Skip to comments.For Ships of State, a Looming Iceberg
Posted on 03/02/2014 2:01:17 PM PST by Kaslin
If you're in the hospital with multiple fractures, a staph infection and a collapsed lung, you may not take great comfort when your doctor informs you that his last patient has it worse, being dead. Sometimes encouraging comparisons are not that encouraging.
So Chicagoans didn't break out confetti upon hearing that Standard & Poor's Ratings Services regard the city's fiscal condition as less dire than Detroit's. In other news, most residents of Baghdad were not killed by suicide bombers yesterday.
The S&P report is not exactly a burst of sunshine. It judges "both Detroit's and Chicago's budgetary performance to be 'very weak,'" and notes that debt service amounts to 12 percent of total city expenditures, only marginally better than Detroit's 14 percent. It points out that Chicago's public pension funds are badly underfunded, creating pressure for a tax increase.
In Illinois, public pensions play the same role for government that the iceberg played for the Titanic -- being large, hard to avoid and potentially catastrophic. The Land of Lincoln, however, offers just a particularly lurid example of a malady that has spread across the country.
In state after state, elected officials have promised public employees retirement packages without securing the revenue needed to keep the promises. In Illinois, the state pegged its contributions below where they should have been for a long time. On top of that, lawmakers couldn't resist the temptation to borrow from the fund and skip contributions whenever it was convenient.
"Effectively, the state used the pension systems as a credit card to fund ongoing service operations," says the Center for Tax and Budget Accountability. The result is that now the state has large and growing obligations that exceed the money it has to cover them.
In 2012, Illinois' unfunded obligation was $187 billion, triple the size of the state budget. Even after the legislature agreed last year to trim benefits and boost funding, the shortfall amounts to $100 billion.
But there is plenty of company in this misery. More than 40 states have grappled with government employee retirement obligations in the past few years, but "many of them have simply deferred pension costs to the future," reports The New York Times. "And none have come close to closing their pension gaps quickly enough to keep pace with a rapidly aging -- and retiring -- public work force."
Stanford University economist Joshua Rauh says that not only have the states not made progress on the issue overall, they have actually expanded the gaping canyon they dug. By his calculations, the distance between projected benefits and projected resources has widened from $3.1 trillion in 2009 to $4 trillion today. "I can't give you a good example of a state" that has closed the gap, another expert told the Times.
But something will eventually have to be done, and the shape of that something is easy to discern. Either taxpayers will be compelled to hand over more of their earnings to the government or workers who accepted the terms of their employment in good faith will get royally hosed, or both. Barring some miracle that provides a windfall to pension funds, someone will be eating a steady diet of dirt sandwiches.
Public pensions represent one of the biggest, worst and most inexcusable policy failures of our time. This is not like invading Iraq, where we might conceivably have created stability, or the financial meltdown of 2008, which surprised even the smartest experts. This is math, where numbers either add up or don't.
The failure is the sort that gives shameless political pandering a bad name. Politicians can gain favor from public employees by accepting contracts that promise generous pensions. They can indulge other constituents by diverting the money designated for pensions. They can appease taxpayers by holding down taxes in the near term.
They can also get re-elected over and over, knowing that future lawmakers and constituents will be the ones to pay the price. Only an informed and alert electorate can prevent this kind of scam -- and the complexity and dullness of the subject make such vigilance wildly implausible.
So when it comes to public pensions, elected officials have arrived at a formula that suits them well: Never do today what you can do tomorrow. And don't do it then, either.
These public employee unions and public employee pension plans have worked out very well for America. /sarc
So glad that Walker took care of this in Wisconsin.
The unfunded pensions would bankrupt America even without the unions, and the math was proven on that in the seventies.
Both major parties contributed to the mess, and the time for the lessor of two evils is long past.
If the Republican Party will not move to the right then it must be jettisoned.
I view Illinois, California, and NY as “too big to fail”.
They are the cornerstones of Dem electoral vote strategy.
Look for the regime to give them federally guaranteed state borrowings.
The magic touch of liberalism, crime, and corruption.
Someone will write the story of the demise of American cities, although I don’t think anyone has yet attempted to do so. At the end of World War II, industry shifted to peacetime production and veterans bought homes and cars. Their cars allowed them to buy their homes in the suburbs and they used their cars to drive to their work in the cities. Over time, the work followed them out to the suburbs, including the factories.
Blacks moved into the vacancies caused by suburban flight and they and public employees became the power based for local politics. The Democrats seized political control of the cities and used their power to pay back their power base. Much of this decay was masked by the growth of the service economy which infused the cities with cash, at least in the short term.
The internet did for the service industry what the interstate highways did for manufacturing. Neither was anchored to the city core and when they left they took their tax base with them. Since city voters will not tolerate the austerity that would be required for a turn around, the cities are largely doomed. The smart ones have already organized themselves out of existence by merging with their parent county.
If the federal government does that, may that will be the straw that makes some states leave the union.
"Who, me worry about money?"
THIS MADE ME LAUGH OUT LOUD shortly after quitting his powerful WH job as Obama's COS, Rahm held a presser declaring he "just remembered" he really, Really wanted to be Mayor of Chicago. Then Rahm announced he had magically "raised" $10 million for his campaign in "just a matter of weeks." (waiting for hysterical laughter to die down). Ya gotta wonder how much Wall Street Rahm wired offshore when Obama put him in charge of the entire US Treasury. Read on.
CONNECTING THE DOTS: Obama's stranglehold on Treasury via COS Rahm Emanuel's dual role
THE TARGETING PAPER TRAIL BEGINS: Soon as they occupied the WH, Obama and the Chicago con artists (a) took control of the US Census; (b) Obama placed his COS Rahm Emanuel in control of the US Dept of the Treasury (the IRS).
THE SMOKING GUN---WSJ REPORT--On Jan 20, 2009 Timothy Geithner was appointed Obama's Secy of the Treasury. But within three weeks, the Obama White House tightened its grip on Treasury. Obama put his COS, Rahm Emanuel, in charge of Treasury---Rahm Emanuel's dual role was an unusual move.
When he got to Treasury, WH COS Rahm Emanuel was so involved in the inner workings of the Treasury that the phrase "Rahm wants it" had become an unofficial mantra among subservient govt staffers, prostrate in obeisance, scurrying to accede to Rahm's wishes, according to Treasury government officials. Reported by WSJ / 05/31/09
More here: http://online.wsj.com/article/SB124113406528875137.html
Rahm Emanuel takes over Chicago / May 16, 2011
EDITED EXCERPT .... an exciting time in the inbred world of Chicago Democratic politics.... Democratic don, Richard M. Daley ruled for 22 years, inheriting the mayoralty from his father, Mayor Richard J. Daley who held on for a generation. Now the ex-chief of staff of Chicagoan Barack Obama (once a state Senator, now president) was installed. US Treasury Secy Tim Geithner was there, and so was Chicagoan David Axelrod, an O team player.
BTW, Mayor Daley's former chief of staff, Valerie Jarrett, hired Obama's wife, Michelle, to work in Chicago City Hall. Jarret is now ensconced in Washington, as Obama's chief policy advisor.
In Chicago gangland vernacular, "chief policy advisor" means "wire-transfer artist".
Mayor Emanuel's innovative ways commenced early on---his organization was getting $50G's for the best seats at the inauguration (mmmm........that accounts for another couple million scammed from Treasury).
The mayoralty (and its--cough--"benefits") is a job Emanuel has coveted since he was a machine go-fer back in the 1980s.....before he became Bill Clinton's national campaign finance chairman and then a dual role as senior White House aide and Goldman Sachs lobbyist and then (gasp) becoming a multi-millionaire, thanks to a measly few months at a local investment firm...then a (gag) Congressman for four terms---then White House chief of staff for Obama that helped create the 2010 Republican House landslide.
EXHIBIT ONE---FR Posted on Friday, February 21, 2014 by massmike
Efforts to overhaul California's public pension system are getting a boost as taxpayers voice outrage-----fueled by the case of former Ventura County Sheriff Robert Brooks. He retired in 2011 with a salary of $227,000. Today, he is pensioned and collects $50,000 a year MORE than his salary, with guaranteed COLAs.
EVEN THAT WASN'T ENOUGH FOR THE GREEDSTER Now he's suing for $75,000 more, claiming its allowed under the law.
But voters may have the final say WRT an initiative in November, similar to a possible statewide measure, that would funnel all new employees into a 401k savings plan rather than a pension. It also gives current employees a choice -- either increase their contributions or cut future benefits (similar initiative passed in San Jose).
An LAT analysis found 84 percent of the roughly two-dozen Ventura County govt retirees with pensions in excess of $100,000 made more money in retirement than working. Excerpt foxnews.com ...
EXHIBIT TWO --- The number of retired New Jersey public officials who get more than $100,000 a year has increased by 75 percent in the past three years, according to a new report.
New Jersey Watchdog says 1,731 govt retirees collect $100,000 a year or more, which is 739 more than did in 2010. Watchdog used state treasury records which indicates there are 275,000 retired public workers.
The investigative group said Jersey City school Superintendent Charles Epps gets $195,000 in annual pensions as does retired Essex County College President A.Z. Yamba.
Retired police and fire officials are most likely to be to $100K Club members. The Police and Firemens Retirement System has 794 six-figure pensioners trailed by the Teachers Pension and Annuity Fund with 527, Judicial Retirement System with 283 and Public Employees Retirement System with 127.
Onetime deputy police chief Joseph Blaettler is the poster boy for NJ special retirement. When he retired at age 46 as Union City deputy police chief, he started pocketing nearly $135,000 a year in pension checks. Not including yearly COLAs. Blaettler said in 2012, If taxpayers want to get angry with someone they need to ask their local and state politicians how they allowed the system to get to the point it is at.