public pensions
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)
Cook County Public Pension Crisis Worsens
Back on April 9, 2012, I blogged about the public pension crisis in Cook County, Illinois. From that post:
Chicago, Cook County, and Illinois- a trifecta of serious financial concerns.
Hal Dardick talked about all three entities and their growing pension problems early this morning on the Chicago Tribune website:
Cook County’s pension fund will go broke in 26 years without changes that could include an increase in employee contributions and later retirement ages, according to a new analysis.
The report, done under the direction of county Commissioner Bridget Gainer in her role as chairwoman of the board’s pension-oversight panel, shows that it’s not just state and city pension funds that have perilous futures.
Even if the county fund generally is in better shape, Gainer said, that doesn’t mean the county can continue to ignore a funding gap that had grown to $5.2 billion by the end of 2010. That’s seven times the size it was a decade earlier…
(Editor’s note: Italics added for emphasis)
The public pension crisis in the country’s second most populous county has grown worse since I posted that, with the funding gap now having reached $6.79 billion. Paul Merrion revealed on the Crain’s Chicago Business website Wednesday:
Solvency of Cook County’s pension funds deteriorated in the last fiscal year, according to a new report, and county commissioners are pressing anew for reforms.
The county’s main Employees’ Annuity and Benefit Fund saw its pension debt grow to $6.79 billion, up $969.5 million last year and an increase of $1.6 billion in the gap between assets and liabilities since 2010. The plan is only 53.5 percent funded, down from 57.5 percent in fiscal 2011, and the fund is projected to be insolvent by 2034.
(Editor’s note: Italics added for emphasis)
I anticipate Cook County’s financial woes will make themselves known well before that 2034 date. County residents and businesses should plan accordingly.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Merrion, Paul. “Cook County pension woes worsen.” Crain’s Chicago Business. 8 May 2013. (http://www.chicagobusiness.com/article/20130508/NEWS02/130509769/cook-county-pension-woes-worsenwww.sj-r.com). 10 May 2013.
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.
City Of Chicago On Review For ‘Possible Downgrade’ By Moody’s
“We still have a very strong bond rating. Our fiscal position is getting better every year and we are aggressively managing our liabilities and obligations.”
-City of Chicago Comptroller Amer Ahmad, July 20, 2012, as noted in a July 22, 2012, Chicago Sun-Times article
I’ve been warning Survival And Prosperity readers for some time that the City of Chicago’s finances are not as peachy keen as City Hall would like outsiders to believe.
So much so, the City’s credit rating is on review for a possible downgrade by Moody’s Investors Service. From the Moody’s website earlier today:
Moody’s has announced its final approach to the way it will analyze and adjust pension liabilities as part of its credit analysis of state and local governments. These changes reflect the rating agency’s view that pension obligations are a significant source of credit pressure for governments and warrant a more conservative view of the potential size of the obligations. As a result of this new approach, Moody’s has also placed the general obligation ratings of the cities of Chicago, Cincinnati, Minneapolis, and Portland, OR, and of 25 other US local governments and school districts on review for possible downgrade. The entities whose ratings have been placed on review have large adjusted net pension liabilities relative to their rating category…
Moody’s rates over 8,000 local governments in the United States. Less than 1% of those with general obligation or equivalent ratings have been placed under review because of the new pension adjustments.
(Editor’s note: Italics added for emphasis)
Great. Chicago is in another “select group” it really doesn’t want to belong to these days.
You can read the entire announcement on the Moody’s website here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Illinois Public Pension Funding Gap Now Over $100 Billion?
It’s been depressing to watch the public pension funding gap keep growing here in Illinois.
The last time I blogged about the subject (March 4), the unfunded debt to the five state pension systems amounted to $96.8 billion.
When I first reported on the public pension crisis on April 28, 2011, state employee pensions were underfunded by more than $80 billion.
And this weekend, I saw on the Crain’s Chicago Business website that the pension shortfall has now passed the $100 billion mark. Paul Merrion wrote this weekend:
Sometime this month, Illinois probably exceeded $100 billion in pension debt, a sorry milestone in the state’s long slog to fiscal hell.
Illinois would be only the second state to reach the 12-digit mark. But California, the previous epic fail, has a much larger tax base and is on the mend.
Pension statistics tend to make eyes glaze over, and the $100 billion moment is an unofficial, back-of-the-envelope calculation. But it’s an undeniably big and potentially symbolic number as state legislators wrestle with the shortfall in money owed to current and future retired teachers, judges, state workers and even lawmakers themselves.
(Editor’s note: Italics added for emphasis)
“A sorry milestone in the state’s long slog to fiscal hell.”
Nicely-worded. And something the state’s residents really need to digest, seeing that “every man, woman and child living in Illinois” is on the hook for $7,767 for this debt according to Merrion.
I’ll tell you one thing. Hearing this latest fiscal faux pas makes me question the wisdom of buying a home in the state this spring considering what looks to be coming down the pipeline. Which sucks, because rents are astronomical for suitable property in the areas where my girlfriend and I prefer to live.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Merrion, Paul. “Illinois hits a sorry milestone.” Crain’s Chicago Business. 25 Mar. 2013. (http://www.chicagobusiness.com/article/20130323/ISSUE01/303239976/illinois-hits-a-sorry-milestone). 25 March. 2013.
Illinois Governor’s Spokesperson: ‘We’re Facing The Worst Recession Since The Great Depression’
Reading the Chicago Tribune website last night I saw that Governor Pat Quinn will be proposing a $30 billion-plus budget this week for the State of Illinois.
The Tribune’s Ray Long provided some of the latest figures showing just how precarious the state’s financial situation really is these days:
• $96.8 billion in unfunded debt to five state pension systems
• $9.7 billion in unpaid bills
• 8.7 percent unemployment in December, almost a percentage point higher than the national unemployment rate
• $6.1 billion annual pension payment in the next budget year- $900 million more than in the current one
One word comes to mind. Fugly.
Then there’s this from Long’s piece:
“When you’re the chief executive, you face challenges from the outside that are not of your making,” said Quinn spokeswoman Brooke Anderson. “The governor’s job is to control the things he can and manage the elements that are outside his control. But I’d say that we’ve been in a perfect storm since the moment Gov. Quinn got here. We’re facing the worst recession since the Great Depression, decades of financial mismanagement that has been culminating in the pension crisis and unpaid bills. And you have to deal with that.”
“We’re facing the worst recession since the Great Depression”
What about that economic recovery Governor Quinn said was taking place here in the “Land of Lincoln?” From a February 6 article on the Tribune website:
“Do we want, in the years to come, a prosperous Illinois where working people continue to have good jobs, where businesses thrive, and where all our children have a world-class education?” Quinn told the House and Senate. “Or do we want to stop the progress and watch our economic recovery stall?”
(Editor’s note: Italics added for emphasis)
Let me guess. That bit about the recession is only the opinion of Quinn’s “mouthpiece.” And she’s trying to shield her boss from some blame.
Fair enough. But the thing is, Ms. Anderson- either knowingly or unknowingly- is on to something. We may not technically be in a recession these days, but for many Illinois residents it probably doesn’t feel like much of a recovery either.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Sources:
Long, Ray. “Gov. Pat Quinn to unveil $30 billion-plus Illinois budget.” Chicago Tribune. 3 Mar. 2013. (http://www.chicagotribune.com/news/local/ct-met-quinn-budget-20130304,0,7431041,full.story). 3 Mar. 2013.
Garcia, Monique, Long, Ray, and Guerrero, Rafael. “Quinn wants minimum wage hike, assault weapons ban.” Chicago Tribune. 6 Feb. 2013. (http://articles.chicagotribune.com/2013-02-06/news/chi-quinn-to-call-for-minimum-wage-increase-to-10-an-hour-20130206_1_assault-weapons-minimum-wage-pat-quinn-today). 3 Mar. 2013.
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.
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.
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.
Labor Minister: France ‘Is A Totally Bankrupt State’
Speaking of France, how is the Socialist-led European state faring these days?
Not so great, it seems.
In fact, a pretty reliable source claims they’re bankrupt.
Graham Ruddick reported on The Telegraph (UK) website Monday:
Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.
“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.
(Editor’s note: Italics added for emphasis)
As I mentioned earlier tonight, some claim President Obama desires French-style Socialism for the United States.
If France’s economy truly is in shambles, and the U.S. President really wants to emulate them, well- here’s a glimpse of what Americans could expect. From an Investor’s Business Daily editorial yesterday:
Fresh after May 2012′s election, President Francois Hollande wasted no time raising government spending, hiking tax rates to 75% on those above $1.3 million in income, hiring 60,000 bureaucrats, cutting the retirement age for public pensions to 60 and undoing fiscal reforms by his predecessor, Nicolas Sarkozy. During his campaign, Hollande declared himself “the enemy of finance.” France today proves it…
Public debt has soared from 68% of GDP in 2008 to 90% in 2012, joblessness has hit 11%, and GDP growth of its $2.8 trillion economy is projected in 2013 at zero.
Tax hikes have driven the richest taxpayers from the country, making the $43 billion budget hole unlikely to be plugged by Hollande’s $26 billion tax hike. Meanwhile, a squeeze on business creates rising numbers of unemployed, who in turn demand state services.
Time will tell how this will all work out for the Socialists in France. But if history rhymes once again, keep in mind something former British Prime Minister Margaret Thatcher said in a 1976 interview:
Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them. They then start to nationalise everything, and people just do not like more and more nationalisation, and they’re now trying to control everything by other means. They’re progressively reducing the choice available to ordinary people.
Any of this sound familiar?
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Sources:
Ruddick, Graham. “France ‘totally bankrupt’, says labour minister Michel Sapin.” The Telegraph. 28 Jan. 2013. (http://www.telegraph.co.uk/finance/financialcrisis/9832845/France-totally-bankrupt-says-labour-minister-Michel-Sapin.html). 30 Jan. 2013.
“Like The Bourbons, France’s Socialists Have Learned Nothing, Forgotten Nothing.” Investor’s Business Daily. 29 Jan. 2013. (http://news.investors.com/ibd-editorials/012913-642388-france-socialist-model-is-same-old-recipe-for-bankruptcy.htm). 30 Jan. 2013.
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