, haw. How incredulous coming from someone who cannot even prepare a budget and who spends borrowed money as if he were leaving the planet!
Funny but sad at the same time.
Especially since, if I recall correctly, President Bush the Second had the same problem when it came to spending.
Haven’t you heard? The nation does have a spending problem.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
“Talk of the County.” Lake County News-Sun. 5 Apr. 2013. (http://newssun.suntimes.com/news/19270481-418/talk-of-the-county.html). 10 Apr. 2013.
Cook County, Illinois, Sued For New Gun Tax
“You’re welcome to sue. We’ve looked at this and we believe we can survive any challenge.”
-Cook County, Illinois, Board President Toni Preckwinkle, on proposed new taxes on firearm and ammunition purchases within the county, October 18, 2012
On November 9, 2012, the Cook County, Illinois, Board of Commissioners voted 16 to 1 in approving Board President Toni Preckwinkle’s $2.95 billion budget for 2013- and a new $25 per gun “violence tax” on firearm purchases by law-abiding citizens to pay for the carnage caused by violent criminals.
On November 12, I blogged that there was talk of two lawsuits being drawn up against the county as a result of this tax on residents exercising a Constitutional right.
And Thursday night, I came across the following from Cook County Reporter Lisa Donovan on the Chicago Sun-Times website:
A group of Chicago area gun dealers and owners filed a lawsuit Thursday in Cook County Circuit Court, aiming to halt a new $25 tax on every gun purchase in Cook County…
“Proponents of the tax have admitted that its purpose is to curb the number of firearms in circulation. The Tax thus is intended to deter individuals from exercising their fundamental right to keep and bear arms guaranteed by the Second and the Fourteenth Amendments to the United States Constitution and… the Illinois Constitution,” the lawsuit states.
The suit claims the tax infringes “on the right of law-abiding citizens to keep and bear, and law-abiding Retailers to sell, arms as guaranteed” by state and local constitutions.
The gun tax is scheduled to go into effect on April 1.
It’s been claimed that the new tax is also a gun registration scheme being carried out by the second most populous county in the United States. On November 23, 2012, I wrote:
From the website of Maxon Shooters Supplies & Indoor Range (one of the gun shops affected) in nearby Des Plaines:
Did you know the “Violence Tax” would give the city of Chicago & Cook County COMPLETE ACCESS to all records of firearm sales, ammunition and etc. This would ALLOW law enforcement agencies to ENTER YOUR HOME to inventory and audit all your firearms & ammunition WITHOUT A WARRANT!
With the recent passage of Cook County Ordinance Number 13-O-13, which requires “persons who own or possess firearms within Cook County to promptly report to the Cook County Sheriff the loss, theft, destruction or transfer of firearms,” gun registration- whether intended or not- is now in effect in the county. From section 58-190, “Report of transferred firearms:”
A person reporting the sale, transfer, inheritance, or other disposition of a firearm shall provide the following information:
(1) Owner name;
(2) Owner address;
(3) Owner Firearm Owner’s Identification Card number;
(4) Date of acquisition;
(5) Place of acquisition;
(6) Means of acquisition;
(7) Firearm type;
(8) Firearm serial number;
(9) Date of sale, transfer, inheritance or other disposition; and
(10) The name, address, and Firearm Owner’s Identification Card number of the transferee.
No doubt about it, gun registration now exists in Cook County, Illinois. And history shows that confiscation often follows.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Donovan, Lisa. “Gun owners, dealers sue over Cook County’s $25 tax on firearms.” Chicago Sun-Times. 14 Mar. 2013. (http://www.suntimes.com/news/18859382-418/gun-owners-dealers-sue-over-cook-countys-25-tax-on-firearms.html). 16 Mar. 2013.
Chicago Ranks 5th On List Of U.S. Cities With Highest Tax Burdens
New York City-based financial news and opinion organization 24/7 Wall St. recently released their 2013 lists of “American Cities with the Highest (and Lowest) Taxes.”
Alas, my hometown of Chicago ranked fifth on the “highest taxes” list. From the February 25 piece:
5. Chicago, Ill.
> Taxes for family earning $25,000: $3,898 (4th highest)
> Taxes for family earning $150,000: $14,814 (14th highest)
> Unemployment rate: 9.7% (12th highest)As of 2011, Chicago residents paid the highest effective sales tax rate of any city studied, at 9.75%. This increased the tax burden for lower-income earners, who paid a higher percentage of their income in sales taxes. Partly because of the city’s sales tax, a Chicago family earning $25,000 had a state and local tax burden equal to 15.6% of their income, while for a family earning $150,000, the figure was just 9.9%. Poorer residents are also burdened by the state-level flat income tax, which was raised from 3% to 5% in 2011.
I’ll be the city’s poor don’t realize there getting screwed as bad as they are on taxes.
It looks to me these are the first 24/7 Wall St. lists of “American Cities with the Highest (and Lowest) Taxes,” so I can’t compare Chicago’s 2013 ranking to years past.
Rounding out the “top 5” on the “highest taxes” list were:
4. Louisville, KY
3. Columbus, OH
2. Philadelphia, PA
1. Bridgeport, CT
You can view this year’s “top 10” U.S. cities with the lowest tax burdens and highest tax burdens on the 24/7 Wall St. website here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
VIA MAT Policy Change Doesn’t Affect BullionVault And GoldMoney Customers With U.S. Tax Liabilities
On February 22, 2013, the following appeared on SilverDoctors.com:
ViaMat, one of the world’s leading precious metals storage firms (used by BullionVault & GoldMoney as primary storage provider) has just notified US customers that effective April 30th 2013, it will discontinue private storage of precious metals for all clients with a US tax liability. Clients have until April 30th to notify Via Mat International where they would like their physical bullion dispatched to.
And from The Daily Reckoning website on March 5:
An article on this subject said:
“For one, the big gold depositories like Gold Money and Bullion Vault ALL use Via Mat as a primary secure storage provider. So it’s only a matter of time before Via Mat’s decision cascades across these other firms.”
We believe that neither BullionVault nor GoldMoney will see “Via Mat’s decision cascade across these other firms.” Neither company faces U.S. taxation nor are they in U.S. jurisdiction. They are gold dealers who buy and sell gold for their clients for cash and house the gold in Via Mat’s vaults.
As Survival And Prosperity participates in affiliate programs offered by both BullionVault and GoldMoney, I decided I’d better contact both companies to make sure my referrals/their customers with U.S. tax liabilities won’t be affected by VIA MAT’s recent policy change.
Here’s what I received from GoldMoney this Monday:
Dear Mr. Hill,
Thank you for taking the time to contact us and to express your concerns.
We are aware of VIA MAT’s change of policy regarding individuals with potential US tax liabilities.
However, please be advised that this does not impact GoldMoney customers since you do not have a direct relationship with VIA MAT when you store metals at VIA MAT vaults with GoldMoney.
For more information, please see the following FAQ:
http://www.goldmoney.com/faq/are-us-residents-allowed-to-hold-metal-with-goldmoney-at-via-mat-vaults.html
And from BullionVault Tuesday morning:
Dear Mr.Hill,
Thank you for your email. BullionVault is a commercial client of ViaMat. The letter posted and referred to on the internet last month says that the decision applies to ViaMat’s own US private clients. ViaMat has confirmed to BullionVault in writing that it has “no impact whatsoever” on the services they provide to us.
So there you have it. BullionVault and GoldMoney customers with U.S. tax liabilities won’t be affected by VIA MAT’s recent change in policy.
Special thanks go out to GoldMoney’s Toni Sty and BullionVault’s Adrian Ash for helping me get to the bottom of this.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Sources:
The Doc. “LEADING GOLD STORAGE FIRM VIAMAT DUMPS ALL US CLIENTS.” SilverDoctors.com. 22 Feb. 2013. (http://www.silverdoctors.com/leading-gold-storage-firm-viamat-dumps-all-us-clients/). 7 Mar. 2013.
“Where To Go as Swiss are Shutting Out U.S. Taxpayers.” The Daily Reckoning. 5 Mar. 2013. (http://dailyreckoning.com/where-to-go-as-swiss-are-shutting-out-u-s-taxpayers/). 7 Mar. 2013.
Illinois Governor Pat Quinn Goes After Corporate Tax ‘Loopholes’ To Pay Bills
“Thirteen area companies say they may cut more than 1,100 jobs in the near future, according to the state’s Worker Adjustment and Retraining Notification (WARN) Act report for February.”
-Chicago Tribune, March 5, 2013
Yesterday, Illinois Governor Pat Quinn proposed a $62.4 billion budget for the State of Illinois in 2014. Ray Long reported on the Chicago Tribune website Wednesday:
Quinn also proposed whittling down the state’s $10 billion backlog of unpaid bills by closing what he calls corporate tax loopholes, a move that business groups say amounts to tax hikes on them. Quinn suggested suspending three so-called loopholes that bring in $445 million a year: the federal production activities break, the non-combination rule and the foreign divided allowance.
(Editor’s note: Italics added for emphasis)
From a transcript of the governor’s budget address to the Illinois General Assembly:
Over the next 12 weeks, we should work together to enact legislation that suspends unnecessary corporate tax loopholes and dedicates the resulting revenue to a new Bill Payment Trust Fund.
For example, we should suspend the Foreign Dividend corporate loophole. We should also join other states that have decoupled from the Federal Production Activities loophole. And we should suspend the Non-Combination Rule that allows big corporations to shift their income to locations outside Illinois. Together, these three loopholes alone cost our treasury about $445 million per year.
Suspending corporate loopholes like these until the bills are paid will be good for our vendors and good for our economy.
You know what’s “good for our vendors and good for our economy?” Legislators in Springfield not spending taxpayers’ hard-earned money like drunken sailors. Illinois, like Uncle Sam, has a debilitating spending problem. If the state didn’t spend so much, it might be able to afford to pay its vendors.
Governor Quinn added in his budget address:
Why should we give costly, ineffective loopholes to some of the biggest and most profitable corporations on earth, when we have bills to pay?
Maybe because the jobs these corporations provide are desperately-needed by your constituents? The state’s “official” unemployment rate was 8.6 percent at the end of last year, significantly above the national rate. These days, the “Land of Lincoln” is fast-acquiring a reputation for being bad for business (raising corporate income taxes 46 percent at the beginning of 2011 can have that effect), with our neighbors only too happy to poach companies looking to move to this part of the Midwest or in the start-up phase. And with the businesses go the jobs.
Does it really make sense to pursue “a move that business groups say amounts to tax hikes on them” in light of all this?
After all, if these loopholes are really so evil and detrimental to the State’s bottom line, why would the Governor propose to suspend them only “until the bills are paid?”
Rather than becoming even more business-unfriendly, the State of Illinois, its vendors, and its constituents are better served by a reinvigorated program that attracts, grows, and retains business here. Financial incentives will almost certainly play a role in this initiative. And with the businesses now come the jobs. Along with the tax revenue to pay off our “tab” from all that drunken spending over the years.
Keep on antagonizing the private sector, and the state will continue on its present course of becoming one giant ghetto smack dab in the middle of the Midwest.
You can read Governor Quinn’s entire 2014 budget address here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Long, Ray. “Quinn blames lawmakers for inaction on pension reform.” Chicago Tribune. 6 Mar. 2013. (http://www.chicagotribune.com/news/politics/clout/chi-quinn-blames-lawmakers-for-inaction-on-pension-reform-20130306,0,971611.story). 6 Mar. 2013.
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)
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