Tag Archives: Underfunding

Pritzker Administration sloughs off Illinois pension liabilities passing $500 billion mark, dissembles on pension crisis again, by Mark Glennon

Posted on November 22, 2021 | 2 comments

The taxpayers of Illinois are buried under the pensions that have been granted to public employees. From Mark Glennon at wirepoints.org:

There’s a lesson here not only about Illinois pensions but about how easily the press will let Gov. J.B. Pritzker thumb his nose at a crisis.

We reported Wednesday that the total unfunded liability for Illinois state and local pensions passed the $500 billion mark. That includes pensioner healthcare liabilities, which are constitutionally guarantied just like pensions. It is based on numbers from Moody’s Investor Services which uses assumptions comparable to those used in the private sector and are less optimistic than those the state uses. Read Wirepoints Special Report: Illinois pension shortfall surpasses $500 billion, average debt burden now $110,000 per household

Greg Hinz at Crain’s asked Gov. J.B. Pritzker’s office for a response.

“Pritzker’s office is pushing back on the notion that he’s done too little,” wrote Hinz. “Steps such as discounted buyouts of some pensions have ‘begun to bend the curve,’ with the percentage of total spending that goes to pension now flattening, a spokeswoman says in an email.”

Nonsense. Pritzker has done nothing significant whatsoever to fix pensions and it is particularly dishonest to cite pension buyouts as an example of progress.

Pritzker has long been boasting about pension buyouts but forever refuses to provide any support or analysis showing that buyouts would have any meaningful effect. We and others have written about it repeatedly.

  • In 2019 he told The Economic Club of Chicago that some study says buyouts will save “billions and billions,” perhaps $25 billion. But he has never produced that study or anything else to support the claim, and the state’s bond documents said something very different in the debt offering made just prior to that claim. Those documents said just 818 workers and retirees who are eligible for either of the state’s buyout programs had applied for one. That’s less than 2.3%, not 20% as Pritzker told the Economic Club. The documents further said, “The State is unable to quantify the amount or timing of any [reduction in pension liabilities] at this time.” In other words, Pritzker brags about savings to the public but the state says something different when the penalty would be securities fraud.

Continue reading→

2 Comments

Posted in Debt, Government, Law, Pensions, Taxes

Tagged , , ,

The Pension Train Has No Seat Belts, by John Mauldin

Posted on June 18, 2018 | Leave a comment

Pensions are the same unsustainable trajectory as the rest of our debt-saturated world. From John Mauldin at mauldineconomics.com:

In describing various economic train wrecks these last few weeks, I may have given the wrong impression about trains. I love riding the train on the East Coast or in Europe. They’re usually a safe and efficient way to travel. And I can sit and read and work, plus not deal with airport security. But in this series, I’m concerned about economic train wrecks, of which I foresee many coming before The Big One which I call The Great Reset, where all the debt, all over the world, will have to be “rationalized.” That probably won’t happen until the middle or end of the next decade. We have some time to plan, which is good because it’s all but inevitable now, without massive political will. And I don’t see that anywhere.

Unlike actual trains, we as individuals don’t have the option of choosing a different economy. We’re stuck with the one we have, and it’s barreling forward in a decidedly unsafe manner, on tracks designed and built a century ago. Today, we’ll review yet another way this train will probably veer off the tracks as we discuss the numerous public pension defaults I think are coming.

Last week, I described the massive global debt problem. As you read on, remember promises are a kind of debt, too. Public worker pension plans are massive promises. They don’t always show up on the state and local balance sheets correctly (or directly!), but they have a similar effect. Governments worldwide promised to pay certain workers certain benefits at certain times. That is debt, for all practical purposes.

If it’s debt, who are the lenders? The workers. They extended “credit” with their labor. The agreed-upon pension benefits are the interest they rightly expect to receive for lending years of their lives. Some were perhaps unwise loans (particularly from the taxpayers’ perspective), but they’re not illegitimate. As with any other debt, the borrower is obligated to pay. What if the borrower simply can’t repay? Then the choices narrow to default and bankruptcy.

Today’s letter is chapter 6 in my Train Wreck series. If you’re just joining us, here are links to help you catch up.

To continue reading: The Pension Train Has No Seat Belts

Leave a comment

Posted in Business, Collapse, Debt, Economy, Financial markets, Governments, Pensions, Uncategorized

Tagged ,

State/Local Pensions Systems Face Disastrous $3.4 Trilliont Funding Hole, by Attracta Mooney

Posted on April 12, 2016 | Leave a comment

The state and local pension system implosion has been a slow-motion train wreck that has lasted several years and will last several more, unless there is some sort of grand collapse all at once. The situation grows increasingly dire. From Attracta Mooney at the Financial Times via davidstockmanscontracorner.com:

The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies.

According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.

Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.”

Mr Nunes, who put forward a bill to the House of Representatives last month to overhaul how public pension plans report their figures, added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.”

Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits.

Joshua Rauh, a senior fellow at the Hoover Institution, a think-tank, and professor of finance at the Stanford Graduate School of Business, who carried out the study, said: “The pension problems are threatening to consume state and local budgets in the absence of some major changes.

“It is quite likely that over a five to 10-year horizon we are going to see more bankruptcies of cities where the unfunded pension liabilities will play a large role.”

To continue reading: State/Local Pensions Systems Face Disastrous $3.4 Trillion Funding Hole

 

Leave a comment

Posted in Pensions

Tagged , ,

Imploding Pensions Take The Rest Of US Down With Them, by John Rubino

Posted on April 2, 2016 | 3 comments

From John Rubino on a guest post at theburningplatform.com:

It’s the same story pretty much everywhere: Cities and states promised ridiculously generous (by today’s standards) pensions to teachers, cops and firefighters, failed to sufficiently fund the plans and invested the money they did have very badly. And now the weight of the resulting unfunded obligations are crushing not just plan recipients but entire communities. Here’s a representative case:

Oregon PERS unfunded liability swells to $21 billion
(KTVZ) – This week, Oregon’s Public Employee Retirement System Board received an earnings report on the status of the PERS fund investment. The report said Oregon’s PERS fund fell by 4 percent in 2015, a loss of nearly $3 billion — and a Central Oregon lawmaker said that means major reforms are more urgent than ever.“The blow to PERS from the Moro court case left Oregon with an additional $5 billion in unfunded liability,” Sen. Tim Knopp, R-Bend, said Tuesday. “Now PERS is an additional $8 billion short of its target.”

In that ruling nearly a year ago, the state Supreme Court overturned the vast majority of the PERS reform cost-saving provisions enacted by the 2013 Legislature.

The current unfunded PERS liability now exceeds $21 billion, up from $18 billion last year, he noted.

PERS Communications Director David Crossley said while the PERS fund earned just over 2 percent last year, it did not achieve the “assumed savings rate” of 7.75 percent, so the liability increased by about $3 billion.

He noted that PERS had positive earnings, but lost value because it pays out about $3.5 billion in benefits a year.

PERS rates for school districts and local governments will rise in July 2017, Knopp said, forcing school districts to lay off teachers, reduce school days, increase class sizes, and cut programs like art and PE. Local governments will also have to make cuts to public safety and other critical services.

This combination of worse-than-expected investment returns and legal barriers to cost savings is playing out across the country. See Fitch downgrades Chicago after “worst possible outcome” in state supreme court pension reform bid.

To continue reading: Imploding Pensions Take The Rest Of US Down With Them

3 Comments

Posted in Collapse, Debt, Economics, Financial markets, Governments, Investing, Pensions

Tagged