Courts have mandated payments that consume 100 percent of the state's revenue.
The article linked above, on Fox News Politics, comically says, "even the lottery isn't safe", and is completely missing the point. Yes, the state lotto requires a payment from the legislature each year and there's no funding past June 30. Yes that means the state is planning to halt Powerball and Mega Millions sales. And, yes, that means if given a choice between a smaller, lump sum lottery payment or the "guaranteed" monthly payments, take the lump sum. But talking about the lottery is burying the lede: Illinois is in a really bad situation even for Illinois.
But the problems are years in the making, caused in large in part by the state’s poorly funded pension system— which led Moody’s Investors Services to downgrade the credit rating to the lowest of any state. The state currently has $130 billion in unfunded pension obligations, and a backlog of unpaid bills worth $13 billion.The state is at junk bond status. Re-read that sentence a couple of paragraphs above again. They need to spend 100% of their revenue just on court mandated payments. The Illinois Supreme Court ruled in May 2015 that pensions for current government workers can’t be modified. If 100% of the revenue has to go to the pension funds, that leaves no pay for teachers, no maintenance, no repair of municipal systems, no lights for the state buildings, police or anything else at all. Every state function has to shut down.
Reports have suggested the state could be the first to attempt to declare Chapter 9 bankruptcy -- but under the law, that’s impossible unless Congress gets involved.Confidentially, Mr. Brown, don't worry that the rest of the country would think less of you. Filing for bankruptcy wouldn't make us think any less of your state than we already do.
“Nobody here in Illinois is considering bankruptcy—first of all, it’s not allowed,” said Steve Brown, press secretary for Illinois House Speaker Michael Madigan. “Second of all, it would damage the reputation of the state and it’s just not necessary.”
CBS Moneywatch reports the reason for the problems is Illinois made promises in pension plans but then didn't keep them.
But critics say some of those pensions carried overly optimistic assumptions, especially given periods of market turmoil like the global financial crisis, which ate into investment returns. The state's general assembly wasn't required to fully fund pensions, which meant tax money was spent on other priorities such as schools or infrastructure.Note that CBS isn't saying the state spent the money to fund the programs through investment vehicles and it just hasn't worked out. The statement says the state government "wasn't required to fully fund pensions", so they spent it on other things. I'm not saying it's related to the fact that as soon as I started to type "Illinois politicians pension promises" into my search bar, before I finished the second word it offered to autocomplete with "Illinois politicians in jail". As the saying goes, I'm not not saying it either.
If you're a numbers geek, you will probably find the details on the Illinois pension fund problems in this report from Illinois Policy.org illuminating. I'm not familiar with the organization, but the page seems reasonable in the sense of being numbers oriented and not throwing inflammatory language at anyone. Their website says,
Illinois Policy is an independent organization generating public policy solutions aimed at promoting personal freedom and prosperity in Illinois.Illinois has real problems with its pension obligations, and the sad story (as others have reported) is that it's likely to happen in other states. There have been calls to split Illinois into more states and assign those pieces to their neighboring states. I have no idea what that would do to the legal obligations, but how would you feel if pension obligations you had no part in creating from another state were suddenly billed to you? Is it "fair" or remotely reasonable to have Indianapolis taxpayers be put on the hook for the bad deals of Chicago politicians? Is it any more fair if the Fed.gov gets involved and pays money it doesn't have either to bail out pension plans?
It might surprise you that I come down quite a bit harder on the politicians than the employee unions on this. The unions did what anyone expects them to do: demand and pressure for more and more benefits for members. The politicians who accepted those contracts and then didn't do their part to make sure they were funded bare the blame. The unions say "pensions are a promise" and are partly right. Keeping those pension agreements is more than just a promise; it's a fiduciary responsibility of the government that made them. And I use government and responsibility in the same sentence without a trace of irony.
Cities and Counties can file for bankruptcy under Chapter 9. The state can't, but it would change the nature of the state's obligations.
ReplyDeletehttps://www.amazon.com/Orange-County-Bankruptcy-Investigative-Summary
The simple solution is to make it illegal for a politician to receive a contribution, gift, honorarium, etc. from anyone whose salary they vote for. It would end the problem quickly. Don't expect the legislature to move on that one.
DeleteRemember that politicians who leave office get to keep their campaign war chests...
how would you feel if pension obligations you had no part in creating from another state were suddenly billed to you?
ReplyDeleteI know how I feel about pension obligations I had no part in creating from another generation being billed to me, when they are large enough to prevent me from saving my own retirement. Retirees better start a victory garden, because after they eat their cats they won't have anything else to eat.
"Fair" and "armed robbery" are not words that go together, no matter how many government employees say it to you six hours a day in a twelve year custodial situation for brainwashing. You ought to teach your children Stockdale before you allow them to attend public school.
Here we see the genius of the deep state in action. This guy is pissed at the generation in front of him, for following the laws they were required to follow instead of pissed at the politicians for misspending that money.
DeleteThat's the thing about Social Security. You didn't have the option of not paying into it. It was pay in or go to jail. The politicians treated it like a slush fund instead of a fiduciary duty. I have to assume some of them knew they could manipulate public opinion to get detractors to go kill each other.
Brilliant propaganda.
Nothing wrong with the original 1935 FICA law. The problem arose with later generations of politicians who added benefits for classes of people that were never envisioned by the original designers. SS disabilty, for example.
DeleteOriginal 3:13 AM commenter here. If the action taken was gassing Jews instead of stealing retirement savings, would you be defending the common people for their law-abiding-ness? Why do you think peoples' earned income is a proper domain of government to manage? This Communist/Fascist/Nazi/Socialist/Liberal idea is central to the 20th century genocides in China, Russia, and Germany.
DeleteThe citizens in bulk always have the option of not obeying, as in 2014 with attempted gun registration in Connecticut. No government can force any large group of population to do anything, government doesn't have the military strength. All law-obeying by large groups is voluntary.
Suppose some nut makes an impassioned speech that everyone should gas the Jews, or turn all retirements into a Ponzi. A proper listener's response is to hope the guy gets mental healthcare; you certainly shouldn't want to OBEY him. Anyone who gives aid and comfort to murderers creating a Ponzi is an accomplice or accessory, and needs to be in prison until their brain is repaired.
There is no way to evade accountability for the action of hiring men to push others around at gunpoint, including by calling the act "voting". The voters are just as culpable as the legislators.
Fiduciary responsibility. It is a foreign concept to politicians most of whom are lawyers. And the wrongness of the concept of things like pensions is that those funds are free to be gambled with or shifted to other uses in violation of that responsibility. Also, it is not just a problem with Illinois, but with most other states and the Federal Government.
ReplyDeleteCommitments made to people like our veterans are made by one set of poltiicians and down the road, other politicians feel free to "change" those obligations when it is convenient (and of course, I am talking about taking away benefits, never increasing them).
I am hopeful that President Trump and his business minded, results oriented cabinet will survive the onslaught so that a new mindset will take hold. But of course, that is up to the voters. Now that they are being shown a "different" and more responsible way, not necessarily perfect mind you, but better way to manage government, maybe they will take notice and demand such people in the future.
"The state's general assembly wasn't required to fully fund pensions, which meant tax money was spent on other priorities such as schools or infrastructure."
ReplyDeleteHAHAHAHA! They misspelled, "Pissed away on bloated, useless projects to fatten connected friends and relatives, who then kicked some of the money back to the crooked politicians."
Read John Kass in the Tribune. Those of us who have lived here all our lives see the waste. And politicians outside Cook County promises to correct it, and somehow, they never do. Taxpayers who pay attention refer to it as the Corruption Tax: the extra millions we pay that ends up on bullshit projects like Maggie Daley Park, the new stadium at DePaul, and countless others.
Another good source for insight into the rotten underbelly of Chicago and Illinois politics is Second City Cop blog, link in nic.
I don't know what's going to happen here. but it ain't going to be pretty.
I was going to change that "spent on other priorities" to "spent on hookers and blow" but restrained myself for once.
DeleteA few months ago I realized the most ironic thing in the world is that in looking for multiple sources for things I see being talked about, I'm doing better "journalism" than the major networks!
"Hookers and blow," probably would've been appropriate.....
DeleteIt would be easy to blame the court for enforcing the laws. It would be easy to blame the state workers for demanding their pensions that they pay for. But 100% of the blame is on the legislators. They designed the pension system and they made the changes over the years that doomed it. In my state the legislator bowed to the demands of the police and fireman unions to allow them to retire 8 years earlier than other state retirees and still get 100% of their retirement. Who wouldn't be sympathetic to the police and firemen, but there was no provision to pay for it. So all the other retirees had to make it up. But in the end no one really paid for it and the pension system is in trouble.
ReplyDeleteAnother example of how they the state screwed up the retirement system; they allowed a retiree to claim either their money match (a legitimate retirement amount based on how much was in their account) or a percentage of their pay for the last three years. Then magically every retiring legislator gave their staff high paying state jobs which they stayed in for three years to get a nice lifetime retirement. A gift from the tax payers.
The problems with state retirement systems were created by legislators and usually demanded by union or other special interests.