The Supreme Court of Illinois handed down a verdict that public pensions can’t be adjusted. What does that mean for the state and city of Chicago, bankruptcy? No other answer.
The credit rating for the city was downgraded to junk bonds after the court verdict. Why, the credit agencies know the unfunded pension liabilities can’t be paid? The media say property taxes must be raised to pay the obligations. The protesters, all 20 of them the local media tried to make look like 2,000, say corporations must pay the freight. Both may happen. It’s happened other places, like Detroit. The result, both moved away. Homeowners moved to the burbs and corporations moved to another state. Can’t move out-state in Illinois, since the state is in the same shape as the city.
How did this happen? Over time two events took place. First, promises were made that can’t be kept regarding the level of pensions that public employees receive. Far too much money vs. capacity to pay that level of pensions. Second, politicians looted the pensions funds for other purposes. No different from the private sector. Bad management. In the private sector, the management gets changed before bankruptcy occurs or, if that doesn’t happen, soon after. In the public sector Mayor Daley retires and Mike Madigan keeps running the state. Into the ground.
If the state tries tax increases, its goodbye to my tax dollars. I simply move my residency to Arizona. Just one more month is all that takes. Business is already moving to Indiana and Wisconsin. How many homeowners in Chicago will decide they can’t pay an ever-increasing property tax rate to support their retired neighbor’s generous pension plan? How many of those already receiving that generous pension have already moved elsewhere to avid the high property taxes in Chicago and the rest of Illinois?
More public employees are retiring every day. The escalators in the pensions plans will keep increasing the obligations. People are living longer. The public employees who administer the pension funds underperform the private sector when it comes to investment returns on those funds. But, they consistently over-estimate future earnings. So, it’s really worse than the published numbers suggest.
The truth of the matter, it’s unfixable. And, every form of media in Illinois applauds the court decision and supports the tax increases. Teachers in Chicago are poised to strike yet again for higher wages. Where does that money come from? It doesn’t come from the teachers who struck a deal years ago where they only pay 1% into those hefty pensions.
Someone suggested every public employee in the City of Chicago and the State of Illinois be fired. Then, and only then, can they be re-hired and a new pension agreement be initiated. That is the only way under the court ruling that any adjustment can be made to the pensions. New employees can be put under a new structure. Sure, that will happen.
Another great suggestion. Tax pensions, including social security. Great idea, between the Feds taxing social security, ObamaCare eating up a pile with Medicare increases, and inflation, the City of Chicago can take the rest.How’s this for income redistribution? Everyone with a pension gets taxed so public employees can retire to Florida with three times the pension the 90% getting taxed receive?
No, what will happen is Chicago will follow Detroit into bankruptcy. Emanuel didn’t do this. But, he won the election and gets the short straw and will get the blame that follows. He can do nothing to save his political future. In his inaugural address he said nothing about the city’s financial mess. He spoke about the need to give the youth of Chicago a better life. How, with money the city doesn’t have?
Governor Rauner has more to work with than the mayor. He is better equipped to solve this disaster. But, he will get absolutely no help from the Democratic congress in the state.
How do you like these apples, grandkids of yours and mine? We, you and I, have done this to them. Our passive stupidity continues even as the storm watchers( credit rating agencies) tell us the storm is upon us. We , too, know it can’t be fixed by conventional means. We, too, know the courts don’t care if the tornado levels the city and the state. Not the court’s problem. Other states and other cities have taken corrective action and their storms have blown over and into Illinois. They are positioned well to benefit from the carnage in Illinois.
