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Experiences with financially struggling government?
Old 06-16-2017, 06:29 AM   #1
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Experiences with financially struggling government?

If anyone saw the news yesterday Illinois is about to be kicked out of the mega millions/powerball lottery due to a lack of payments and a budget for the last 2 years. This is on top of bond rating agencies threatening to take the state to junk level investing in July as well should nothing come of the state representatives. This got me thinking, does anyone have experience living in or near a government entity that is struggling financially?

Were there any notable changes to how things were run over time, increases in taxes, loss of services, changes in property/income/sales taxes and shifts in demographics in the near to medium turn that were quickly noticeable?

As a hip, avocado toast eating , suburban living, late 20's, married and renting millennial who resides in the land of Illinois this had me wondering how things could turn out for Illinois residences. Obviously Detroit had it extremely rough prior to bankruptcy but for other towns/cities what has happened? And do the financial hardships really hit everyone, or if you live in an area that tends to be fairly wealthy and without much government assistance do things change much at all for you?
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Old 06-16-2017, 07:29 AM   #2
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"Does anyone have experience living in or near a government entity that is struggling financially?
Were there any notable changes to how things were run over time, increases in taxes, loss of services, changes in property/income/sales taxes and shifts in demographics in the near to medium turn that were quickly noticeable?
And do the financial hardships really hit everyone, or if you live in an area that tends to be fairly wealthy and without much government assistance do things change much at all for you?"

You would do well asking these questions to the retirees of the City of Detroit, or of a couple of cities in California--like Stockton. Their pensions and insurance benefits were cut dramatically as there simply wasn't the funds to pay them.

In the past, many civil servants were paid less than "market wage" for their jobs, but they received great insurance benefits, excessive sick leave and lots of vacation/comp. time. And they were promised defined pensions that were never properly funded.

Up until now, unfunded government pensions (and other benefits) were being borrowed from Peter to pay Paul. But with so many baby boomers going fast into retirement, there's no way the money's going to be there to pay.

In reality, the State of Illinois is insolvent and headed for some bankruptcy proceedings of some kind. The City of Chicago is no better. I feel so bad for the present and future retired employees that are probably going to have pensions and health care benefits cut.

In the meantime, taxes in cities with insolvent governments are out of sight, and are going to go higher. Expect current citizens of these cities to leave--as has been experienced in Detroit. When taxpayers leave, things even get worse fiscally for cities.

I once lived in Indiana and worked in Illinois. I moved to a southern state without state income taxes and with low property taxes. A very low cost of living allowed me to live a much higher standard of living while still saving enough to retire early.

Moving to a city/state with better managed governments and a higher standard of living at a much lower cost was the best move of my life.
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Old 06-16-2017, 07:51 AM   #3
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As a hip, avocado toast eating , suburban [Chicago] living, late 20's, married and renting millennial ...

I don't know if our youngest son likes avocadoes, but otherwise, you've described him. Despite his wife growing up there (New Trier grad), they are interviewing in another state and looking forward to the exit. Me, I'm like Bamaman--we left Illinois a decade ago due to the broken med-mal insurance system in the Southern counties near St. Louis. Have never regretted it.
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Old 06-16-2017, 09:39 AM   #4
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We will be considering moving out of Illinois when the time comes to move.

I just can't see any way out of a death spiral here. There doesn't appear to be enough voters who are willing to ask for the tough medicine now to prevent the death spiral.

We keep borrowing, and rates keep going up. I see the train coming down the tracks, headed right for us.

-ERD50
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Old 06-16-2017, 09:57 AM   #5
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There doesn't appear to be enough voters who are willing to ask for the tough medicine now to prevent the death spiral.
Not even in the cemeteries?
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Old 06-16-2017, 10:02 AM   #6
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Illinois is definitely in trouble. Unlike a municipality, there appears to be no path for a state to declare bankruptcy! I had high hopes for Gov. Rauner to do something to fix our mess, but he has been a non-starter IMO. Maybe, or maybe not due to his own doing. However, as long as Illinois doesn't tax retirement income, we will be staying put. We have family here and want that social/familial connection. But if they start taxing IRA and 401K withdrawals at anything near current (or higher) income tax rates, we be gone! I'm not sure where to, but we won't be staying in this state if we can help it.
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Old 06-16-2017, 10:12 AM   #7
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We will be considering moving out of Illinois when the time comes to move.

I just can't see any way out of a death spiral here. There doesn't appear to be enough voters who are willing to ask for the tough medicine now to prevent the death spiral.

We keep borrowing, and rates keep going up. I see the train coming down the tracks, headed right for us.

-ERD50
I can't even imagine the stress of living there. People here joke about the situation in Illinois but to those living in that state, I'm sure there is nothing funny about it.

If/when you move, where would you go? Maybe you could just scoot over the border to an adjacent state within easy driving distance. Or, if you have dreams of a warmer climate, this might be an opportunity to move to some place further south like Florida. Making lemonade out of a lemon can be a satisfying experience.

New Orleans is a mess financially too; property taxes are insane and so are the potholes. Financial woes, crime, and corruption in New Orleans proper are a few of the reasons why we chose to live less than a mile outside the city limits in an inner suburb where the property taxes are low and the potholes are repaired. Things are not perfect here in our suburb, but they could be so much worse. We are hoping that our suburb will be OK for another 30 years since we will probably be dead by then.
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Old 06-16-2017, 10:19 AM   #8
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I don't find the state budget affects me personally much here in the Chicago burbs, but for this latest kerfuffle (Powerball, Mega Millions may be victims of Illinois budget impasse, lottery officials say - Chicago Tribune), it's more that there just isn't a state budget than the state of the state budget.

There hasn't been a state budget passed for 23 months and counting: https://www.reuters.com/article/us-i...-idUSKBN1962PO

To the OP: Not Bucktown or Wicker Park or Wrigleyville ?

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...As a hip, avocado toast eating , suburban living, late 20's, married and renting millennial who resides in the land of Illinois ...
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Old 06-16-2017, 10:28 AM   #9
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I don't find the state budget affects me personally much here in the Chicago burbs
So glad to read this. Whew. There can be some significant advantages to living in the suburbs, at least here in New Orleans.
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Old 06-16-2017, 10:36 AM   #10
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So glad to read this. Whew. There can be some significant advantages to living in the suburbs, at least here in New Orleans.
I don't know that the burbs here are any better or worse than living in the city. There are just very interesting strong politics that have been at play with some very interesting strong personalities for a very long time (and since Illinois doesn't have a lot of cachet other than the land of Lincoln claim, at least something about the state is interesting ).

DD and her DH and two kids own a townhouse in a hip city neighborhood with high city and county taxes, her DH works for a Chicago startup, she works for a non-Illinois-basd company, their two kids are in a pricey private school (the city's public school system is its own big scary mess but that is not a new budget-based development), and I don't know if they ever think about moving out of state. Their trash gets picked up, their street was just repaved, there are lots of highly visible police and firefighters, etc., so I don't know how different life would be for them if Illinois were financially stable.
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Old 06-16-2017, 10:41 AM   #11
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Used to live there, got out not because of the govt., but because of lack of job opportunities in tech. That was a generation ago, and perhaps a sign that the state was not looking forward enough, despite having one of the best engineering schools in the world. Most graduates dispersed. I understand there is an effort to change that. Too late? I don't know.

None of my family has municipal or state pensions. I do know my dad complained bitterly when comparing his pension (trades) to government pensions. I guess he had a point.

One takeaway: if your government is doing things like selling their toll roads and parking spots to the highest bidder for a quick cash hit high, think about moving. IMHO that's a really bad sign.
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Old 06-16-2017, 10:50 AM   #12
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Their trash gets picked up, their street was just repaved, there are lots of highly visible police and firefighters, etc., so I don't know how different life would be for them if Illinois were financially stable.
Wow! That's like night and day compared with New Orleans proper. Sounds pretty good. New Orleans police had a 4 hour response time a few months ago although that may be better now (or not). The pothole situation there is insane as well. I think the trash gets picked up.
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Old 06-16-2017, 11:00 AM   #13
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I'd hate to be reliant on any government backed pension or retirement, they are all in bad shape
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Old 06-16-2017, 11:04 AM   #14
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I can't even imagine the stress of living there. People here joke about the situation in Illinois but to those living in that state, I'm sure there is nothing funny about it.

If/when you move, where would you go? Maybe you could just scoot over the border to an adjacent state within easy driving distance. Or, if you have dreams of a warmer climate, this might be an opportunity to move to some place further south like Florida. Making lemonade out of a lemon can be a satisfying experience.

New Orleans is a mess financially too; property taxes are insane and so are the potholes. Financial woes, crime, and corruption in New Orleans proper are a few of the reasons why we chose to live less than a mile outside the city limits in an inner suburb where the property taxes are low and the potholes are repaired. Things are not perfect here in our suburb, but they could be so much worse. We are hoping that our suburb will be OK for another 30 years since we will probably be dead by then.
Like BWE just mentioned, day-to-day life is still good for us (very good in many/most ways). It's the future I'm concerned about. If they keep raising taxes, the tax base will continue to leave. A reduced tax base means taxing the remaining base even more - rinse/repeat and you get that death spiral.

Moving may depend on where the kids end up, but there's no sign of them leaving the area yet. But we could move to Indiana or Wisconsin, and still have access to the cultural events in Chicago that we enjoy.

We won't be moving to a warmer climate, I hate heat/humidity. Florida is not a dream for me, but a nightmare ( except in February)! To each their own.

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Old 06-16-2017, 11:08 AM   #15
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Used to live there, got out not because of the govt., but because of lack of job opportunities in tech. That was a generation ago, and perhaps a sign that the state was not looking forward enough, despite having one of the best engineering schools in the world. Most graduates dispersed. I understand there is an effort to change that. Too late? I don't know.

None of my family has municipal or state pensions. I do know my dad complained bitterly when comparing his pension (trades) to government pensions. I guess he had a point.

One takeaway: if your government is doing things like selling their toll roads and parking spots to the highest bidder for a quick cash hit high, think about moving. IMHO that's a really bad sign.
I noticed a headline yesterday that Illinois's unemployment rate is 4.7 percent, the lowest in ten years--a bit higher than the national rate but still, pretty good for this state. DD's DH works in tech; I think the opportunities are still here.
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Old 06-16-2017, 11:15 AM   #16
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Like BWE just mentioned, day-to-day life is still good for us (very good in many/most ways). It's the future I'm concerned about. If they keep raising taxes, the tax base will continue to leave. A reduced tax base means taxing the remaining base even more - rinse/repeat and you get that death spiral.

Moving may depend on where the kids end up, but there's no sign of them leaving the area yet. But we could move to Indiana or Wisconsin, and still have access to the cultural events in Chicago that we enjoy.

We won't be moving to a warmer climate, I hate heat/humidity. Florida is not a dream for me, but a nightmare ( except in February)! To each their own.

-ERD50
Good decision not to move there, then. We didn't find the idea of moving to Florida to be very appealing either (for different reasons), but many people do retire to Florida.

I like the idea of you and your wife moving to Indiana or Wisconsin. Chicago is a wonderful city (or was back in 1956, the last time I was there). It has so much to offer. Hopefully your kids will be able to stay in the area too.
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Old 06-16-2017, 11:15 AM   #17
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Like BWE just mentioned, day-to-day life is still good for us (very good in many/most ways). It's the future I'm concerned about. If they keep raising taxes, the tax base will continue to leave. A reduced tax base means taxing the remaining base even more - rinse/repeat and you get that death spiral.
I think another problem is the aging population and the exemption of taxation of pensions. Really nice feature if you are retiree.

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I noticed a headline yesterday that Illinois's unemployment rate is 4.7 percent, the lowest in ten years--a bit higher than the national rate but still, pretty good for this state. DD's DH works in tech; I think the opportunities are still here.
Right, as I said, there is an effort to change that and attract tech. That's good. Unfortunately, in the 70s to 90s, it seemed to be all about industrial talent (think Deere, Catepillar, etc.) Also retail (think Sears).

Uh oh.

No big offices for Amazon, Microsoft, Facebook, etc. But there is an attempt to change that. I hope it is quick enough.
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Old 06-16-2017, 11:17 AM   #18
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I noticed a headline yesterday that Illinois's unemployment rate is 4.7 percent, the lowest in ten years--a bit higher than the national rate but still, pretty good for this state. DD's DH works in tech; I think the opportunities are still here.


There are jobs but those unemployment numbers are skewed, along with debt numbers, everyone is in the red and surviving on credit just like your neighbors and every government out there
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Old 06-16-2017, 11:18 AM   #19
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I think another problem is the aging population and the exemption of taxation of pensions. Really nice feature if you are retiree. ....
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Old 06-16-2017, 11:22 AM   #20
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We will be considering moving out of Illinois when the time comes to move.

I just can't see any way out of a death spiral here. There doesn't appear to be enough voters who are willing to ask for the tough medicine now to prevent the death spiral.

We keep borrowing, and rates keep going up. I see the train coming down the tracks, headed right for us.

-ERD50

Yea, that is what really surprises me.... that the voters keep putting back the people who created the problem and thinking things will change...


IMO they should have been downgraded at least 2 years ago when they did not pass a budget... their debt is at a very high level that there is a possibility that it will not be paid... there were people who owned Puerto Rico debt that thought the laws would protect them, but the laws changed...



I am surprised there are so many people that are still staying... I read an article that said the pension liability is $27,000 per family!!! Not to mention the $14 or so billion of unpaid bills...
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