Chicago pension plans are massively underfunded to the tune of $18.6 billion. Yet, the Illinois legislature passed a bill that would actually reduce contributions to the fund.
Governor Bruce Rauner made the fiscally responsible decision to veto the bill.
As expected, Chicago Mayor Rahm Emanuel points the finger at the Governor instead of looking in the mirror to see what the real problem is.
Pensions & Investments reports Illinois governor vetoes bill to reduce Chicago fire, police pension contributions.
Illinois Gov. Bruce Rauner vetoed Friday a bill that reduces Chicago’s pension contributions to its police and fire retirement systems in the near term, nearly one year after the measure passed the General Assembly.
SB 777, which passed the General Assembly on May 31, 2015, reduced Chicago’s required pension payments to the $2.4 billion Chicago Policemen’s Annuity & Benefit Fund and the $1 billion Chicago Firemen’s Annuity & Benefit Fund over five years, starting in 2016, and extended the deadline for the fire and police pension funds to reach 90% funding to 2055 from the current 2040 deadline.
Mr. Rauner wrote in his veto letter to legislators on Friday that the bill continues the “irresponsible practice of deferring” pension funding decisions and that reducing pension contributions in the near term sticks taxpayers with higher future pension contributions.
Finger-Pointing Debate
- Governor Rauner: “By deferring responsible funding responsible funding decisions until 2021 and then extending the timeline for reaching responsible funding levels from 2040 to 2055, Chicago is borrowing against its taxpayers to the tune of $18.6 billion,” Mr. Rauner wrote. “This practice has to stop. If we continue, we’ve learned nothing from our past mistakes.”
- Mayor Emanuel: “With a stroke of his pen, Bruce Rauner just told every Chicago taxpayer to take a hike,” said Chicago Mayor Rahm Emanuel in a statement Friday. “Bruce Rauner ran for office promising to shake up Springfield, but all he’s doing is shaking down Chicago residents, forcing an unnecessary $300 million property tax increase on them and using them as pawns in his failed political agenda. And it is an unspeakable act of disrespect toward our men and women in uniform — and toward Chicago taxpayers — that the governor would veto a bill to protect taxpayers and police and fire pensions as we head into Memorial Day weekend. Decades from now, the Rauner Tax will be this governor’s legacy in Chicago.
Pension Shortages
Emanuel Wants More Can-Kicking
It’s pretty clear who is on the right side of this debate. Mayor Emanuel wants to kick the can and Governor Rauner says no.
If the Mayor does not want property tax hikes there is an easy solution: “Don’t hike them”.
The Mayor already made the largest property tax hike in history, and Chicago citizens get absolutely nothing out of it. Every penny goes to unions.
And guess what?
New accounting rules show Chicago Pension Liabilities Jump 168%!. Chicago pensions were understated by $11.5 Billion. The total deficit is now $18.6 billion.
Yet the mayor wants to further reduce contributions! Supposedly the problem will magically fix itself if only given more time and more underfunding!
Tax Hikes Not the Solution
The pension mess and the Chicago public school mess cannot be placed on the backs of Illinois taxpayer.
Mayor Emanuel already passed the biggest tax hike in history. Here are some links for discussion:
- Chicago Tax Collector Hath Arrived With Massive Tax Hike: Emanuel Says “No Stone Unturned … Not Done Yet”.
- Chicago’s Sheep Dogs Approve Mayor’s Tax on Sheep; Quote of the Day “It’s Not a Piece of Art”
- Chicago Public School System Threatens Massive Tax Hikes Via “Backdoor” Bond Guarantee
Solution is Bankruptcy
If Mayor Emanuel really wanted to do something for the city and city taxpayers, he would be begging House Speaker Michael Madigan for the one and only thing that can help the city: legislation that would allow Illinois municipal bankruptcies.
Let’s stop pretending there is another solution, because there isn’t.
Mike “Mish” Shedlock
The state should shoulder no financial burden for a municipality’s pension problem.
+1.
And the state needs to stick to that gun, regardless of supposed consequences. No but-head-ism (as in, but, we have to …..) It needs to be a clearly stated, and stuck to, strategy on behalf of the state, that unless Chicago finds a way to defy the unions and cram their pensions down as far as necessary; be that outright hollow-eyed-in-the-streets starvation or not; Chicago and Chicago alone will have to raise taxes such that all young workers, police and fire officers included, leave; leading the whole mess to completely implode and/or literally burn to the ground unimpeded.
Before all this the average Chicago household was in hock for over $40K just for unfunded city pensions in addition to the unfunded billions for all the Cook County and State stupidity orchestrated by the dictator filth Madigan. If states could have revolutions, Madigan and Rahmbo along with some of the bigger name compassion fascists would be decorating lamp posts right now.
The important thing is for all those “on hock” to just leave. As I said above, the goal is to render the two only possibilities
1)a cramdown to essentially nothing leaving all retired city employees without extrenal savings the option of greeting at Walmart ’til death, or starvation
2) No taxpayers left to fleece, so that Chicago literally burns down to a pile of charcoal, for simple lack of anyone to fight the fires.
What specifically needs to be prevented, is ANY outside “aid” to prevent either of the above. Chicago made their bed. Noone else, regardless of how horrific some Rahmite adman may make the results of staying out of it look on TV, should have to contribute even one penny, under any circumstance, come what may.
Part of the solution going forward would be to eliminate all public pensions. Move them into 401-k equivalents and SS, like the private sector has done over the last 40 years. And make them work until the normal retirement age – not 50 or 55 – when the average lifespan is 80. Why should the private sector workers be forced to fund the cadillac pension programs for the government trough feeders when they are thrown scraps of baloney?
Public safety is one of the biggest scams going in this country. Have you ever noticed that many urban firefighters who only need a high-school degree to hire on, get paid like medical doctors and retire with multi-million dollar pensions at 55 are from a long-line of family firefighters? No surprise. Dad or Uncle Charlie pulls strings to bring the relatives on board. What a gig. Get paid for sleeping, playing b-ball, grocery shopping with 2 or 3 day work weeks. No wonder there are 600 applications or more for every job opening. For what other occupation do you find that many applications?
We need to go back to volunteer fire departments before the public safety gravy train puts us all in the poor house.
Either that or privatize the police and fire departments. Emergency medical calls should be handled by privatized paramedics. Firefighters should only do what their name implies: Fight fires.
My two firefighter EMT cousins in Joliet get shot at and have rocks thrown at them when they go into the “Democrat Base” neighborhoods to save those people’s lives. I do not think it practical for them to be doing that at 67. Change the pension plans for sure but there are real world circumstances that make these jobs for younger people.
ComEd workers endure even worse treatment in those neighborhoods. While one guy is pointing a gun at them, another is stealing everything from the truck. The police do nothing but write reports for insurance.
Good luck with privatized firefighters in chicago, Lmao!
I get a warm fuzzy when I think that every teamster who lost his pension voted Democrat.
There is another solution. The Fed prints to monetize massive deficits. The currency dilutes massively. Pensioners get every nominal penny they are owed. Milk costs $75.00 per gallon. Problem solved.
This is the solution Rahm sees coming. So do I.
Consider the possibility that inflation will drive up wages followed by increases in pension benefits. Where does it end?
In Zimbabwe.
Didn’t say it was a preferred solution.
Let’s try taxing the rich and making corporations pay their fair share before we try balancing the budget on the backs of working people
The rich are the hard working people and they pay 90% of the taxes.
Wipe the drool off your chin and take another stab at it.
“The rich are the hard working people”
How do you know? >50% of declared income (IRS) is not from current employment!
The hardest working people are, and have always been, the poor and the slaves. The whole point of being rich is having other people do stuff for you. I am not working class and work less hard than people painting the bridges, even though I may be more disciplined in many ways. Working hard and wages earned correlate poorly.
The 90% taxes is simply untrue. Go read up. The effective total tax rate across various market income quintiles in the USA hovers around 30%, slightly higher for the bottom quintile. In terms of effective contribution, the top quintile takes slightly more than 50% of all income and also pays slightly more than 50% of all taxes (including payroll, state and local taxes). Zeroing in on the truly wealthy, one sees that as one narrows the top slice, the effective tax rate falls.
People often forget that only 30% of tax revenues at all levels of government come from federal income taxes, extrapolating the skew there to all taxes (“cherry-picking”), forgetting that a large share of taxes is payroll and local taxes which often impose a proportionately higher burden on the less rich.
When your source of income is the government your effective tax rate is zero. Which is why every form of governmentalism eventually fails.
“Let’s try taxing the rich and making corporations pay their fair share before we try balancing the budget on the backs of working people”
There isn’t really a fair share. Democrats keep adding government programs then expect someone else to pay for them. $15 an hour is $0 an hour, when the government has priced someone out of a job.
Business owners didn’t vote for paid family leave in California. When it was passed, everyone had X deducted from their pay check. One democrat lawmaker said that eventually, companies “will have to pay their fair share”. There is no fair share of something that is shoved down ones throat.
Los Angeles just passed a measure. One city politician said that if a company can’t afford it, they shouldn’t be in business. What is fair share about that?
Not that familiar with Illinois politics. But fascinated that the voters elected a fiscally conservative republican governor when Chicagoland accounts for such a high percentage of the state population. Are the liberals responsible for draining the rest of the state all Cook County residents or something? Build a big fence around Cook and make it the 51st state. Rahm seems to be a smart fellow and has a high opinion of himself. Let him figure it out. The only real solution is to force liberals to spend their own money and balance their own books. Once they start to eat their own cooking the situation could only improve.
Liberals always run out of other people’s money and then come for yours.
Everyone knows that Chicago is the next Detroit, but the Detroit story isn’t exactly over yet either… All of this is amazing since Venezuela (Puerto Rico, Greece, fill in the blank) is staring everyone in the face. “Denial” is a still a river in Egypt apparently… There should be a new support group formed: SA – Socialists Anonymous. “Hello my name is ____ and I’m a Socialist.”
https://mishtalk.com/2016/05/24/detroit-fresh-out-of-bankruptcy-discovers-195m-pension-shortfall/
What a disaster. At some point the Socialist chickens come home to roost. I think we’re reached Peak Socialism.
“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein (misattributed) – Narcotics Anonymous
http://www.nickragone.com/storage/social.bmp?__SQUARESPACE_CACHEVERSION=1234145596826
https://anticap.files.wordpress.com/2016/01/enjoy-socialism.jpg?w=614
http://howdyyall.com/Texas/TodaysNews/HeadlineImg/1477.gif
“Socialists are happy until they run out of other people’s money.” – Margaret Thatcher
“Socialism in general has a record of failure so blatant that only an intellectual could ignore or evade it.” – Thomas Sowell
“Toute nation a le gouvernement qu’elle mérite.” (Every country has the government it deserves.) Lettres et Opuscules Inédits (1851) (letter of August 15, 1811). – Joseph de Maistre
“Politicians are people who, when they see light at the end of the tunnel, go out and buy some more tunnel.” ~John Quinton
We hang the petty thieves and appoint the great ones to public office – Aesop
“I have come to the conclusion that politics is too serious a matter to be left to the politicians.” – Charles de Gaulle
The best answer is a reduction in pensions based on a sliding scale starting with the carreer politicians down to the lowest paid union worker. The mosre you make the bigger the hair cut. Rahm does not have any answers.
Puerto Rico (pensions, gov services, bankruptcy, minimum wage reduction etc.)
Link [http://www.nydailynews.com/news/national/gonzalez-puerto-rico-faces-colonial-style-takeover-ease-debt-article-1.2651777]
GONZALEZ: Puerto Rico faces ‘wholesale’ colonial-style takeover to ease $2B debt
“The President is committed to this,” Treasury Secretary Jacob Lew said this week. “If this legislation doesn’t pass, there will be a chaotic unwinding that will be just pain for the people of Puerto Rico.” Lew was referring to some $2 billion in debt payments that Puerto Rico is certain to default on come July 1…
…They also fear that a five-year fiscal plan that the oversight board must approve before any debt restructuring can occur will end up instituting severe cuts in public services and government pension funds. The bill already includes a reduction in the minimum wage to $4.25 an hour for people under 25.
A briefing paper put out by Republican leaders actually boasts that if Puerto Rico’s government “fails to comply with the fiscal plan” approved by the oversight board, the board “may impose mandatory cuts . . . a power far beyond that exercised by the Control Board established for the District of Columbia.”
Puerto Rico is just another Greece. Graft, corruption, and fraud run rampant there. The biggest property owner in Puerto Rico is? HUD!!!!!!!! If Puerto Rico wants the same rights as states in the USA let them join us officially. Otherwise it is not the taxpayers problem to bail them out. Nothing will change on the island as long as we are on the hook.
Puerto Rico actually is worse then Greece and will continue down this road until the people say enough already and the continental US stops handing the island money all the time. The Dems love the island as they are votes. Now that illegals can basically vote in the USA without citizenship Puerto Rico may well go into default as they should.
“Let’s stop pretending there is another solution, because there isn’t.”
You mean we’ve come to the end of “extend and pretend” policy? A greater imagination is required at this point. One that can accept extending into infinity.
The power to print is the power to destroy. Printing has made corporate defined benefit pensions almost extinct, and muni pensions are next. No way can pensions be funded with negative real interest.
A related phenomenon; printing confiscates the purchasing power from muni budgets. Thus cities keep getting ever more desperate to make up for what bankers took away from them.
Cities cannot be restored without honest money. Defined benefit pensions cannot be restored without honest money. Two sides to the same coin.
“Mayor Emanuel: “With a stroke of his pen, Bruce Rauner just told every Chicago taxpayer to take a hike,” said Chicago Mayor Rahm Emanuel in a statement Friday. “Bruce Rauner ran for office promising to shake up Springfield, but all he’s doing is shaking down Chicago residents, forcing an unnecessary $300 million property tax increase on them and using them as pawns in his failed political agenda.”
The failed political agenda is the democrat politicians of Chicago. They over promised, which is why pensions are under funded.
Rahm is not shaking down Chicago. The democrat politicians of Chicago made this bed. It is for them to sleep in it.
It is time to wake up and admit a lot of pension funds are in trouble. The Central States Pension Fund which represents more than 400,000 International Brotherhood of Teamster union members, retirees recently admitted it can’t fulfill its promises. Because of this the fund has proposed reducing monthly benefits currently being paid to pensioners by 22% on average.
It should be noted that underfunded pension funds is not a problem only here in America, but it exist all over the world. The PBGC, America’s safety net for failed pensions has total assets of about $88 billion and liabilities of $164 billion, this is an indication of how dire the situation is. The article below delves into why in the future many pension payouts will be cut.
http://brucewilds.blogspot.com/2016/05/pension-benefits-will-be-cut.html