pension crisis

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)

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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.

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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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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.

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Illinois Bond Issue Halted Due To Credit Concerns

Today, residents of the state of Illinois saw the repercussions of having $8 billion of unpaid bills, a $96.8 billion pension funding gap, and falling credit ratings. Karen Pierog reported on the Reuters website:

Illinois yanked a $500 million general obligation bond issue slated for Wednesday because of credit concerns that could boost its borrowing costs, in the latest financial blow to the state, which has failed to fix its bloated public pensions.

Investment banks that planned to bid on the debt indicated investors would demand higher yields on the 25-year bonds, said John Sinsheimer, Illinois’ capital markets director.

“We were getting indications of higher spreads than we were anticipating,” said Sinsheimer, who declined to discuss specific spread levels. “We felt it was prudent to pull the deal for the time being.”

(Editor’s notes: Italics added for emphasis)

Pierog pointed out:

Illinois is already faced with the highest spreads – 137 basis points in the latest week – over Municipal Market Data’s benchmark triple-A scale among states and cities tracked by MMD, a unit of Thomson Reuters.

Over the weekend, I noted Standard & Poor’s downgraded the State of Illinois on Friday to an “A-” rating with a negative outlook- last among all 50 states. I added that among other major credit rating agencies, Moody’s also ranks Illinois last of all the U.S. states and Fitch ranks it 49th but on watch for a possible downgrade.

As for Illinois taxpayers? They may have to pay tens of millions of dollars more in interest when the state looks to borrow more money- like what almost happened today.

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

Source:

Pierog, Karen. “UPDATE 2-Illinois pulls $500 mln bond sale amid credit concerns.” Reuters. 30 Jan 2013. (http://www.reuters.com/article/2013/01/30/illinois-bonds-idUSL1N0AZ6TQ20130130). 30 Jan. 2013.

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S&P Downgrades Illinois Credit Rating To Worst In Nation

When I heard a major credit rating agency had downgraded Illinois Friday, the term “death spiral state” quickly came to mind.

And then my thoughts turned to the tens of millions of dollars Illinois taxpayers might be on the hook for down the road.

Ray Long and Monique Garcia reported on the Chicago Tribune website Friday:

Illinois fell to the bottom of all 50 states in the rankings of a major credit ratings agency Friday following the failure of Gov. Pat Quinn and lawmakers to fix the state’s hemorrhaging pension system during this month’s lame-duck session.

Standard & Poor’s Ratings Service downgraded Illinois in what is the latest fallout over the $96.8 billion debt to five state pension systems. The New York rating firm’s ranking signaled taxpayers may pay tens of millions of dollars more in interest when the state borrows money for roads and other projects.

(Editor’s note: Italics added for emphasis)

Illinois now has an “A-” rating with a negative outlook from S&P. Among other major credit rating agencies, Moody’s ranks Illinois last among the 50 states and Fitch ranks it 49th but on watch for a possible downgrade.

Regarding the state’s huge pension funding gap, Mark Peters wrote on the Wall Street Journal website Friday:

S&P estimates the pension system in the coming year will see assets fall to 39% of future obligations.

(Editor’s note: Italics added for emphasis)

Hardly any talk about the crisis in the local mainstream media outlets this weekend. Amazing. I can’t understand why more Illinois residents aren’t up in arms over this humongous financial mess the state is in.

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

Sources:

Garcia, Monique and Long, Ray. “Illinois credit rating sinks to worst in nation.” Chicago Tribune. 25 Jan. 2013. (http://articles.chicagotribune.com/2013-01-25/news/chi-illinois-credit-rating-sinks-to-worst-in-nation-20130125_1_action-on-pension-reform-robin-prunty-illinois-credit). 27 Jan. 2013.

Peters, Mark. “S&P Cuts Illinois Credit Rating.” Wall Street Journal. 25 Jan. 2013. (http://online.wsj.com/article/SB10001424127887324539304578264293106044944.html). 27 Jan. 2013.

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Project Prepper, Part 6: Buying A Home In A ‘Death Spiral State’

Last time out with the “Project Prepper” series of posts, after deciding that I’ll be moving out of Chicago and into the suburbs in the spring, I took a little bit of a detour and blogged about the “Mayan Apocalypse” that was supposed to arrive on December 21, 2012. Getting back on track today, approximately 4.5 months remain before my girlfriend and I plan to move, we still haven’t decided whether we’re going to buy or rent the suburban property in which we intend to reside in for the next few years (Wisconsin being selected as our ultimate destination).

Truth be told, I’m starting to lean towards renting- unless we can get our hands on a great deal. Even more so after reading a recent Forbes piece about “death spiral states” (hat tip Second City Cop). Back on November 25, 2012, former Forbes editor William Baldwin wrote on the website:

Don’t buy a house in a state where private sector workers are outnumbered by folks dependent on government.

Thinking about buying a house? Or a municipal bond? Be careful where you put your capital. Don’t put it in a state at high risk of a fiscal tailspin.

Eleven states make our list of danger spots for investors. They can look forward to a rising tax burden, deteriorating state finances and an exodus of employers. The list includes California, New York, Illinois and Ohio, along with some smaller states like New Mexico and Hawaii.

If your career takes you to Los Angeles or Chicago, don’t buy a house. Rent.

“If your career takes you to Los Angeles or Chicago, don’t buy a house. Rent.”

Point taken.

I didn’t insert those italics in the first sentence, in case you’re wondering.

Baldwin elaborated on the problems he sees with the “Land of Lincoln.” From the piece:

Illinois is especially known for its dishonesty, whether among officeholders (future license plate motto: Land of Corruption) or in the habit of under-accounting for promises to government employees. The Rauh study counted $66 billion in the till to cover pension obligations of $233 billion.

To lend money to California, Illinois or the other nine states perched on the precipice requires a leap of faith. So does buying a house in those locales. Don’t count on a property tax limit to protect your home’s value. If other taxes are high enough, there won’t be any buyers.

Definitely something for my girlfriend and I to chew on as we ramp up our housing search in the coming weeks. Although it doesn’t seem wise to purchase a home in a “death spriral state,” does it?

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

Source:

Baldwin, William. “Do You Live In A Death Spiral State?” Forbes. 25 Nov. 2012. (http://www.forbes.com/sites/baldwin/2012/11/25/do-you-live-in-a-death-spiral-state/). 18 Jan. 2013.

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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.

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Best- And Worst-Run U.S. States In 2012

New York City-based financial news and opinion organization 24/7 Wall St. has just released their 2012 list of best- and worst-run states in America. While they ranked all 50 based on financial health, standard of living, and government services data, 24/7 Wall St. declared the top 5 best-run states to be:

1. North Dakota
2. Wyoming
3. Nebraska
4. Utah
5. Iowa

The top 5 worst-run states are:

1. California
2. Rhode Island
3. Illinois
4. Arizona
5. New Jersey

Last November, 24/7 Wall St. named Illinois the 2nd worst-run state in America. Up to 3rd this year? High-fives all around the “Land of Lincoln” today. Here’s what 24/7 Wall St. had to say about Illinois this year:

48. Illinois

> Debt per capita: $4,790 (11th highest)
> Budget deficit: 40.2% (2nd largest)
> Unemployment: 9.8% (tied-10th highest)
> Median household income: $53,234 (18th highest)
> Pct. below poverty line: 15.0% (25th highest)

Although many states have budget issues, Illinois’ faces among the biggest problems. In 2010, the state’s budget shortfall was more than 40% of its general fund, the second-highest of any state. Both S&P and Moody’s gave Illinois credit ratings that were the second-worst of all states. In addition, the state only funded 45% of its pension liability in 2010, the lowest percentage of any state. Governor Patrick Quinn has made the now-$85 billion pension gap a top priority for the new legislative session beginning in January.

“$85 billion pension gap.” Make that $96.8 billion last I heard.

And as for Wisconsin, where I plan on moving to in a couple of years? 24/7 Wall St. ranked the “Badger State” the 21st best-run state in America this year- down from 16th in 2011.

You can find out where 24/7 Wall St. ranked your state this year by going here on their website.

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Paul Volcker-Led Group: Illinois Could Have Trouble Meeting ‘Its Population’s Basic Needs’

Any remaining doubts I may have had about my home state of Illinois being in bad shape are gone after reading a new report from the non-partisan, Paul Volcker-led State Budget Crisis Task Force. In June 2011, former New York Lieutenant Governor Richard Ravitch and former Federal Reserve Chairman Paul Volcker assembled the task force to examine threats to near- and long-term fiscal sustainability in six U.S. states: California, Illinois, New Jersey, New York, Texas, and Virginia. From the “Summary” portion of the Report of the State Budget Crisis Task Force: Illinois Report that was released Wednesday:

Illinois’ budget is not fiscally sustainable. Despite recent progress and difficult choices, it is still in a deep hole. It cannot simultaneously continue current services, keep taxes at current levels, provide all promised benefits, and make needed investments in education and infrastructure. All of the major threats identified by the Task Force in its July 2012 report have contributed to Illinois’ current problems and will contribute to future budget-balancing struggles.

Illinois has the worst unfunded pension liability of any state, an estimated $85 billion. It has underfunded its pension systems since the early 1980s. Contributions now must escalate rapidly if Illinois is to honor promised benefits; by fiscal year 2015, pension costs (and related debt service) could take up one-fourth of the state’s resources. Illinois will not be able to fund other priorities unless it adopts serious pension reform.

Medicaid enrollment and expenditures in Illinois doubled between 2000 and 2011, growing far more rapidly than tax revenue. In June 2012 the state made major changes that reduce spending, but rising health care costs and the aging population will continue to drive costs upward. Without further reform, unsustainable Medicaid growth will crowd out other essential areas of the budget.

Illinois’ debt is also crowding out the budget. In 2003 Illinois sold a record-breaking $10 billion in pension obligation bonds, and again in fiscal years 2010 and 2011, the state sold bonds to cover its required contributions. The result of pension borrowing is that Illinois’ debt per capita is one of the highest of any state. Over 60 percent of Illinois’ total outstanding debt is due to pension bonds.

Illinois has compounded its challenges with poor fiscal management and opaque budgeting. At the onset of the 2008 financial crisis, Illinois was essentially insolvent. In the years leading up to the crisis, Illinois borrowed and shifted money across years and funds to “balance” the budget, without providing sustainable resources to pay for ongoing commitments. Budget gimmicks became a standard practice. The state has perennially pushed its bills off to the future; at the start of fiscal year 2013, unpaid obligations from prior years were approximately $8 billion. Illinois did all this without any sort of long-term financial plan to restore balance, and without reserves. Illinois has been doing backflips on a high wire, without a net.

Narrow, eroding tax bases have contributed to Illinois’ fiscal difficulties. State tax revenues were stagnant for at least a decade before the recent recession. Illinois enacted a major, temporary, income tax increase in 2011, but the additional revenues are being offset by reductions in federal American Recovery and Reinvestment Act of 2009 (ARRA) monies. Income tax revenues will not keep up with growth in the aging population because Illinois exempts retirement income. Other tax bases — on corporate income, cigarettes, and motor fuel — have been eroding and failing to keep up with economic growth. Illinois’ sales tax rates are high, but its base is narrow and the state taxes relatively few services. Illinois tax revenues are not likely to grow enough to meet future needs.

Federal deficit reduction threatens Illinois, as other states. Federal dollars account for approximately a quarter of the state’s all-funds budget and, after the expiration of federal stimulus spending, currently are $14.8 billion. Federal aid matches about 50 percent of Illinois’ Medicaid spending, and constitutes about 35 percent of the budget of the Department of Human Services, 30 percent of transportation, 20 percent of K-12 education, and 20 percent of spending for environment and natural resources. Federal spending cuts will put these programs at risk.

Illinois’ aging and deteriorating infrastructure is in urgent need of immediate repairs to meet basic standards of public safety. Beyond that, it needs expansion and modernization to accommodate future growth. Over the next several decades, Illinois’ infrastructure needs will likely exceed $300 billion, yet the state does not have a comprehensive plan to address this critical need. There are real costs associated with underfunding of infrastructure: shipping and travel delays, congestion, pollution, and diminished economic growth.

The state’s fiscal problems affect local governments in Illinois by shrinking revenue transfers at a time when these monies are most needed. The state has also proposed shifting funding responsibility for teachers’ pensions from the state to local school districts. This would eliminate some incentives that can drive pension costs upward, but would put considerable pressure on local finances. Local governments struggle with their own revenue problems, unfunded pension liabilities, and bond rating downgrades. The state does minimal monitoring of local government finances, and budget cuts could further reduce this oversight.

Illinois’ past fiscal choices and future threats challenge the state’s ability to meet its population’s basic needs, let alone accommodate future growth. Infrastructure is deteriorating. Education is threatened. Public safety, public health, and care for the needy all are at risk. Taxpayers and the state’s competitiveness are also at risk.

Illinois needs to make tough choices — now…

“Illinois’ past fiscal choices and future threats challenge the state’s ability to meet its population’s basic needs.”

Basic needs? That’s pretty bad.

This report comes on the heels of an analysis by the Tax Foundation, a non-partisan tax research group, in which Illinois residents were found to pay the 11th highest state-local tax burden in the United States in fiscal year 2010.

Early in 2011, Illinois Governor Pat Quinn hiked personal income taxes 67 percent.

It will be interesting (scary?) to see where the “Land of Lincoln” stands in next year’s Annual State-Local Tax Burden Rankings, when FY 2011 is factored in.

You can read the entire State Budget Crisis Task Force report on their website here (.pdf file).

You can view the latest Tax Foundation tax-burden rankings on their website here.

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Illinois Has $7.5 To $8 Billion In Unpaid Bills At Start Of FY 2013

Like Chicago, I blog a lot about Illinois because I’m concerned about the direction the state is heading. Especially when it comes to finances.

Back on June 22, I talked about the state’s unpaid bills, which according to the Chicago Tribune’s Monique Garcia on May 28 were expected to total $8.5 billion by the end of June.

Thankfully, there’s recently been some good news in this area. According to the July edition of Comptroller’s Quarterly (a publication from the office of Illinois Comptroller Judy Baar Topinka):

As Illinois reached the end of the fiscal year, persistent payment delays continued despite significant revenue increases. In fact, the state moved into fiscal year 2013- following the first full year of state tax increases – with an estimated $7.5 to $8 billion in unpaid obligations, slightly lower than the $8.5 billion total of the last two fiscal years.

(Editor’s note: Italics added for emphasis)

$8.5 billion down to $7.5 to $8 billion in unpaid bills. An improvement- yes. But not by a whole lot unfortunately.

After the report from the Illinois Comptroller came out Reuters reminded everyone of the precarious financial position “The Land of Lincoln” remains in. Joan Gralla wrote on July 16:

Illinois faces some of the worst fiscal problems in the United States.

Standard & Poor’s Ratings Services gave it the second-lowest general obligation rating of the states it rates, ‘A-plus’, and has had it on a negative outlook since January 2011. Of all the states S&P rates, California has the lowest rating, ‘A-minus’ with a positive outlook.

As I also noted back on June 22, the State of Illinois had a total deficit of $43.8 billion and an unfunded pension liability of nearly $83 billion at the end of fiscal year 2011.

I routinely hear Illinois mentioned as one of two states- the other being California- most likely to go bankrupt down the road.

You can read the latest issue of Comptroller’s Quarterly on the Comptroller’s webpage here.

Source:

Gralla, Joan. “Illinois’s unpaid bills backlog still big despite revenue rise” Reuters. 16 July 2012. (http://www.reuters.com/article/2012/07/16/us-usa-illinois-bills-idUSBRE86F1EN20120716). 8 Aug. 2012.

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Why I Blog About Chicago So Much

A number of Survival And Prosperity readers might be wondering why I blog about Chicago so much in a weblog that’s supposed to focus on financial and personal safety and growth. Here’s why:

• First, I see Chicago as a proverbial “canary in the coal mine” as it concerns the state of the Nation

• Second, this blog is a project- a hobby if you will- that’s based out of my residence on Chicago’s Northwest Side. While I also spend time at my family’s place in southeastern Wisconsin, since I’m usually working my butt off up there, the bulk of my writing is done here in the “Windy City.”

• Third, as I was born in Chicago, have deep family roots here, and have lived in the Chicagoland area for most of my life, I blog about it because I’m worried about where we’re heading. Specifically, I’m talking about the city’s finances and crime.

Concerning the city’s financial health:

• Chicago ended 2011 with $465 million of more debt

• The city is looking at a projected budget shortfall of $369 million next year

• Only $623 million remains of the $2.98 billion received a couple of years ago when the Chicago Skyway and parking meters were privatized under former Mayor Richard M. Daley

• Chicago 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

• Total long-term debt sits at just over $27 billion, or $10,000 for every one of the city’s nearly 2.7 million residents

Regarding crime in the “Second City”:

• Flash mobs/flash robberies/flash mobberies, mob actions, wildings, and other crimes are appearing in parts of Chicago that weren’t previously known for such incidents

• Shootings were up 6 percent for the first seven months of 2012 year-over-year, even though the City of Chicago (and Cook County) has incredibly-strict gun “control” laws already on the books

• Murders were up 27 percent for the first seven months of 2012 year-over-year

• The number of “physical arrests” made by the Chicago Police Department fell again in 2011 to 152,740 from 167,355 the year prior. This continues a six-year trend that coincides with a CPD hiring slowdown and a declining number of police officers.

• The streets of Chicago could get a lot rougher shortly as the State of Illinois is proposing to close several adult and juvenile prisons, in addition to a prison early-release measure signed into law on June 22 by Illinois Governor Pat Quinn that revives good time credit for non-violent offenders who complete drug treatment, job training, or rehabilitation programs while behind bars. Opponents of the program claim there are not enough protections to prevent violent offenders from being released.

Can you see why I’m worried about the direction Chicago is heading?

Chicago’s a great city. And hopefully by blogging about issues like the ones above attention is drawn to them and the City of Chicago is more motivated to formulate effective mitigation strategies to keep this city great.

Chicagoans have a tremendous challenge ahead with what I foresee is in store for the nation. Now is not the time to be drinking the Kool-Aid or be burying our heads in the sand.

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Christopher E. Hill, Editor
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