Tag: Quinn

Illinois’ Pension Time-Bomb Too Big Too Fix

So says the Commercial Club of Chicago.

In a memo to its members, the Civic Committee of the Commercial Club of Chicago said last week’s elections didn’t bring in an influx of lawmakers willing to deal with the pension crisis but instead leaves taxpayers with “more legislators who aren’t prepared, or willing, to make the tough decisions necessary to save our state.”

“We are writing today to let you know that the pension crisis has grown so severe that it is now, unfixable,” said the letter co-signed by Miles White, chairman of the Commercial Club; Jim Farrell, chairman of the Civic Committee, and Ty Fahner, president of the Civic Committee and Commercial Club.

via Sun-Times.

Miles White is the Chairman and CEO of Abbott Labs.  Jim Farrell is the retired Chairman and CEO of Illinois Tool Works.  Ty Fahner is a partner at Mayer Brown where he handles tax, bankruptcy, and securities matters.  These are not dumb guys.  They understand finance and are used to dealing with large numbers.

The headline is of course misleading; the problem is fixable.  It’s really just that every week that’s wasted means the solution will be more painful.  The Commercial Club outlines what it thinks needs to be done:

  • All cost-of-living increases need to be eliminated for retirees, who now get annual 3 percent pension boosts.
  • A cap on salaries must be imposed upon which pensions can be based.
  • The retirement age for full pension benefits needs to be raised to 67.
  • Downstate and suburban school systems must be forced to take on pension payments from the state for educators over a 12-year phase-in.

This is pretty painful for the pension members.  Naturally there will be some pain on the taxpayers as well.  It’s a bad situation that’s only getting worse by the day.

Legislative Change Means $670 million More for Teachers’ Pensions

The state will have to come up with another $670 million for the teacher pension system in the next budget after a retirement fund panel crunched the numbers and adjusted its assumptions.

The Teachers’ Retirement System lowered what it expects from investments from 8.5 percent to 8 percent. The pension fund’s leadership also increased a variety of other assumptions, including how long it expects retired teachers to live. The fund covers teachers outside Chicago.  …

The state is paying $2.7 billion into the fund in its current budget. Without any adjustments, the state would have owed about $2.89 billion in the new budget year that begins next July 1.But the changes approved Friday increased that price tag to $3.37 billion. All told, the state will have to pay $670 million more than this year.

via Chicago Tribune.

Consider, we’re going to pay $3.3 billion into the teachers pensions and another $3 billion on debt service.  That’s $6 billion next year that could have gone to pay for services for the poor and the elderly but instead are going to the politically connected and union members (… I realize that’s redundant.)

But this may be the best line of all:

Senate President John Cullerton and House Speaker Michael Madigan, both Chicago Democrats, recently suggested that changes to the pension system would have to get done in January at the earliest. That’s a post-election period when more lame ducks are freer to take politically risky votes, and the bar to pass legislation with an immediate effective date drops from three-fifths to a simple majority.

Allow me to translate:  Fixing the pensions is going to be very unpopular and thankfully our experience is that voters have short memories.  We also don’t care how much more money this costs the state (after all, all the bond holders and the teachers unions are our buddies.) We’re also not sure that we can get all the Democrats to go along.  So we to avoid any embarrassment — and to make sure the unions make the campaign donations they promised before the election — we’re going to put this off until next year.

The Machine is like a casino… the house never loses.

One Word for CPS Teachers: Save

Save.

Save as much money as you can.

Live well below your means.

The pension time-bomb is coming.

One of the most vexing problems for Chicago and its teachers went virtually unmentioned during the strike: The pension fund is about to hit a wall.

The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.

via NYTimes.com.

and;

“Each day we wait to enact comprehensive pension reform, the problem gets worse,” Quinn said in a statement. “The unfunded liability will grow to more than $92 billion by the end of next fiscal year. Illinois is currently on track to spend more on pensions than education by 2016 and that is unacceptable.
— Pat Quinn

via Des Plaines, IL Patch.

If you think that taxpayers are going to fund your pensions, forget-about it.

If you think you can tax the rich to fund your pensions, forget-about it.

If you think that people are going to move into a community where their property taxes increase by 7% every year in order to fund failing schools, forget-about it.

If you think you’re going to get your COLA every year, forget-about it.

You have two options:  Save every nickel and dime you can, or plan to work until you’re in your 70’s.

Consider:

Illinois has an unfunded pension liability of at least $83 billion, according to state figures. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states, data compiled by Bloomberg show.  …

Illinois had about $28 billion of general-obligation debt as of May 8, according to bond documents. The state of about 13 million people plans to sell $50 million of debt next month for technology projects, John Sinsheimer, the state’s director of capital markets, said in an interview.

via Businessweek.

Further:

Illinois’s backlog of unpaid bills has risen to more than $9 billion because of pension costs and falling federal aid, leaving the state “essentially treading water,” Comptroller Judy Baar Topinka said.

via Bloomberg.

$83B + $28B + $9B = $120,000,000,000 in debt.  The extra $50 million at 0.42% of the total is a rounding error.  It should also be noted that this does not include the City of Chicago (or any other municipality or county debt) which is another $12-16 billion in debt depending on who you ask.

12,869,257 people in the state of Illinois.  Every man, woman, and child owed owes $9,324.54 to the state.  If you live in Chicago you owe another 5,910.34 locally for total of $15,234.89.  (Are you feeling good about your new contract yet?)

I was just looking over the FY2013 Illinois State Budget as prepared by Gov. Quinn.  On Pg 37 we’re told that Debt Service is 5.42% of all outlays.  That’s over $3.3B per year paying principle and interest on money we borrowed.  That’s $3.3B per year we could use to hire police officers, or teachers, or fully fund the pension funds but will instead go to pay for our bad fiscal decisions of the past.

More importantly, total expenditures are $61.0B.  That means that if we (a/k/a the State of Illinois) completely stopped operating, fired all the employees, shuttered all the buildings, and spend 100% of the budget on paying off debt we’d be debt free in 2 years.

Oh, I know what you’re going to say… You’re going to tell me all about how the Chicago Teachers’ Pension Fund is not as underwater as the general state fund.  True, but it’s still broke and broken.  And there’s no money to fix it.

Then you’re going to say that this is a right guaranteed by the Illinois Constitution.  Oh ya?  Well where’s the money going to come from?  The rich?  You wish:

When New Jersey governor Chris Christie heard British Prime Minister David Cameron invite France’s wealthy to decamp to England to escape a proposed 75% tax rate, he felt something akin to déjà vu. Every day top executives of Johnson & Johnson (JNJ), Merck (MRK), and other companies commute from their homes in Pennsylvania to offices in Christie’s state, saving roughly two-thirds on their state income tax bill — and costing New Jersey’s treasury $50 million, by one estimate.

via Fortune (a/k/a CNN).

You don’t understand the Laffer Curve.

The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a “millionaire’s tax” pushed through by Gov. Martin O’Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

via CNBC.

You’re confused how a state and raise taxes and lose revenue.  It happens all the time.  I wrote a piece about cigarette taxes in Cook County; raised taxes, lost revenue.

The more you tax something the less of it you get.

You tax income, you get less income.  You tax babies, you get less babies.

Even the left-loving Bono (of U2 fame) moves his wealth around to avoid taxes.

In Illinois, if we quadrupled the state income tax on those with adjusted gross income over $500k it would take over 13 years just to get current state pension liabilities square.  This would not cover the additional debt of Chicago Teachers, Chicago Police & Fire, or any of the billions and billions of general debt.

So take your 16% raise and start saving.  Save like your life depends on it.  Because it does.

Illinois Teachers’ Pension Troubles

It’s important to note that this fund do NOT include CPS teachers.

Illinois public school teachers and retirees could have reason to worry about the kinds of pension checks they will be getting down the line.  …

The Springfield State-Journal register reported over the weekend that pension director Dick Ingram sent a memo to his board on Feb. 9, saying he was no longer confident that the state’s largest pension system will continue to pay it enough money to stay above water. The state owes Ingram’s fund $43 billion.  …

Ingram said pension funding is under severe threat from the state’s unpaid bills, soaring Medicaid costs and the $85 billion in overall unfunded pension liability, which is expected to rise.

“If that is the case, the only other option available that would significantly change the amount owed is to reduce past service costs for active members and retirees,” Ingram wrote in the memo.  …

Gov. Pat Quinn addressed the pension crisis shortly after releasing his budget plan in February.  …

“Everybody is going to get a haircut. No one will get scalped – that’s the basic concept,” the governor added.

via CBS Chicago.

Decades of the Machine running both Chicago and the state have led to every government entity in the state not being able to meet it’s obligations.

This is a wake-up call to not only teachers, but police officers, firefighters, and government workers of every sort.  The good ‘ole days are over.  The gravy train is ending.

Time to get real.

Aldermen Push For What?

This is just insane:

On Sunday, Aldermen Deborah Graham (29th), Robert Fioretti (2nd), and Toni Foulkes (15th) joined members of the Chicago Teachers Union, Action Now, and a group of parents and community safety advocates for a press conference urging Mayor Rahm Emanuel to make the Vacant Property Safe Passages Ordinance a priority.

If approved, the ordinance […] would require daylight watchmen to guard schoolchildren as they pass by vacant properties near public schools.

“Recently, the mayor said he cares so much about student safety on the way to school that he’s installing speed cameras,” said Aileen Kelleher, Action Now communications director, during a phone interview Tuesday. “We’re saying if you care so much about safety this ordinance should be your number one priority.”  …

This most recent push for the Vacant Property Safe Passages Ordinance comes just three months after the city passed a law requiring vacant property owners, whether an individual or a bank, to pay to register and maintain their abandoned buildings.  Similarly, last week Gov. Pat Quinn introduced a new program aimed at rehabilitating foreclosed homes in Cook County.

With November’s ordinance in mind, those in support of the Safe Passages law say vacant property owners should also foot the bill for hiring the proposed watchmen.

“We want the guards to be hired from within the communities where the vacant buildings are so that it’s also a job-creation program, because along with the housing crisis there’s also an employment crisis,” said Kelleher.

Additionally, the ordinance would levy fines of up to $500 if the building’s mortgage holder fails to provide a watchman between 8 a.m. and 4 p.m.

via Progress Illinois.

This can never pass.  Nothing good can come of it.

According to Illinois Statute — namely 225 ILCS 447 the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act of 2004 — every one of these “watchmen” would be required to have a PERC.  The statute provides that:

 “Private security contractor” means a person who engages in the business of providing a private security officer, watchman, patrol, guard dog, canine odor detection, or a similar service by any other title or name on a contractual basis for another person, firm, corporation, or other entity for a fee or other consideration and performing one or more of the following functions:   …

See 225 ILCS 447.

This means that anyone who’s going to watch these houses must take and pass a 20-hour course with test.  They must also not have been convicted of a felony and submit their fingerprints for a background check.  Despite the requirements, it’s not uncommon to see these jobs listed on Craigslist for $10-12/hour.

The proposed ordinance would require watchmen (or watchwomen I would assume) to be present between 8 a.m. and 4 p.m. or 8 hours per day.  That’s $80 per day in pay for someone to basically sit on their duff and read the paper in front of a vacant building.  Of course the real cost (vacation, medical, workemen’s comp, payroll taxes, overhead, training, etc) would mean that the property owner would likely be charged more like $120/day.

Even at $100/day, that’s $3,000/month… just to have someone watch a vacant property.  Who can afford to pay that?  The property owner will essentially be left with two options:  tear the place down or rent it out for someone well below market value.

Given that one can get a building (single family house on a single lot) torn down and hauled away for $10,000-20,000 (depending on the size and condition of the place,) it stands to reason that anyone who expects their place to be vacant for a long time to just may be better off just tearing the place down.  The property owner can also now save on taxes (vacant land is hardly taxed) and insurance as well.  This will minimize the property expense over the long-haul.

Equally problematic is that the ordinance may force the property owner to place anyone as a tenant in the property regardless of rent.  If you’re going to charge me $3,000/mo to keep the place empty and secured then it’s just better for me to find someone, anyone, who’s willing to stay in the place for $10/mo.  The question is then who’s renting the place for $10/mo?  Maybe someone who shouldn’t be living next to a school in the first place?

And there’s the rub.  What makes these people think that a tenant on the property would be better than having the property vacant?  Would you rather have your child walk by a vacant property or Jeffery Dahmer’s place?

Of course if the city was at full police strength wouldn’t there be more cops on the street looking over these places?  I’m just say’n.

The article states there are 19,000 vacant properties in the city.  At $3,000 per month that’s $57,000,000 in new costs that would have to picked-up by property owners each month.

That’s $57,000,000 in monthly transfer payments from “property owners” to  “guards to be hired from within the communities where the vacant buildings” exist.  Annually that a $684 million tax on property owners in the city.

It’s a complete joke.  Just like paying mommies to walk their children to school when they should be doing it anyway.

 

Rahm Wants Handgun Registry

Stupidity in human form.

Mayor Rahm Emanuel today said he wants state lawmakers to approve a statewide handgun registry.  …

Rep. Brandon Phelps, who has championed efforts to pass a concealed weapons bill in Illinois, said the mayor’s office called him Thursday morning to let him know the registration proposal would be introduced.

“Number 1,  my first response was I don’t know why you’re trying to do this statewide because we don’t want your policies on us downstate,” said Phelps, a Southern Illinois Democrat from Harrisburg. “Number. 2, it’s never going to work. They’re trying to go after criminals. They’re never going to register their guns. They won’t pay the fee. “

Phelps called Emanuel’s initiative a “slap in the face of every law-abiding gun owner.”

via Chicago Tribune.com.

It’s been shown time and time again that gun registries simply do not work.  The greatest national experience was Canada’s long gun registry.

Department of Justice reported to Parliament that the system would cost $119 million to implement, and that the income generated fromlicensingfees would be $117 million. This gives a net cost of $2 million. At the time of the 2002 audit, the revised estimates from the Department of Justice were that the cost of the program would be more than $1 billion by 2004/05 and that the income from licence fees in the same period would be $140 million.[6]

In February 2004, documents obtained by Zone Libre of Télévision de Radio-Canada suggest that the gun registry has cost around $2 billion so far.

So we know that a registry is crazy expensive and becomes another government boondoggle.

Well, maybe it’s still worthwhile because it really reduces crime.

Former Ontario Provincial Police Commissioner Julian Fantino (who was opposed to the gun registry) stated in a press release in 2003:

We have an ongoing gun crisis including firearms-related homicides lately in Toronto, and a law registering firearms has neither deterred these crimes nor helped us solve any of them. None of the guns we know to have been used were registered, although we believe that more than half of them were smuggled into Canada from the United States. The firearms registry is long on philosophy and short on practical results considering the money could be more effectively used for security against terrorism as well as a host of other public safety initiatives.”

Well ok, maybe he was really really biased.  Perhaps other police really thought the registry was a great idea?

In April 2011, a survey was conducted by the Edmonton Police Association. Its members voted 81 percent in favour of scrapping the long-gun registry.

Well, at least law abiding citizens who do register their guns will know that their data is safe right?

John Hicks, an Orillia-area computer consultant, and webmaster for the Canada Firearms Centre, has said that anyone with a home computer could have easily accessed names, addresses and detailed shopping lists (including make, model and serial number) of registered guns belonging to licenced firearms owners. Hicks told the Ontario Federation of Anglers and Hunters (OFAH) that “During my tenure as the CFC webmaster I duly informed management that the website that interfaced to the firearms registry was flawed. It took some $15 million to develop and I broke inside into it within 30 minutes.”

The Ontario Federation of Anglers and Hunters questioned the security of the gun registry after a home invasion that seemed to target a licenced gun collector. The OFAH argues that, in the wrong hands, a database detailing the whereabouts of every legally-owned firearm in Canada is a potential shopping list for criminals.

Given that any handgun registry would likely include all of the guns owned by police officers (& county sheriffs, state troopers, etc.) means that a whole big batch of government bureaucrats and anyone who wants to hack into the database would have the name, address, and list of owned handguns of everyone law enforcement officer in the state.

This could be the dumbest idea from the Rahmfather yet.

Speed Cameras Save Children

Quinn pulls out an old line:

Gov. Pat Quinn gave Mayor Rahm Emanuel something he wanted Monday: the power to use cameras across nearly half of Chicago to nab speeding drivers and fine them as much as $100.  Questions linger about the effectiveness and scope of the speed camera plan, but the governor sought to frame the issue as being about protecting children, not raising revenue.  “I think that youve got to understand that if you save even one life, you are saving the whole world,” Quinn said during an appearance at a high school on the Far South Side.

via Chicago Tribune.

Reminds me of the Simpson’s:

FOID Card Requests Sink Police

Illinois has so many requests for Firearm Owner’s Identification cards that state police can’t process them in a timely manner.  In addition, people calling the state police to ask why they haven’t received their FOID cards are put on hold for as long as 35 minutes, if they’re lucky enough to get through to an answering machine that puts them on hold.  I tried the number 12 times, received a busy signal 11 of those times and got the answering machine once.  After 20 minutes on hold, I hung up.

Under law, the state has 30 days to process FOID card requests.  I’ve been waiting 50 days for a response to my application.  …

According to Monique Bond, spokeswoman for the state police department, Illinois had a record number of FOID card applications in the last three years. Last year, 321,437 people applied for FOID cards, 287,552 in 2010 and 326,008 in 2009. … ”There has been a 16 percent increase in FOID cards applicants in Chicago, which Bond attributed to a Supreme Court decision overturning the city’s gun ban.

Richard Pearson, executive director of the Illinois State Rifle Association, laughed when I asked if he had heard complaints about the state’s tardiness in responding to FOID card applicants.  “The governor isn’t staffing the FOID processing center of the state police department,” Pearson said. “He’s not replacing people as they retire. And that’s because he’s not enthusiastic about the idea of gun ownership.

via Southtown Star.

Would anyone believe that politics is not playing a role?

Illinois, the Greece of America

It all started with this story:

Even though the legislature and Gov. Pat Quinn last year imposed a temporary 67 percent state income tax increase, Quinn’s office expects to have a $500 million budget deficit this year.

Quinn is calling for a 9 percent cut in most areas of state government, except education and health care. But even with cuts at that level, the state would have a projected $800 million budget deficit for fiscal 2015, the year when most of the tax hike expires.  …

Looking at the bigger picture, the state has a backlog of about $8.5 billion in unpaid bills and owes about $27 billion in outstanding bonds. And then there’s the roughly $80 billion owed to the state’s public employee pension funds.

via Belleville News-Democrat.

Think about that: One Hundred Fifteen Billion Five Hundred Million Dollars.  I’m told there’s about 12.9 million people in Illinois.  So were looking at $8,953.50 per person.  That’s pretty astonishing!

And that story led to this story:

[W]hy aren’t we more worried about Illinois? It’s more or less the same size as Greece, its finances are in the same generally catastrophic shape, and its leaders are just as feckless and dishonest. It owes tens of billions of dollars to various investors and stakeholders and will clearly have to stiff many of them at some point.  …

How a state with a constitutional mandate to balance its budget can do this in the first place — and how an “unpaid bill” can be excluded from the annual budget — is a question for future prosecutors. But for investors it’s a clear sign that some sort of default is coming.

via: Dollar Collaspse.

Dare to dream that someone (cough cough Madigan) would go to jail on this mess.

Hat tip to SCC.