Chicago Public Pension Loads

[Tekward]

The total amount of city, county and state retirement debt Chicagoans are on the hook for is $150 billion, based on Moody’s most recent pension data. Split that evenly across the city’s one million-plus households and you arrive at nearly $145,000 per household.

https://wirepoints.org/wealthy-chic...under-progressive-approach-to-pension-crisis/

Interesting comments also.

 

[Retiree_Having_Fun]

Good article. I like when they relate the $$$ to the people that actually have to pay the bill.

 

[karen1972]

And if you asked all of us that fled Chicago in the last 10 years, you would probably see this issue listed in the top 5 at least. You just can't tax yourself out of the issues they have there. 7% YoY increases in property tax, 11.5% sales tax, state tax going from 3% to 5%, tolls, parking, Chicago is flush with so much money its insane.. where it goes well if you live there you know exactly how and where.

When the property tax for a $300k house is more than the mortgage for a $300k house you have an issue. The issue I always believed is the way they have it structured, grandfathering in super huge discounts for people that stay in their home, freezing property taxes for people over 65. They put almost all the burden of paying for the pensions on newcomers and now no one wants to move there.. weird how that happens. They need to remove the discounts, not freeze property tax but instead defer it like so many other states do so people are not forced out of their homes but when they sell, they can collect at that point.

 

[VanWinkle]

Special treatment for government employees needs to stop. Let them contribute to 401K, SS, and taxable savings like the rest of us. I don't believe you have to offer exorbitant pensions and benefits to get the best people. I don't see much return for the benefits in intellect or ability to compromise.

 

[cooch96]

Wow. I remember looking into municipal bonds about ten years ago and was not impressed by the risk-reward ratio. Who keeps funding Chicago’s debt? It makes no sense to me.

 

[Another Reader]

Is this the total liability or the unfunded liability? Over how many years will the net highest possible liability payout be spread?

Yes, this pension system has problems, but the possible tax impact must be calculated accurately to be meaningful.

Edit: Read the article, appears to be the per household share of all pension systems' unfunded liabilities. Not good, but not all unfunded liabilities are incurred and the cost is spread out over time. This will get sorted out through a combination of tax increases, restructuring of benefits, and a bankruptcy or two somewhere in the country to set the precedent. I personally would not live in an area with the tax burdens Chicagoans already bear, and I would certainly try to move well before the SHTF.

 

[ERD50]

I'd like to see this expressed as annual expense to manage/service these pensions, interest payments, etc. With projections for annual expenses for the next 20 years.

I think that would be more telling than a somewhat hard to grasp future liability. You can't really compare to a similar sized mortgage, much of that is going towards principal.

-ERD50

 

[Senator]

Can't CHI just let the Feds take over the pension obligations?

 

[Telly]

Can't CHI just let the Feds take over the pension obligations?

I wondered about that... does the PBGC insure Public pensions? Found this:

https://www.pbgc.gov/sites/default/files/pbgc-at-a-glance-infographic.pdf

Doesn't look like it. Probably a good idea not too!

 

[ERD50]

I wondered about that... does the PBGC insure Public pensions? Found this:

https://www.pbgc.gov/sites/default/files/pbgc-at-a-glance-infographic.pdf

Doesn't look like it. Probably a good idea not too!

No, and the Public pensions never paid into the PBGC either. PBGC is not government funded, it is funded and run from the insurance payments that are made by the companies who offer pensions (so to some extent, comes out of private worker's total compensation).

It's interesting that the govt insisted on insurance for private pensions, but not for govt pensions. I think they just figured their taxing power was their 'insurance'. That may not work out for some of them.

-ERD50

 

[MichaelB]

+1@ Another Reader

The article appears intended more to inflame than inform, it confuses data between the City of Chicago and the State of Illinois, and it has a deeply faulty assumption. There is no denying the poor financial management of the pension obligations for both city and state, but it helps to look at data.

Pew Research has excellent data and analysis on public pensions in the US. They show a net unfunded liability of $122B. (Here) This includes the projected cost of benefits, which is a considerable part of the total obligation. This amounts to a bit less than 2% of the projected GDP of the state for the next 10 years. It is sizable but not by any means unpayable. As pointed out, that will come from taxes, and residents, both current and future, will choose accordingly. The pension obligations of Chicago and Illinois are neither the largest nor the most underfunded, but they do occupy a considerable amount of financial media.

 

[ERD50]

... The pension obligations of Chicago and Illinois are neither the largest nor the most underfunded, but they do occupy a considerable amount of financial media.

From that PEW source, IL is in the bottom 3 in both % funded and size of net liability (though size isn't really relevant, per cent is). And the gap across the 50 states is very wide. So I'd say it is worthy of "a considerable amount of financial media".

-ERD50

 

[Chuckanut]

Illinois is right [-]up[/-] down there with Kentucky among the worst funded states, IIRC.

 

[VanWinkle]

From that PEW source, IL is in the bottom 3 in both % funded and size of net liability (though size isn't really relevant, per cent is). And the gap across the 50 states is very wide. So I'd say it is worthy of "a considerable amount of financial media".

-ERD50

+1

 

[Tekward]

And if you asked all of us that fled Chicago in the last 10 years, you would probably see this issue listed in the top 5 at least. You just can't tax yourself out of the issues they have there. 7% YoY increases in property tax, 11.5% sales tax, state tax going from 3% to 5%, tolls, parking, Chicago is flush with so much money its insane.. where it goes well if you live there you know exactly how and where.

Was this also in the top 5?

https://www.illinoispolicy.org/repo...llected-more-than-1b-from-drivers-since-2008/

"Although the number of cameras statewide has remained relatively flat since 2010, each camera on average is generating more revenue than ever. Revenue per camera in 2018 was more than $185,600...."

Disclaimer: I don't have any issue with Illinois, I'm just amazed at the costs & taxes.

 

[Retiree_Having_Fun]

Was this also in the top 5?


Revenue per camera in 2018 was more than $185,600...."

This is a testament to how bad driving compliance to the law has become. These camera intersections are well marked and warned via apps like WAZE. Just guess at how many red lights are blown at intersections WITHOUT cameras.

 

[RenoJay]

Amazing. At the turn of the Millennium I lived in Chicago. Having moved my start up there because I located a CEO who lived there, I found it to be a delightful and vibrant city. AND I was pleasantly surprised at how much more take home pay I had vs California (from whenst I came) since state income tax rate was only 3%. But the 2001 recession forced me to seek employment elsewhere so I sold my Chicago house (and learned about transfer taxes), eventually started a biz that made a lot of money and then moved to Nevada since I’d gotten hooked on low state income taxes. Phew. Clearly things have gone downhill in the Windy City.