Survival And Prosperity

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

Motorola CEO: Illinois ‘Asleep At The Switch, And The Day Of Reckoning Will Come’

You know the state of Illinois has real fiscal challenges when a member of the U.S. President’s Management Advisory Board (PMAB) says that’s the case. Greg Brown, President and CEO of Schaumburg-based Motorola Solutions, spoke to Crain’s Chicago Business last week and said the following about his company’s relationship to the Midwestern state:

Illinois remains front and center for us for a variety of reasons: incumbency, skills that are resident, our existing footprint. It’s Illinois’ to lose, but Illinois is on a path to lose it. The state of Illinois is asleep at the switch, and the day of reckoning will come. You can’t have the state’s fiscal house being what it is and be able to attract capital. If Illinois kicks the can and stays in a four-corner offense, then capital will move out of state, including ours. I’ve had governors of Florida and Michigan proactively call me and say: “Would you consider moving a division, opening a plant? Would you consider moving R&D here? Would you deploy a sales division here?” Illinois doesn’t think like that. It needs a complete overhaul. It needs to happen soon.

Judging by the continued inaction in Springfield (seat of Illinois government) on issues of significant fiscal importance to the state and its 12.9 million residents, something tells me that can will keep being kicked down the road until the “day of reckoning” Brown talked about finally arrives.

In the meantime, the State of Illinois continues to languish.

Consider what Ted Dabrowski, Vice President of Policy at the Illinois Policy Institute, wrote back on November 28 on the organization’s website:

Today, Illinois still has more than $9 billion in unpaid bills. The Legislature continues to run structural deficits, appropriating more funds than the revenues it receives. The state’s pension systems are more than $200 billion in the hole and facing insolvency. And the state has been downgraded 10 times by the three major rating agencies since Gov. Quinn took office.

I am truly concerned about what lies in store for the “Land of Lincoln” going forward.

Sources:

Pletz, John. “Motorola’s CEO on taxes, tablets and why Illinois is dying.” Crain’s Chicago Business. 24 Dec. 2012. (http://www.chicagobusiness.com/article/20121222/ISSUE01/312229987/motorolas-ceo-on-taxes-tablets-and-why-illinois-is-dying). 26 Dec. 2012.

Dabrowski, Ted. “Forget reform: Illinois legislators want to borrow $4 billion.” Illinois Policy Institute. 28 Nov. 2012. (http://illinoispolicy.org/blog/blog.asp?ArticleSource=5283). 26 Dec. 2012.

Tags: budget deficits, credit rating agencies, credit ratings, Greg Brown, Illinois, Illinois Policy Institute, Motorola, Pat Quinn, pension crisis, pensions, PMAB, President’s Management Advisory Board, state government, State of Illinois, Ted Dabrowski

Financial Woes Keep Growing For Chicago, Cook County, And Illinois

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…

The effort comes as Mayor Rahm Emanuel is highlighting even more dire problems for city pension funds, in part by launching his own website with a real-time tally of the city’s pension funding gap of more than $25 billion.

Gov. Pat Quinn, meanwhile, awaits a report from a pension reform panel. The state’s pension gap is about $80 billion.

(Editor’s note: Italics added for emphasis)

Make that $83 billion, according to a different Tribune piece from Sunday. From the “Edtorials” on April 8:

The state of Illinois admits to $83 billion in pension underfunding, a staggering weight on today’s and tomorrow’s taxpayers. Add to that the as yet uncalculated billions in unfunded pension obligations for city, county and other local governments…

The Illinois Policy Institute, a right-leaning think tank, now is releasing 133 pages of frightening data — we obtained a copy Thursday — that project yet another devastating hit to taxpayers: Beyond that $83 billion in unfunded pensions, state government alone faces an unfunded liability of more than $54 billion in retiree health liabilities over the next 30 years.

(Editor’s note: Italics added for emphasis)

Tribune staff doesn’t think the “Land of Lincoln” is well-prepared to take on this newly-publicized obligation. From the editorial:

We’ve noted before that many states similarly fund unaffordably generous retiree health benefits on a pay-as-you-go basis. But those states don’t rank worst in the nation in their preparedness to meet pension obligations. Nor do most of those states expect to finish this fiscal year with a budget deficit and a malingering $9 billion in unpaid bills. As a result, then, most states are better prepared to meet these retiree health costs than is the insolvent state of Illinois.

By the last of the IPI’s 133 pages, we conjured one question, then a follow-up:

How could Illinois pols do this to taxpayers?

And come November, will voters finally exact some consequences?

Answer #1- I don’t know. Perhaps because many “pols” put themselves/families/friends/special interests first, before the interests of the entire state of Illinois?

Maybe the question that really needs to be asked is, “How could Illinois taxpayers be so stupid as to let the pols get away with it?”

Answer #2: It’s hard to envision much of anything changing. Why’s that? As the Chicago Tribune’s Monique Garcia, Alissa Groeninger, and Ray Long noted back on March 20:

Even before unofficial results rolled in, some sitting Republican lawmakers were bound to lose in DuPage County, casualties of the Democratic-drawn state legislative districts. The map is tilted so heavily toward Democrats that the party led by House Speaker Michael Madigan, the Illinois Democratic chairman, is all but ensured November general election victories that could set it on a course to control the General Assembly for the next decade.

(Editor’s note: Italics added for emphasis)

Even Chicago Mayor Rahm Emanuel realizes what “business as usual” could very well mean for these locations. From the editorial:

During a Tribune forum Wednesday, Mayor Rahm Emanuel explained how that overhang — some estimates run far higher — deters businesses from locating in Chicago: Companies don’t want to buy shares in a phenomenal tax burden that will unfold over decades.

And neither do current residents. The financial health of Chicago, Cook County, and Illinois needs to improve drastically and fast- or many of those who can leave, will.

Sources:

Dardick, Hal. “Cook County also faces pension funding gap, new analysis says.” Chicago Tribune. 9 Apr. 2012. (http://www.chicagotribune.com/news/local/ct-met-cook-county-pensions-0409-20120409,0,5440594.story). 9 Apr. 2012.

“Surprise! You owe another $54 billion.” Chicago Tribune. 8 Apr. 2012. (http://articles.chicagotribune.com/2012-04-08/news/ct-edit-health-20120408_1_retiree-health-pension-reforms-pension-underfunding). 9 Apr. 2012.

Garcia, Monique, Groeninger, Alissa and Ray Long. “Indicted state lawmaker cruises to primary victory.” Chicago Tribune. 20 Mar. 2012. (http://www.chicagotribune.com/news/politics/clout/chi-state-lawmaker-charged-with-bribery-cruising-to-primary-victory-20120320,0,1719356.story). 9 Apr. 2012.

Tags: 2012 election, Bridget Gainer, Chicago, Cook County, Democrats, Illinois, Illinois General Assembly, Illinois Policy Institute, IPI, Michael Madigan, Pat Quinn, pensions, Rahm Emanuel, retiree health benefits