Illinois was in an actuarial mess long ago. Covid-19 makes it harder to ignore says Wirepoints.
The chart by Michael Cembalest shows Illinois was paying about 25% of its budget for pension costs.
Before Covid-19, Illinois should have been paying over 50% to be sound on an actuarial basis. Now, the true costs are 58% of the budget.
Illinois has the worst funded pension plans in the nation. That was true before Covid-19 as well.
New Jersey, Hawaii, Connecticut, and Kentucky are next in line. But no other state comes close to having that much of their budgets swallowed by retirement costs.
McConnell Says Let the States Go Bankrupt
In a Hugh Hewitt interview last month, Senate Majority leader Mitch McConnell Pushes Bankruptcy.
HH: I think people do not understand how badly mismanaged some states have been, and their unfunded liabilities. And if they were in the private sector, they would have to reorganize under the bankruptcy code. But there is no bankruptcy code chapter. Do you think that we need to invent one for states so that they can discharge some of these liabilities that were put in place by previous governors like, I mean, Jerry Brown ran a giveaway program for public employee unions that was just astonishing, and as did Gray Davis, as did, you know, a lot of Democratic governors, Illinois is probably the worst, and Connecticut.
MM: Yeah, I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available. My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that. That’s not something I’m going to be in favor of.
Unfortunate State of Bankruptcy Code
Unfortunately, states do not have the ability to declare bankruptcy under current law.
Cities and municipalities do have the right, but only if the states allow it.
According to Pew, Only 12 states authorize cities to file
without conditions, and another 12 permit filing with certain stipulations.
“For 50 years, Detroit’s economy,
its physical infrastructure, and its social structure had been on a steady decline. And the political system did nothing whatsoever about it,” says Richard Ravitch, former lieutenant governor of New York, who helped New York City avoid bankruptcy in 1975 and has been advising Detroit officials.By the time the state got involved in 2011, it was too late. The police chief described the situation as not only a
financial crisis but also a “service delivery insolvency,” characterized by high crime rates, broken streetlights, thousands of abandoned and blighted structures and lots, and closed parks, among other problems.
Illinois Cities in Same Situation as Detroit (by Population Rank)
- Rockford (4)
- Peoria (7)
- Danville (61)
- East St. Louis (81)
- Kankakee (86)
- Melrose Park (89)
- Harvey (96)
- Blue Island (109)
- Evergreen Park (124)
- Cairo (461)
All of those are dead or dying cities. All but Rockford and Peoria turn up in a Wirepoints report on Troubled Pension Plans.
Illinois Insolvent Pension Plans
In What’s Next for Illinois, Wirepoints mentions Rockford, Harvey, Palos Heights, East St. Louis, Peoria, Danville and dozens of other cities (see graph at left)
Rockford’s is the fourth largest city in Illinois with a population of 147,881, nudged out of third place by Joliet with 147,957.
Illinois is Insolvent: State Requests a Pension Bailout From Congress
On April 17, I commented Illinois is Insolvent: State Requests a Pension Bailout From Congress
No Bailout
Illinois does not deserve a bailout. Its pension woes are of it own making and have nothing to do with the coronavirus.
Three National Priorities
- Bankruptcy legislation that allows municipalities to file when they want to, not when dictators like Illinois’ House Speaker Mike Madigan allow them.
- National right-to-work legislation that supersedes state legislation.
- Scrap Davis-Bacon and all prevailing wage laws
Explaining Dysfunctional Illinois in One Word, One Idea, One Person
I mentioned those priorities on Jan 9, 2017 , in Explaining Dysfunctional Illinois in One Word, One Idea, One Person
McConnell is correct, at least as pertains to municipalities: “There’s no good reason for it [municipal bankruptcy] not to be available,” said McConnell.
There is a Reason, But Not a Good One
Republicans could easily have passed all three of those priorities when they held both houses of Congress.
But they didn’t.
What are McConnell’s and Trump’s excuses for that?
Mike “Mish” Shedlock
When does the revolution begin?
The quid pro quo between the Democratic Party and public unions is now costing our Nation hundreds of billions of dollars. The Democratic party owns this problem 100%
‘What are McConnell’s and Trump’s excuses for that?’
Paul Ryan.
We just have terrible leadership – I don’t mean corruption writ large, but for a country built on laissez faire capitalism, these blockheads are terrible at math, don’t understand their own committees, and have no spines. At the end of the day that’s on us I suppose.
“We just have terrible leadership”
Everywhere has terrible leadership. It’s a given. Unavoidable.
Simply because the only ones who win the competition leadership positions, will always and everywhere be the ones who are the most focused on just that: Winning the competition for leadership positions. Anyone who wastes even an iota of effort on anything other than looking out for Number 1s “career advancement”, loses out to those who don’t. There is simply no way around that. The next “Dear Leader” will never be the “good Dear Leader.” They are all garbage, and forever will be.
The only difference being, how much power do they have. The choice is only ever between a horrible psychopath of a leader with highly restrained powers and resources. Or the same psychopath with no restraints at all.
30 million Americans are unemployed. Here’s how to employ them.
A chat with the economist pushing the once-radical idea of a federal job guarantee.
Now I understand. Illinois pension problems are Trumps fault! When the republicans held congress, Trump was doing hjs best to defend himself against your Russian collusion nonsense. Can’t wait to hear the spin from the left when Durham issues the indictments this summer. Please don’t let the facts get in your way.
Bankruptcy doesn’t guarantee anything. A judge can order minor trimming on pensions, big tax increases, and a complete abrogation of all bond debt.
I live in Florida which is in pretty good shape according to the chart up there. How does Florida do it? Florida’s state pension system doesn’t actually pay all that much. For 95% of all employees it only pays 48% of the employees highest average 5 years of income, and only after 30 years. The vast majority of people don’t work a full 30 years in the state system. The counties are all in the system. My county, Brevard, has an average payout of just $8,600/year/retired employee. All of that comes out of investments. The State doesn’t contribute budgetarily at all, other than what it puts in as a part of each employee’s benefits.
However, our problem is with cops and firemen who make way too much in the retirement system, which is everyone else’s problem too. They can get 99% of their high 5, including overtime. That’s the killer in most states. But it is unfixable. Because they vote Republican. That’s why Trump and the Republicans did nothing on pensions and won’t. Ever.
In California cops & firemen get huge pensions also, but would you say it is because the politicians want to reward republican voting there, Jon? If so, it’s not working.
Detroit was handed a bankruptcy judgment by the Federal District Court a few years ago with a mandate that the city was responsible to the pension plans of 190 million dollars, and had to start paying on that judgment on January 2018. In order to handle the payments to the pension plan, they had to cut the operating budget 10%, and you guessed it, police and fire departments took the bulk of the hit. Who knows how far out of kilter things will go after the “governor” in the state shut the city down in March, and can’t wait to shut it down again, they already have the standing plan..
If they want that pension problem fixed, all they need to do is open up and stay open.
“police and fire departments took the bulk of the hit”
But, I’m quite sure, conveniently not in neighborhoods were the political class live…..
Powell to Mnuchin:
“You’re gonna need a bigger printer.”