tax hikes

Crain’s Chicago Business: Pension Reform Ruling Could Cost Taxpayers Extra $200 Million A Year Through End Of Decade

In my Sunday post about Chicago’s pension reform legislation being ruled unconstitutional, I blogged:

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

How many hundreds of millions are we talking about here?

Greg Hinz wrote in his blog on the Crain’s Chicago Business website Monday:

The court decision throwing out a deal to refinance two Chicago pension funds appears to be among the most costly in the city’s history, in some ways ranking right up there with the Great Chicago Fire.

Exact figures are not available and vary some depending on who’s doing the estimating. But based on statements by city officials and documents filed by the pension funds themselves, it’s likely that the decision by Cook County Circuit Court Judge Rita Novak will cost city taxpayers around $200 million a year through the end of the decade—and will keep rising for decades thereafter.

“You’d have to go back to either the Depression or the Great Fire to find a comparable situation in which the city faced either greater challenges or more painful decisions,” Civic Federation President Laurence Msall said. “It’s clearly going to result in increased taxes and reduced services.”

(Editor’s note: Bold added for emphasis)

Remember, that additional $200 million hit to Chicago taxpayers would come on top of addressing fire and police pensions. And bailing out the Chicago Public Schools, which had its credit rating reduced to junk status today by Fitch Ratings. In May, I noted Moody’s downgraded the Chicago Board of Education (the primary debt issuers of CPS) three notches to junk.

You can read Hinz’s entire blog post on the Crain’s Chicago Business website here. If I were still a Chicago resident, I’d probably find it disturbing. But at least I’d be clued in as to what could be coming down the line.

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

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Judge Rules Chicago’s Pension Reform Legislation Unconstitutional

Here’s the latest on Chicago’s public pension crisis. Hal Dardick and Rick Pearson reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems.

The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services.

The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers. The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations — and are at risk of going broke within 13 years — after many years of low investment returns fueled by recession and inadequate funding.

Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation

(Editor’s note: Bold added for emphasis)

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

And the City’s response to the ruling? Mayor Emanuel’s Press Office countered Friday:

Statement of City of Chicago Corporation Counsel Stephen Patton on SB1922

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there. We continue to strongly believe that the City’s pension reform legislation, unlike the State legislation held unconstitutional this past spring, does not diminish or impair pension benefits, but rather preserves and protects them. This law not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, over time, they will be fully funded and the 61,000 affected City workers and retirees will receive the pensions they were promised.”

As to the City of Chicago’s credit rating possibly getting whacked after the decision? Timothy W. Martin reported on The Wall Street Journal website Friday afternoon:

Moody’s said Friday’s ruling had no effect on Chicago’s bond grade. But rival Standard & Poor’s Ratings Services, which currently has an investment-grade rating for the city, said that “regardless of the ultimate outcome” of Mr. Emanuel’s pension law, it “will likely lower” its Chicago rating in the next six months, unless city leaders chart out a solution to address its pension problems.

(Editor’s note: Bold added for emphasis)

Like I’ve been saying for a couple years now, that proverbial brick wall keeps approaching for Chicago.

Since City Hall can’t get its affairs in order, Chicagoans might want to look at straightening out theirs if they intend to stick around for the long haul.

Sources:

Dardick, Hal and Pearson, Rick. “Judge finds city’s changes to pension funds unconstitutional.” Chicago Tribune. 24 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-chicago-pension-ruling-met-20150724-story.html). 25 July 2015.

Martin, Timothy W. “Chicago’s Pension Overhaul Plan Tossed Out by Judge.” The Wall Street Journal. 24 July 2015. (http://www.wsj.com/articles/judge-rules-2014-law-to-reduce-chicago-pension-shortfall-unconstitutional-1437754525). 25 July 2015.

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Downtown Chicago Diners Could See 11.25 Percent Sales Tax In 2016

Back on July 16, I noted the total sales tax rate in Chicago and the rest of Cook County looks to rise to 10.25 percent again in the coming year, making it one of the highest rates in the nation.

But diners of certain downtown Chicago eateries could be hit by an even higher sales tax rate. Pointing out an additional sales tax (“McPier tax”) downtown that tacks on an additional 1 percent to food/beverage bills, Lauren Choolijian reported on the WBEZ 91.5 website yesterday:

For restaurant patrons that dine south of Diversey Parkway, north of the Stevenson Expressway, east of Ashland Avenue and west of Lake Michigan, the Cook County proposal means an 11.25 percent sales tax will be added to their tab in 2016. The McPier tax affects all food and beverage purchases prepared for “immediate consumption,” and that includes soft drinks and alcoholic beverages…

(Editor’s note: Bold added for emphasis)

Actual and proposed fee, fine, and tax increases are making the headlines quite often these days in the Chicago area. If my suspicions prove correct (these hikes are just the first of many due to steadily eroding financial conditions), Chicagoland residents, workers, and prospective visitors will increasingly seek alternatives (for example, dining out closer to home as it concerns the above), local government revenue collection will plummet, and public services will continue to be scaled back.

Anyway, check out Choolijian’s piece on the WBEZ site here for the full details of the 11.25 percent sales tax hit.

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

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Wednesday, July 22nd, 2015 Fiscal Policy, Government, Taxes, Tourism No Comments

Crain’s Chicago Business: City’s Rising Fees, Fines, And Taxes Look To Continue

Chicago readers of Survival And Prosperity might want to read two articles that recently appeared on the Crain’s Chicago Business website concerning rising fees, fines, and taxes in the city. In a piece entitled “Chicago’s expanding appetite for new taxes,” Thomas A. Corfman wrote Saturday:

While Mayor Rahm Emanuel has held the line on property taxes, revenue from other local taxes has climbed nearly 20 percent since he took office.

A strengthening economy explains much of the surge. But Emanuel has fueled the growth by raising taxes on things such as cable TV and parking…

Keep in mind that “line on property taxes” may soon be breached. Significantly. Corfman added:

While property tax revenue has fluctuated slightly since 2011 after accounting for new construction, that’s likely to end soon. The badly undercapitalized police and firefighter pension funds are supposed to receive a state-mandated $550 million payment next year. Property taxes will likely account for the bulk of the increase, says Ald. Roderick Sawyer of the South Side’s 6th Ward

(Editor’s note: Bold added for emphasis)

This comes on the heels of another Corfman article entitled, “How much could Chicago pension payments jack up your property bill? Try 30%”. He wrote on July 4:

Even as Mayor Rahm Emanuel warns about a property tax hike of up to $250 million for the cash-strapped Chicago Public Schools, another big wave of increases likely is coming to rescue the pensions of police officers and firefighters.

A massive payment due to those retirement plans next year could drive up Chicago property taxes by more than 30 percent, according to a Crain’s analysis. And if the current logjam in Springfield continues, it could be a lot worse

(Editor’s note: Bold added for emphasis)

As I wouldn’t steal Crain’s thunder, you can read Corfman’s July 18 article here and his July 4 piece here.

And as always, my intention is not to scare Chicago residents/businesses by blogging about such material. Rather, as a former Chicagoan this is something I feel my former neighbors should be made aware of, especially if they plan on staying in the “Windy City.”

Got to figure out some way to keep ahead of those rising fees, fines, and taxes and eroding public services.

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

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Size Of Cook County Sales Tax Hike Necessary?

No surprise here. Hal Dardick reported on the Chicago Tribune website yesterday:

Cook County Board President Toni Preckwinkle persuaded just enough commissioners to approve a 1-percentage-point sales tax increase Wednesday — the culmination of a major political about-face, but a move she said was needed to bail out the county worker pension system.

Following weeks of one-on-one lobbying sessions by Preckwinkle, nine of the 17 commissioners voted to raise the county share of the sales tax to 1.75 percent. Add up the state, city and public transit portions, and the total sales tax rate in Chicago once again will hit 10.25 percent — one of the highest rates in the nation

Preckwinkle first rose to power in 2010 on a campaign pledge of repealing what remained of an identical sales tax increase under predecessor Todd Stroger…

(Editor’s note: Bold added for emphasis)

Opponents of the sales tax hike claim the County didn’t perform enough belt-tightening before approving the measure. County Commissioner Bridget Gainer (10th District) penned on the Tribune website on July 1:

Don’t get me wrong, the county has a serious budget and pension cost gap, predicted to be $479 million. The proposed 1 percentage point increase in the sales tax would raise some $474 million annually.

But $130 million of the deficit goes away with pension reform. An additional $50 million in savings has already been identified by the budget staff. Yet another $50 million is in reach if we are finally willing to consolidate our redundant taxing bodies and duplicative services…

(Editor’s note: Bold added for emphasis)

Back on December 5, 2013, I pointed out Illinois has the most units of local government of any state in the country at 6,963 local governments (U.S. Census Bureau).

It’s been reported Cook County is home to 1,300 of these taxing agencies alone.

The sales tax hike goes into effect starting January 1, 2016.

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

Sources:

Dardick, Hal. “Cook County Board votes to raise sales tax.” Chicago Tribune. 15 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-sales-tax-increase-met-0716-20150715-story.html#page=1). 16 July 2015.

Gainer, Bridget. “Commentary: Cook County Commissioner Bridget Gainer: I won’t vote for a sales tax hike.” Chicago Tribune. 1 July 2015. (http://www.chicagotribune.com/news/opinion/commentary/ct-cook-county-tax-preckwinkle-gainer-perspec-0702-jm-20150701-story.html). 16 July 2015.

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Cook County Sales Tax Hike Coming?

Cook County, Illinois, could soon have one of the highest sales tax rates in the country (again). The Chicago Tribune Editorial Board wrote on the paper’s website this evening:

Cook County Board President Toni Preckwinkle is weighing the idea of imposing a penny-on-the-dollar increase in the local sales tax to balance the county’s books…

Preckwinkle is lobbying Cook County Board members to raise the county’s portion of the sales tax by 1 percentage point, which would push Chicago’s tax rate to 10.25 percent, among the highest in the nation

(Editor’s note: Bold added for emphasis)

This should come as no surprise to regular readers of Survival And Prosperity. I blogged back on April 10 of last year:

For a while now (last time being earlier this week), I told my girlfriend we were lucky to have escaped the fiscal debacle and revenue grab going on in the city of Chicago.At the same time, I pointed out that as Cook County residents we’re still on the hook for the same type of nonsense.

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

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

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

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

(Editor’s note: Bold added for emphasis)

According to the local press, it’s the sales tax hike Preckwinkle’s now pushing.

And considering Cook County’s fiscal challenges, it shouldn’t surprise blog readers to hear of hikes on “property… and other taxes” down the road.

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

Source:

Editorial Board. “Editorial: Watch out for the Toni Tax.” Chicago Tribune. 23 June 2015. (http://www.chicagotribune.com/news/opinion/editorials/ct-edit-tonitax-0624-20150623-story.html). 23 June 2015.

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Chicago Tribune: ‘Chicagoans Should Consider A Modest Property Tax Increase Inevitable’

Coming on the heels of last Thursday’s post and an earlier one about Chicago-area property/other taxes was an article by Chicago Tribune business columnist Melissa Harris entitled “Chicago isn’t Detroit- and it’s not going bankrupt.”

In the June 20 piece, Harris attempted to argue exactly what the title says (critics are panning it as “Machine”/union propaganda). But what interested me were statements like this:

More revenue will be required soon, most likely in the form of a property tax increase.

Not only is Chicago’s property tax rate lower than those in many suburbs, Chicago’s effective property tax rate ranked 49th out of the 50 largest cities in each state, according to 2009 U.S. Census data…

(Editor’s note: Bold added for emphasis)

And this:

Chicagoans should consider a modest property tax increase inevitable, though how much of an increase it will be could be affected by Moody’s decision, which made it more expensive for Chicago to borrow money…

(Editor’s note: Bold added for emphasis)

If one believes claims the Chicago news media routinely carries Mayor Rahm Emanuel’s water, increased tax hike chatter and growing comparisons of the city to other municipalities by the local press could be sending a strong signal to Chicagoans that they’ll be required to bust out their wallets shortly.

You can read the rest of that column on the Chicago Tribune website here (registration required)

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

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Property Tax Blues For Chicago, North Suburban Homeowners

While Chicagoland was preoccupied with the Blackhawks’ Stanley Cup victory parade Thursday, the Cook County Clerk’s office released the following:

Cook County Clerk David Orr released the 2014 property tax rates for the county’s more than 1,400 taxing agencies on Thursday, the final step in the tax process before bills are mailed out. The average homeowner in the city of Chicago and the northern suburbs will see their tax bill increase slightly, while the average homeowner in the southern suburbs will see a slight reduction in their tax bill.

In the south suburbs residential tax bills will on average be 1.0 percent lower. In north suburbs there will be an average increase of 2.4 percent, and most Chicago homeowners can expect an increase in their bill of 2.8 percent.

For the average single family home, this will translate to a decrease of $51.33 for south suburban homeowners, an increase of $155.49 for north suburban homeowners, and a property tax bill that is $89.44 higher than last year’s for Chicago homeowners…

(Editor’s note: Bold added for emphasis)

By the way, that $89 plus change property tax increase is based on an “average home with market value of $199,000″ in Chicago. Good luck finding a decent-sized family home that cheap in my old neighborhood on the northwest side of the city.

That being said, even a low three figure dollar increase in property taxes would likely be welcomed around my old stomping grounds compared to what could be coming down the line. John Byrne reported on the Chicago Tribune website this afternoon:

The threat of much steeper property tax hikes looms in Chicago. Mayor Rahm Emanuel is trying to find enough money to make police and fire pension payments set to balloon next year, and CPS faces a $1 billion budget hole driven by pension shortfalls of its own…

(Editor’s note: Bold added for emphasis)

You can read the entire press release on the Cook County Clerk’s website here.

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

Source:

Byrne, John. “Chicago property taxes to rise $90 on average.” Chicago Tribune. 18 June 2015. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-property-tax-rates-met-0619-20150618-story.html). 18 June 2015.

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Thursday, June 18th, 2015 Education, Entitlements, Government, Housing, Taxes No Comments

Chicago, The Taxman Cometh

“Amid comparisons to ‘shuffling the deck chairs’ on the Titanic, the City Council’s Finance Committee agreed Monday to add another $1.1 billion to the mountain of debt piled on Chicago taxpayers…”

Chicago Sun-Times website, June 15, 2015

While Chicagoans celebrate the Stanley Cup, City Hall is mulling over which taxes of theirs to hike. Derrick Blakley reported on the CBS 2 (Chicago) website before the weekend:

With a huge budget deficit ahead, Chicago city government is desperately searching for new income.

Now, Mayor Rahm Emanuel may be seriously considering an income tax

Emanuel isn’t specifically talking income tax yet. But one of his strongest city council allies, 49th Ward Ald. Joe Moore, is speaking up.

“In my ideal scenario, it would be a graduated income tax that would be pegged at peoples’ ability to pay,” he says.
Some of the biggest U.S. cities already tax wages, including New York, Philadelphia, Detroit, Cleveland, San Francisco and Denver.

The tax that would also strike suburbanites who work in the city, Moore says.

The concept drew support Thursday from other mayoral allies who want to avoid a property tax hike…

Last year, the mayor rejected a city income tax. Not Thursday…

(Editor’s note: Bold added for emphasis)

The Chicago Sun-Times Editorial Board also picked up on Mayor Emanuel’s silence on the city income tax issue, writing Friday on the paper’s web site:

In a major break from the past, Mayor Rahm Emanuel did not immediately shoot it down…

(Editor’s note: Bold added for emphasis)

The Board added:

Might a Chicago income tax have bad, unintended consequences? Of course. And we’re by no means endorsing the idea here. But so might all the other taxes Chicago needs to consider: a commuter tax, a modest financial transaction, the broadening of the sale tax to cover more services, closing some tax-increment financing districts, congestion pricing and a pay-as-you-go garbage fee, to name some of the biggies.

Each revenue-generator should be vetted and priced out publicly, and the results should be explained far and wide so that the City Council and every Chicagoan come to accept two realities. One is the sheer size of Chicago’s financial crisis. The second is that no single solution will cut it. The pain has to be spread as widely as possible. The question then becomes: Which ingredients, in what proportions, make for the best stew — or at least the one that goes down easiest?

We have long said that raising property taxes — the city’s most stable revenue source, and one of the few it controls directly — is inevitable. But if property taxes are raised too much, both for Chicago and the school system, the city we know and love will cease to exist. An already dwindling middle class will flee.

A property tax hike should only be part of that bigger stew…

(Editor’s note: Bold added for emphasis)

Testing the waters? Conditioning Chicagoans for inevitable tax hikes?

All I know is this. Higher fees/fines/taxes. Reduced government benefits/services. That’s what I see coming down the pipeline for not only Chicago but the rest of the nation in due time.

Prepare accordingly.

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

Sources:

Blakley, Derrick. “Chicago Eyes A City Income Tax On Residents, Suburbanites Who Work Here” CBS 2. 11 June 2015. (http://chicago.cbslocal.com/2015/06/11/chicago-eyes-a-city-income-tax-on-residents-suburbanites-who-work-here/). 16 June 2015.

Editorial Board. “Editorial: Mixing up a stew of Chicago revenue solutions.” Chicago Sun-Times. 12 June 2015. (http://chicago.suntimes.com/opinion/7/71/685251/editorial-16). 16 June 2015.

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Tuesday, June 16th, 2015 Debt Crisis, Fiscal Policy, Government, Taxes No Comments

Illinois Tax Hikes Coming Warn Municipal Bond Fund Managers

Talk of rapidly-approaching tax hikes in the “Land of Lincoln” is growing. Reuters’ Nick Brown, Megan Davies, and Karen Pierog reported yesterday:

With no easy way to financially engineer or negotiate its way out of a budget and pensions crisis, Illinois is likely to dish out some unpleasant medicine to its residents in the next few years. And investors say that is most likely to come in the form of higher taxes.

Given the Democrats’ control of the state legislature and their opposition to many proposals for spending cuts, municipal bond fund managers see little alternative for Republican Governor Bruce Rauner other than eventually agreeing to hike taxes, such as raising the state’s income tax or broadening its sales tax base…

(Editor’s note: Bold added for emphasis)

Regular readers of Survival And Prosperity shouldn’t be surprised when the hikes (fees, fines, and taxes) arrive, as they’ve been discussed on this blog for quite some time now. The tragedy is that Springfield continues to waste time and resources on trivial matters while neglecting to tackle crucial issues like the well-publicized debt crisis. Monique Garcia and Kim Geiger reported on the latest nonsense preoccupying the politicians. From the Chicago Tribune website this afternoon:

Democratic Speaker Michael Madigan’s effort to ask voters to approve a measure to impose higher income taxes on millionaires failed in the House on Thursday, but provides the powerful Southwest Side politician ammunition to attack Republicans in next year’s legislative campaigns.

The proposal needed 71 “yes” votes to pass, but received just 68. But now there’s a roll call, and Madigan’s Illinois Democratic Party could send out mailers criticizing Republicans who voted against the idea. Democrats already have sent out attack ads against Republicans who did not vote in favor of a property tax freeze last week

(Editor’s note: Bold added for emphasis)

Games. Stupid political games as the state’s “financial reckoning day” fast approaches.

By the way, back on March 24 of last year I blogged about that push for a “millionaire’s tax” in Illinois. My prediction now is pretty much the same as it was a year ago:

Should Illinois Democrats jack up their income taxes, I suspect the number of Illinois millionaires right before the tax hike is implemented will plummet. Revenue will follow. Out-of-state vacation homes in Indiana and Wisconsin will be declared as primary residences.

The only difference being, I forgot to mention Michigan vacation homes.

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

Sources:

Brown, Nick, Davies, Megan and Pierog. “As Illinois runs out of options in budget crisis, tax rises seen in the cards.” Reuters. 20 May 2015. (http://news.yahoo.com/illinois-runs-options-budget-crisis-tax-rises-seen-051616644.html). 21 May 2015.

Garcia, Monique and Geiger, Kim. “Madigan’s ‘millionaire tax’ question fails in House.” Chicago Tribune. 21 May 2015. (http://www.chicagotribune.com/news/local/politics/ct-rauner-warns-of-long-overtime-20150521-story.html). 21 May 2015.

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Cook County Public Pension Fix Could Mean Property Tax Hike

Blog readers in Cook County, Illinois, should prepare themselves for the possibility of higher property taxes shortly. Hal Dardick and Monique Garcia reported on the Chicago Tribune website Friday:

Cook County Board President Toni Preckwinkle is trying to revive a plan to overhaul government worker pensions, with supporters arguing the proposal is vastly different from changes to state retirement benefits recently struck down by the Illinois Supreme Court.

The proposal would cut benefits and raise retirement ages but also guarantee health care benefits for workers when they retire. It calls for the county to put almost $147 million more a year into the pension fund, though Preckwinkle continues to be vague about how she’ll fund that increase by repeatedly saying “all options are on the table.”

If the County Board chooses to foot the bill with a property tax increase, the average homeowner would pay up to $65 more a year starting in 2017, according to one internal county document the Tribune obtained when Preckwinkle sought the same legislation last year.

That measure was approved by the Senate last year but stalled in the House. It is now scheduled to be heard by a panel of House lawmakers next week…

(Editor’s note: Bold added for emphasis)

Readers shouldn’t be surprised about the prospect of higher property taxes. I blogged back on January 13:

Cook County Board President Toni Preckwinkle also gave a speech yesterday in which she hinted at county residents having to make future sacrifices. John Byrne reported on the Chicago Tribune website Monday:

Preckwinkle gave a speech to the City Club of Chicago about her first-term achievements and laid out a blueprint for her second four years in office. Asked afterward about the likelihood she will be forced to raise taxes, Preckwinkle said only that it will be “a challenge” to meet the county’s financial obligations.

“We have significant challenges, both around the spike in our debt obligations and our pension obligations, and my charge to our chief financial officer is that he has to do everything he can to be creative in figuring out how to address these problems,” she said…

Preckwinkle crafted a $4 billion budget for 2015 that includes no new taxes, fines or fees. She has warned that the 2016 budget will be far trickier to balance because debt payments will increase and the county could need to come up with $144 million more to pay into the county workers retirement system if she gets the pension fund changes she has asked for from the General Assembly.

“I can’t predict now, because we don’t even have a pension bill, how much it’s going to cost or what it’s going to take, but it’s going to be a real challenge, I’ll say that,” she said Monday.

(Editor’s note: Bold added for emphasis)

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

Source:

Dardick, Hal and Garcia, Monique. “Preckwinkle tries again on Cook County pension changes.” Chicago Tribune. 15 May 2015. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-pension-proposal-met-20150515-story.html). 17 May 2015.

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Tax Hikes Coming As Illinois Public Pension Crisis ‘Fix’ Shot Down By State Supreme Court?

This weekend Illinoisans heard about the Friday ruling by the Illinois Supreme Court on a law that was celebrated by many as a big step in resolving the state’s well-publicized public pension crisis. Rick Pearson and Kim Geiger reported on the Chicago Tribune website Friday:

The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion retirement system debt…

At issue was a December 2013 state law signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.

Employee unions sued, arguing that the state constitution holds that pension benefits amount to a contractual agreement and once they’re bestowed, they cannot be “diminished or impaired.” A circuit court judge in Springfield agreed with that assessment in November. State government appealed that decision to the Illinois Supreme Court, arguing that economic necessity forced curbing retirement benefits.

On Friday the justices rejected that argument, saying the law clearly violated what’s known as the pension protection clause in the 1970 Illinois Constitution…

(Editor’s note: Bold added for emphasis)

Can’t say I was too surprised to hear that ruling handed down.

As for the ramifications on Main Street? Pearson and Geiger added:

The ruling means Republican Gov. Bruce Rauner and the Democrat-controlled General Assembly will have to come up with a new solution after justices appeared to offer little in the way of wiggle room beyond paying what’s owed, which likely would require a tax increase. Coming up with a way to bridge a budget gap of more than $6 billion already was going to be difficult with little more than three weeks before a scheduled May 31 adjournment, and now the pension mess has been added to the mix.

Rauner, who argued during last year’s campaign that the law was unconstitutional and didn’t go far enough to reduce the pension debt, said the court ruling only reinforces his approach of getting voters to approve a constitutional amendment that “would allow the state to move forward on common-sense pension reforms.”

(Editor’s note: Bold added for emphasis)

“A constitutional amendment”

I’m not so sure how that would work out. Consider what Natasha Korecki reported over on the Chicago Sun-Times website Friday:

But it was unclear how such an amendment would help solve the crisis. It arguably could not bring savings because, according to the court ruling, a new law cannot retroactively affect those who are already in the system, said Charles N. Wheeler III, Director of the Public Affairs Reporting program at the University of Illinois at Springfield…

“Likely would require a tax increase”

I suspect- as Survival And Prosperity has been warning for some time now- that Illinoisans will soon be hit with significantly-higher taxes as a consequence of those $6 billion state budget and $105 public pension gaps. Korecki added:

An Illinois Supreme Court ruling that struck down a pension reform law on Friday could have just opened the door even wider to the prospect of deep cuts to services and new taxes for Illinois residents.

With only three weeks left until lawmakers have to pass a balanced budget, legislators now have even more political cover to raise taxes and cut spending following the high court’s decision that it was unconstitutional for the state to pare back promised pension benefits for state employees…

“This ensures that however we resolve this, the citizens of Illinois will be paying more for less service from the state of Illinois,” Kent Redfield, professor emeritus of the University of Illinois at Springfield, said of Friday’s ruling. “I think that’s an inevitable outcome from this.”

(Editor’s note: Bold added for emphasis)

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

Something I’ve kept warning about on this blog, with regular observers of Springfield now talking it about these days (if they weren’t already).

I wonder to what extent Illinoisans have prepared/are preparing for such a scenario? I’ll be talking more about this later.

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

Sources:

Pearson, Rick and Geiger, Kim. “Illinois Supreme Court rules landmark pension law unconstitutional.” Chicago Tribune. 8 May 2015. (http://www.chicagotribune.com/news/local/politics/ct-illinois-pension-law-court-ruling-20150508-story.html#page=1). 11 May 2015.

Korecki, Natasha. “State Supreme Court pension ruling provides political cover to cut more, tax more.” Chicago Sun-Times. 8 May 2015. (http://chicago.suntimes.com/politics/7/71/590030/state-supreme-court-pension-ruling-provides-political-cover-cut-tax). 11 May 2015.

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Standard & Poor’s Warns Chicago ‘Downgrade Of More Than One Notch Is Possible’

Not too much talk about the following last week in the Chicago-area news. From Standard & Poor’s credit analyst Helen Samuelson over on S&P’s Global Credit Portal website on April 9:

CHICAGO (Standard & Poor’s) April 9, 2015–After months of campaigning and uncertainty, Chicago (A+/Negative general obligation debt rating) can get back to the business of running itself. As such, we expect Mayor Rahm Emanuel’s attention to be focused on the city’s budget challenges, namely its ballooning pension obligation.

During the course of the election — and particularly during the runoff — Mayor Emanuel avoided addressing the possibility of property tax increases to help pay for these pension obligations.

“Following Tuesday’s vote, in order to maintain its current rating, we expect the administration to address the pension and budget challenges head on by providing solutions that will support the city’s credit strengths in the near and far term,” said Standard & Poor’s credit analyst Helen Samuelson.

Our ‘A+’ rating is predicated on Chicago’s ability to make the changes necessary to address its budget gap and pension problem. However, even with this ability, to ensure long-term stability Chicago still needs to demonstrate its willingness to make difficult choices that address its budget issues.

Otherwise, the ‘A+’ rating could be severely pressured. Our negative rating outlook reflects the city’s fiscal pressures. If the city doesn’t find structural solutions, a downgrade of more than one notch is possible.

In our view, if the city fails to articulate and implement a plan by the end of 2015 to sustainably fund its pension contributions, or if it substantially draws down its reserves to fund the contributions, we will likely lower the rating. This is regardless of whatever relief the state legislature may or may not provide. We will likely affirm the rating and revise the outlook to stable if Chicago is able to successfully absorb its higher pension costs while maintaining balanced budgetary performance and reserves at or near their current level…

(Editor’s note: Bold added for emphasis)

To date, a different credit rating agency- Moody’s- has been making the most noise about the City of Chicago’s financial woes. Yvette Shields reported on The Bond Buyer website on April 6:

The city has suffered a steep credit rating slide and further credit deterioration is threatened.

Chicago’s GO ratings range from a low of Baa2 — two notches above speculative grade — from Moody’s to a high of A-plus from Standard & Poor’s…

“A-plus.” That may not be the case at year end.

You can read that entire Standard & Poor’s piece on the Global Credit Portal here.

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

Source:

Shields, Yvette. “Big Stakes as Market Awaits Chicago’s Mayoral Pick.” The Bond Buyer. 6 Apr. 2015. (http://www.bondbuyer.com/news/regionalnews/big-stakes-as-market-awaits-chicagos-mayoral-pick-1071986-1.html). 16 Apr. 2015.

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Thursday, April 16th, 2015 Credit, Debt Crisis, Entitlements, Government, Taxes No Comments

Thinking Of Illinois’ Financial Woes While In Wisconsin

Saturday morning while working on projects around my family’s place in Wisconsin, something I read earlier in the week came to mind. Steven Malanga wrote on The Fiscal Times website on March 30:

Illinois officials… are awaiting a ruling from the state’s Supreme Court on a suit by workers seeking to overturn the legislature’s 2013 pension reforms. If the court, which has previously refused to allow any changes to retirement plans for retirees or current workers, throws out the reforms, Illinois will face $145 billion in higher taxes over the next three decades just to pay off the debt, according to a report by the Civic Committee of Chicago.

(Editor’s note: Bold added for emphasis)

“Illinois will face $145 billion in higher taxes…”

I don’t recall hearing/seeing that figure being used before, so I decided to track it back to the source. From an October 9, 2014, press release from the Civic Committee:

The “What If?” initiative identifies some of the consequences that could result from an overturn of the pension law, including:

$145 billion in higher taxes and service cuts over 30 years
• Highest property taxes in the nation
• 41¢ of Big Three state tax dollars devoted to pensions, up from 8¢ in 2007
• A possible $2,500 tuition spike at the University of Illinois
• Severe cuts to K-12 education, leading to as many as 13,000 teacher layoffs
• Critical meltdown of social services, including the end of child care for 41,000 kids and 21,000 seniors losing in-home care

(Editor’s note: Bold added for emphasis)

That’s a pretty scary picture being painted. The accompanying “What If?” brochure does a good job at accomplishing that. Consider some of these additional forecasts being made:

• 64,000 jobs lost
• $375 average property tax increase
• $3,000-plus in state taxes per household

The brochure didn’t indicate how all this was computed.

However, if conditions in the “Land of Lincoln” deteriorate to such a point, Wisconsin is where I’ll likely stay for good. Regular readers might recall that I’ve mentioned my permanent address being a Wisconsin one in the future.

You can read that entire press release/learn more about their “What If?” initiative on the Civic Committee website here.

While I support public pension reform in Illinois, I’m just not convinced what’s been put into play (passed into law) is the best way of going about it.

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

Source:

Malanga, Steven. “Outrageous public pensions could bankrupt these states.” The Fiscal Times. 30 Mar. 2015. (http://finance.yahoo.com/news/outrageous-public-pensions-could-bankrupt-172700274.html). 5 Apr. 2015.

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Chicago City Council Budget Chair On Property Tax Hike: ‘I Believe We Can Truly Say That It Will Happen’

Back when I was an aide to U.S. Senator Paul Simon of Illinois, there was one cardinal rule to be followed when communicating with constituents:

Good news comes from Paul, bad news comes from his assistants.

With that in mind, last night my girlfriend and I were watching the Chicago news on TV when the following story appeared. From the WGN Web Desk this morning:

A Chicago property tax hike could be on the way.

That wasn’t announced by Mayor Rahm Emanuel.

It was said by an alderman who is trying to help him get reelected.

Several of Emanuel’s allies held a press conference Monday to question how challenger Jesus “Chuy” Garcia would pay for the promises he’s making on the campaign trail.

That’s when 34th Ward Alderman Carrie Austin, the City Council budget chairman, said property tax increases may be needed to cover Emanuel’s spending plans.

“I believe we can truly say that it will happen, but it’s all in the ‘how much,’” said Austin. “Nothing is off the table, and I think we should be honest with the people to let them know that everything is being considered.”

(Editor: Bold added for emphasis)

Considering the event was organized to attack mayoral challenger Jesús “Chuy” Garcia and this City Council routinely carries water for Emanuel, I initially thought “The Rahmfather” was trying to kill two birds with one stone here- blast “Chuy” and have Alderman Austin start conditioning Chicagoans for the looming property tax hike I’ve been warning about for some time now on this blog.

Good news Rahm. Bad news City Council budget chairman.

But then I thought more about how Rahm obviously realizes talk of tax hikes is one of the “third-rails” of politics- particularly before a runoff election that’s only a few weeks away (April 7) and where “Chuy” is not too far behind in the various polls.

Plus there’s this from Hal Dardick about the incident on the Chicago Tribune website yesterday:

Austin, known for speaking off the cuff, quickly tried to qualify her property tax hike comment, saying she meant only that “everything is on the table.”

(Editor’s note: Bold added for emphasis)

Maybe this wasn’t orchestrated by Rahm?

Oh well. Smooth move or gaffe, I see it as yet more evidence of a property tax hike being just around the corner.

Plan accordingly.

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

Sources:

“Mayor Emanuel Ally: Property tax hike likely.” WGN News Desk. 10 Mar. 2015. (http://wgntv.com/2015/03/10/mayor-emanuel-ally-property-tax-hike-likely/). 10 Mar. 2015.

Dardick, Hal. “Emanuel ally: Property tax hike likely in second term.” Chicago Tribune. 9 Mar. 2015. (http://www.chicagotribune.com/news/local/politics/chi-emanuel-ally-says-property-tax-likely-in-second-term-20150309-story.html). 10 Mar. 2015.

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Tuesday, March 10th, 2015 Debt Crisis, Fiscal Policy, Government, Taxes No Comments


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