Skip to comments.How Retirement Benefits May Sink the States
Posted on 04/28/2012 12:55:50 PM PDT by SeekAndFind
Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state's future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, "You won't recruit a business, you won't recruit a family to live here."
We're likely to hear more such worries in coming years. That's because state and local governments across the country have accumulated several trillion dollars in unfunded retirement promises to public-sector workers, the costs of which will increasingly force taxes higher and crowd out other spending. Already businesses and residents are slowly starting to sit up and notice.
"Companies don't want to buy shares in a phenomenal tax burden that will unfold over the decades," the Chicago Tribune observed after Mr. Emanuel issued his warning on April 4. And neither will citizens.
Government retiree costs are likely to play an increasing role in the competition among states for business and people, because these liabilities are not evenly distributed. Some states have enormous retiree obligations that they will somehow have to pay; others have enacted significant reforms, or never made lofty promises to their workers in the first place.
Indiana's debt for unfunded retiree health-care benefits, for example, amounts to just $81 per person. Neighboring Illinois's accumulated obligations for the same benefit average $3,399 per person.
Illinois is an object lesson in why firms are starting to pay more attention to the long-term fiscal prospects of communities. Early last year, the state imposed $7 billion in new taxes on residents and business, pledging to use the money to eliminate its deficit and pay down a backlog of unpaid bills (to Medicaid providers, state vendors and delayed tax refunds to businesses).
(Excerpt) Read more at online.wsj.com ...
That's only because Illinois doesn't have enough government to monitor and regulate.
The Democraps chickens are coming home to roost. Sadly they affect everyone.
The libs have fouled their nest in Illinois,now they will move to other states.
Sounds like Rahm has seen a bit of the real world since leaving DC.
We knew the pensions bomb was coming 30 years ago, yet the can got kicked down the road, no one wanted to risk their political careers trying to deal with it.
Those who did try to deal with it were called “CRAZY!”, “NUTZ!”, or “INSANE WHACKOS WHO WANT GRANDMA TO EAT DOG FOOD!”,(Remember that one?).
So today, what’s happening?
The Pols are STILL trying to kick the can down the road, and ignore it.
2 Thessalonians 3:10 If anyone will not work, neither shall he eat.
Yeah that sucks.
Guess we shouldn’t have handed our government over to liberals.
Oh well - go pay your taxes. Your hard working government needs the money. :)
>>No society was built on not working, no policy can succeed creating incentives for lack of productivity<<
If I am smart and invest during my working days, it neither your nor anybody’s business if and when I decide to “stop being productive.”
The fact YOU have been too slow to invest in your retirement is no reason to rain down your inability upon others.
And Social Security is a big $zero in my Retirement planning (as it should be for anyone younger than 55).
Work until you die, that is your privilege. Don’t try to drag everyone into your grave with you.
This issue is unique in that there really is not two sides to the issue, it is instead relatively simple math. The pension payments are coming due, and they are enormous.
When the airflow over the wings (income) provides insufficient lift (expenses) the result is a stall and likely crash.
Yeah, the one where the Fed won't print money to pay for your deficits.
Is there a common thread in all of these states that have such looming deficits and high worker pensions? Could it be a severe and long time lack of vitamin C in legislative control? True many may have had that RINO substitute for L and D but as we have learned, these do not have the effect that a good dose of C has, especially over the long term. Unfortunately, the offerings of L and its close match, D, are boosted by the supplement MSM to the point where no C can last more than a single cycle.
Frankly, at this point, only a mass purgative is likely to unclog the pipes but a lot of pain will have to be endured to clear out these toxins!
There are TWO elements to a cash flow solution ~ (1) Sell all government owned land and facilities to investors, and (2) Fire employees outright.
Illinois and its subdivisions own an enormous investment in buildings, airports, and land. Neighboring Indiana has both a far lower benefit to tax base situation, and, it has a far smaller government owned property burden.
Illinois might well adopt the Barrett Law solution and sell the public sewer system to public charitable trusts with designated bonding authority and areas of service. That would neatly separate the sewers (a high priority item) from the retiree future benefit load (a relatively lower priority item).
Any city or town, or state agency, that refused to go along with selling their sewers to the highest bidder on the bonds underwriting the property transfer would get their water cut off.
We all know what that means eh!
Oh, yeah, and sell off the municipal water systems as well. Even school systems could dispose of the problems of owning buildings by leasing them back from the public charitable trusts that would own them.
Then, too, Illinois could hire Indiana state government to run the place for a while. Now that'd be a trip eh!
BTW, if you take a look at my solution, I think if we’d tailor it to NOT sell the sewer systems supporting areas with a large number of state retirees, we’d get those numbers down to something manageable in just a couple of years.
One year after I retired at 53, I had only one regret..... I should have done it 10 years sooner. ;>)
I don’t care how healthy a person may think they are, they can not foresee when their health is going to become an issue. Some folks just ‘hope’ their health will not start to effect their quality of life. To me, ‘hope’ is all that one is left with—when they lack a plan.
I made life and investment decisions during my working life based, in part, on the times/environment and the ‘knowns’ I had at the time..... and my best guess as to how the future might be.
Folks that are now retired are locked in, and for most of them, there is no starting over.
I am fine financially, but if my pensions and retirement investments were all suddenly taken away, at this eleventh hour in my life, I might as well just die.
You’re right, it isn’t anybody’s damn business as to when you decide to retire.
Folks with a sanctimonious view of how OTHERS should live their life, based on their own individual beliefs should find a new hobby.
It truly is amazing how some people are so bold as to tell others how they should live their lives. Mr. DaveyB is one of them.
“Indiana’s debt for unfunded retiree health-care benefits, for example, amounts to just $81 per person. Neighboring Illinois’s accumulated obligations for the same benefit average $3,399 per person.”
Well, gosh, if they have obligations that high, they’d better raise taxes a bit to help raise the revenue to pay it off. Right? Right????
And — being Illinois — that’s EXACTLY what the legislature will end up doing.
But not only that — the voters who elected the legislators that raise their taxes, will vote the same bunch of thieves in again and AGAIN!
Very interesting thread. Thanks to every poster.
How Socialism May Sink The States
It’s the socialism stupid!
(Socialism IS Legal Plunder)...(Legal Plunder HAS Many Names)...Thus we have an infinite number of plans for organizing it: tariffs, protection, BENEFITS, subsidies, encouragements, progressive taxation, public schools, guaranteed jobs, guaranteed profits, minimum wages, a right to relief, a right to the tools of labor, free credit, and so on, and so on. All these plans as a whole with their common aim of legal plunder constitute socialism.
From Frederic Bastiat’s “The Law”.
Look at the results of socialism...
It’s the socialism stupid!
It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.
From “The Results of Legal Plunder” (Socialism) Frederic Bastiat’s “The Law”.
I predict that someday these debt straddled states will enact legislation that will stop benefit payments to retirees that move out of the state. That would tend to keep the money inside of the state instead of going to a different one with lower cost of living.
While I agree that people should keep their noses out of other people’s business, it is the taxpayer’s business when public employees retire, or at what level of compensation.
It is the taxpayer’s business because there isn’t a single defined benefit public employee pension plan in the US where the public employees have contributed/invested a sum of money during their working careers that will cover the expected payouts of defined benefits for their expected lifetime after retirement. Where systems like CalPERS used to assume an 8% return on their investments to grow their assets, they’re now seeing a 1.1% return (for 2011) and this means that CalPERS is having to go to the legislature and have their pension plan’s shortfalls augmented out of the general account for that year’s benefit payouts.
Illinois and California are realizing this, as are an increasing number of cities and counties all over the country. The defined benefit pension is mathematically unsustainable in the face of increased lifespans due to rapid advances in medical science, and in states like California and Illinois, where enough public employees have gamed the system to fatten their pension benefit stream just before they retired, it isn’t even an issue of lifespans. It is an issue that there are loopholes in the pension benefit computations that are allowing some people to game the system for huge rewards after retirement.
what are you saying?...you got yours from the govt so everyone should just shut up?...
It is MY business....
so any of the sanctimonious "don't tell me when to retire" people want to give up their fed/county/state pensions and live their lives ...fine...until then, its an obscene system and totally insane and totally unsustainable...period
this is the problem with democracy...eventually everyone votes to give themselves more and more and fewer and fewer are actually paying for it....
if the public just stops working and stops giving taxes, then the pensions of all the govt employees stops as well.......
About a decade ago, my state of Georgia moved to 401k plans for new state hires and the previous state employee pension plans weren’t that onerous to begin with. So GA is a right to work state and at least it has no unreasonable government unions to battle. Gov’t unions exist here but they don’t run things.
>>what are you saying?...you got yours from the govt so everyone should just shut up?..<<
The opposite. I got *NOTHING* from the govt — in fact I won’t even get the money *I* put into the National Ponzi Scheme back!
But don’t wag your finger at me and tell me I have to work until I die. If I am smart (I am), I can craft a plan wherein I can stop working, even WITHOUT the money *I* put in.
And if you are 55 or under you had better also craft a retirement plan that doesn’t include Social Security.
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