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* Taxpayers United President Jim Tobin, who believes Abraham Lincoln fought the Civil War over taxes and has long wanted to abolish the Illinois State Police also believes that Illinois will declare bankrupty in 2015…
“Illinois will be the first state to go bankrupt, unless pension reforms are implemented,” said Tobin.
And Tobin’s numbers suggest it’ll be sooner rather than later.
“Yeah, 2015 is about right,” said Tobin.
Tobin totaled up lifetime salary and pension costs to assert a plan for hiring 200 new Illinois state police could cost $38 billion as he called for a state hiring freeze until the state’s pension system is reformed.
States can’t declare bankruptcy, and pension costs are projected to rise $200 million in FY 2015, a far cry from the recent billion dollars a year increases of the recent past. But, other than that, yeah, we’ll be Detroit in two years. That’s about right. For sure.
* The far more likely event, I think, is that Mayor Emanuel might “encourage” one of the city’s pension funds to declare bankruptcy. He refuses to raise taxes to make up for years of zero-funding the city’s pension systems, and a legislative solution doesn’t yet appear in sight.
posted by Rich Miller
Thursday, Aug 8, 13 @ 12:50 pm
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I guess Mr. Tobin disagrees with Moody’s recent report on Illinois:
“Illinois still has a diverse and large economic base, with above-average wealth levels.
STRENGTHS
–Sovereign powers over revenue and spending
–Statutory provisions giving priority to debt service over other state expenditures
–Large, diverse, and wealthy economy”
From Moody’s report:
http://www.moodys.com/research/Moodys-downgrades-State-of-Illinois-27-billion-of-General-Obligation–PR_275057
Comment by Joe M Thursday, Aug 8, 13 @ 1:02 pm
In the earlier post on Moody’s report, somehow the — ended up a - in the url
https://www.moodys.com/research/Moodys-downgrades-State-of-Illinois-27-billion-of-General-Obligation–PR_275057
Comment by Joe M Thursday, Aug 8, 13 @ 1:05 pm
Tobin never lets little details like ‘facts’ get in the way.
Comment by Judgment Day Thursday, Aug 8, 13 @ 1:17 pm
An accidental insight into how mundane the pension crisis is, namely that it’s mostly political.
Politicians are best understood as response machines to aggregate demands. Human services and whatever provides a certain level of political benefit so they have those. Giving defined-benefit pensions to public employees has another level so they do that too.
Because politicians are not particularly smart there’s an inevitable period of doing both to the point of cost overlap (skipping contributions etc).
Now they can’t do that because omg bonds more expensive and service cuts and so forth, and that is sad for the politicians (and I guess real people but since when does politics give them any consideration anyway).
But it’s not an imminent crisis, and it’s not going to melt the state down. It’s just a darkly entertaining object lesson in having to choose what brings you the most benefit, muni labor or lower taxes/higher services.
Comment by Will Caskey Thursday, Aug 8, 13 @ 1:17 pm
Tobin probably also believes all those government services are paid for by the tax fairy …
Comment by RNUG Thursday, Aug 8, 13 @ 1:18 pm
As Rich pointed out: states can’t declare Chapter 9 Bankruptcy because of federalism.
Comment by Steve Thursday, Aug 8, 13 @ 1:22 pm
“The far more likely event, I think, is that Mayor Emanuel might “encourage” one of the city’s pension funds to declare bankruptcy. He refuses to raise taxes to make up for years of zero-funding the city’s pension systems, and a legislative solution doesn’t yet appear in sight.”
I have no doubt that Rahm would love this but I don’t know if a particular municipal fund could declare “bankruptcy” without the entire city declaring bankruptcy. I highly doubt Rahm would be advocating pulling the plug on a City which he claims to be so expertly managing.
Comment by anon Thursday, Aug 8, 13 @ 1:26 pm
2015 is also when the spaceship will arrive to transport Tobin and his true believers back to their home planet.
Comment by wordslinger Thursday, Aug 8, 13 @ 1:27 pm
However, the City of Chicago does have some serious pension/retirement funding issues. But as the state legislature has failed to provide legislative authorization for municipalities and units of local governments to file for Chapter 9 bankruptcy (see Washington Park, IL, St. Clair County, IL - See http://en.wikipedia.org/wiki/Washington_Park,_Illinois), that could present some interesting issues to the Democratic mayor of Chicago.
Be interesting to see if a municipal pension fund for a specific municipality can file for bankruptcy while the underlying municipality does not file. More legal fun and games!
And everybody though Detroit was going to be fun times. Just wait till they get a load of Chicago!
Comment by Judgment Day Thursday, Aug 8, 13 @ 1:28 pm
Hmmm Rahm pushes a city pension fund into bankruptcy the state has to cover the costs. He saves a lot of money.
Comment by Fed up Thursday, Aug 8, 13 @ 1:29 pm
I’d like to know who listens to this guy.
Here is another professional assessment of Illinois, with lots of links:
http://mercatus.org/expert_commentary/why-illinoiss-bond-ratings-dont-add
and
http://mercatus.org/publication/modeling-state-credit-risks-illinois-and-indiana
Comment by Cod Thursday, Aug 8, 13 @ 1:34 pm
Could Tobin be referring to “bankruptcy” in a figurative or moral sense — i.e. the state running out of money to meet its obligations with its current sources of revenue — rather than in its literal, legal sense?
Comment by Secret Square Thursday, Aug 8, 13 @ 1:35 pm
Possible solutions:
1) Benefits freeze on all those receiving pensions.
2) Raise the minimum retirement age to 68 for all future public sector workers.
3) Raise contribution level for existing workers. How much???? That’s a big question.
4) Start applying a state income tax for public sector pensions.
Comment by Steve Thursday, Aug 8, 13 @ 1:38 pm
“Hmmm Rahm pushes a city pension fund into bankruptcy the state has to cover the costs”
Don’t know about that. In fact, IF the pension fund by itself can declare bankruptcy (a very much open question, btw), the current thought is that the process would work something along these lines (per Detroit):
1) Establish 100% pension/retirement obligation amount for all current/future retirees.
2) Establish what the current asset value(s) are for the pension/retirement accounts.
3) Establish what the current/future unfunded obligations (remainder) are for the pension/retirement accounts.
4) The current/future retirees get 100% of the funded portion of their pension/retirement accounts.
5) The current/future retirees get pennies on the dollar for the unfunded portion of the pension/retirement accounts.
But (and here’s the kicker), under the Detroit proposal, the GO (General Obligation) bondholders also get treated as if they are unsecured debtors. They’re obviously pretty unhappy about that.
Be interesting to see how it all plays out.
Comment by Judgment Day Thursday, Aug 8, 13 @ 1:42 pm
Steve
You could not legally just tax “public pensions” alone. You would have to tax all pensions. It is an option but politically it has a downside.
Comment by Old and In The Way Thursday, Aug 8, 13 @ 1:46 pm
Individual City Pension Plans can’t file for bankruptcy though if they run out of money they can become insolvent- The answer to all of thes problems isn’t bankruptcy (which Illinois can’t file in any event)is adoption of the Madigan plan which will go a long way to reducing the urgency of the financial problems afflicting the State- For anyone still thinking the problem is imaginary the liberal NYT had an exhaustive article on Tuesday suggesting that both Chicago and Illinois are really in the soup though not anyway close to the disaster facing Detroit- Madigan’s plan’s constitutionality will be thrown to the Illinois Supreme Court and all those praying that they rule it to be an unlawful impairment should remember that the Court is comprised of politicians who are not going to want to be viewed as having allowed the State to have to decide whether it will continue paying benefits at current levels versus seeing every other State program having to dramatically reduce urgent services- As the NYT addresses there is no level of tax increases which would be politically feasible to allow the pension plans to maintain their current benefit levels
Comment by Sue Thursday, Aug 8, 13 @ 1:49 pm
Judgement Day
You are correct on at least one point. It is an open question. However, it would probably not be possible to declare just one fund insolvent or bankrupt. Declaring one insolvent would pull ALL of the city’s assets and pension funds into the hole as well. Good luck with that one!
Comment by Old and In The Way Thursday, Aug 8, 13 @ 1:51 pm
Some longtime observers may conclude that IL State Police transitioned from a class operation into a top heavy fiefdom which has abused and spiked compensation , overtime , and pensions. If correct, then elimination of ISP ,in it’s high paid traffic cop form, may not be such a wild notion.
Creation of a new agency focused on investigation and forensics might be worth serious consideration.
But overall, it appears Taxpayers United’s Tobin has no clue.
Comment by x ace Thursday, Aug 8, 13 @ 1:57 pm
@Sue:
Give me the name of your pension or 401K plan and we’ll see how you like it if we come raid it. Thanks.
Comment by Demoralized Thursday, Aug 8, 13 @ 1:57 pm
I got it, Tobin wrote the Trib editorial.
Comment by Norseman Thursday, Aug 8, 13 @ 1:58 pm
Demoralized-individual IRA or 401K plans are not comparable to employer sponsored pension plans but unless you have been living on Mars you would know employees’ pensions are routinely adversely impacted when their employers get into financial trouble- Public employees have every right to be angry that the State has failed to live up to its promises so remember that the next time you vote and maybe we can finally hire some honest folks but that is unlikely to happen
Comment by Sue Thursday, Aug 8, 13 @ 2:05 pm
Dear Mr. Tobin- just because you believe something , and then say it out loud, does not make it fact. Thank you, the rest of the citizens of Illinois.
Comment by Roadiepig Thursday, Aug 8, 13 @ 2:18 pm
Dear Mr. Tobin- just because you believe something , and then say it out loud, does not make it fact. Thank you, the rest of the citizens of Illinois.
Comment by Roadiepig Thursday, Aug 8, 13 @ 2:18 pm
Oops- sorry about the double post
Comment by Roadiepig Thursday, Aug 8, 13 @ 2:23 pm
Demoralized:
“Give me the name of your pension or 401K plan and we’ll see how you like it if we come raid it. Thanks.”
It’s called ’social security’, and it’s been ‘raided’ consistently for 30 years, to the tune of Trillions of dollars. Future benefits–already ‘earned’–are constantly under threat.
Comment by Chris Thursday, Aug 8, 13 @ 2:24 pm
As someone who has worked close to 30 years for the State of Illinois at their request - I as a taxpayer for 50 years - would request that folks not talk about reductions in retirement income earned by retired state employees so casually. We are talking about changes in health care and pensions all things we were told we were earning and - which we paid for each and every year. Politicians want to get elected - so they don’t say things about unpaid bills - and the need for additional income (read that taxes) to pay those bills - we have gone without raises for a long time - and now our retirement is going to be impacted - so - please know their is a face behind the word state retiree
Comment by Marie Thursday, Aug 8, 13 @ 2:30 pm
While the State may not go under that soon…. http://www.cnbc.com/id/100929269
“Moody’s figures that 15 states are in better shape than the current reporting rules would indicate. The rest have bigger liabilities (some much bigger) than found in their current financial statements. Based on the adjusted funding gaps, nine states—Massachusetts, Pennsylvania, Colorado, Louisiana, Hawaii, New Jersey, Kentucky and Connecticut—would see their funding liabilities exceed an entire year’s worth of state revenues. In Illinois, the adjusted funding gap amounts to 241 percent of state revenues.”
Comment by Shemp Thursday, Aug 8, 13 @ 2:40 pm
=== Abraham Lincoln fought the Civil War over taxes ===
I remember from my history textbooks - all those long haired radical draft rioters out there in NY City screaming, “no blood for taxes, no blood for taxes”.
As a conservative, I disavow what this schmuck is peddling.
Comment by dupage dan Thursday, Aug 8, 13 @ 2:45 pm
@Sue
The day the state goes bankrupt and ceases to exist as an entity, in the same way a private company might go bankrupt, cease to exist, and be relieved of its pension obligations, is the day I will be ok with my pension being reduced. However, that day will never come because the state has the power to raise revenues to whatever level needed to pay its bills. And states can’t declare bankruptcy anyway.
Apple, meet orange.
Comment by TwoFeetThick Thursday, Aug 8, 13 @ 2:51 pm
Sue–maybe there is no level of tax increase that would allow pension benefits to continue as they are, but Ralph Martire has a comprehensive plan that has many facets of “fixes”, not just increasing taxes. For some reason, this common sense, minimal pain plan won’t be considered. That’s why those in the raided pension plans believe that the main goal is to punish specifically those in the plans. Otherwise, why not a plan that doesn’t devastate only one group? Please don’t bring up the tax increase. If you live in this state and earn a paycheck, no matter whether public or private employment, you’ve been hit with the same tax. Taxing pensions? Well, go ahead and just try bringing social security into that conversation and people will start riots in the streets. So it brings us right back to the target group, state pension plan participants. Ralph Martire.
Comment by JC Thursday, Aug 8, 13 @ 3:02 pm
The City sells O’hare–half of the City’s pension’s unfunded liability is paid–crisis is over. Pretty simple!
Comment by funny guy Thursday, Aug 8, 13 @ 3:12 pm
==in it’s high paid traffic cop form==
Because we need less traffic cops on the highways and interstates, everyone drives safely and obeys the law already!
Comment by Precinct Captain Thursday, Aug 8, 13 @ 3:20 pm
2015 is also the year the cubs are gonna win the World Series……according to Back to the Future Part II
Comment by Former Merit Comp Slave Thursday, Aug 8, 13 @ 3:35 pm
Steve-
You mentioned as one possible solution freezing benefits for all those receiving pensions When you say benefits, are you referring to COLAs(cost of living adjustments)? When you say ALL those receiving pensions, are you also counting the judges?
As you probably know, the Madigan proposed pension reform legislation excludes tampering with all the judges’pensions, including COLAs. If the Madigan proposal became law, and the judges were excluded, I think this would be discriminatory
Also, if COlAs are slashed or eliminated this would result in the pension being diminished ; this I think would be in violation of the Illinois Constitution. As you probably know, part of our pension contributions were exclusively for our COLAs
Thanks.
Comment by Earl Shumaker Thursday, Aug 8, 13 @ 4:09 pm
Dedicate the income and property taxes paid by government employees to the unfunded pension liability single use special fund. That way the politicians and non-workers could not raid it for their pork and programs. When the liability is paid off, direct the revenue to general funds.
Comment by public employees dedicated tax Thursday, Aug 8, 13 @ 4:13 pm
JC- like you, I wish the politicians would consider Martire’s common sense approach to pension reform. Instead, Madigan and his supporters wants to “solve” the pension they helped create by taking a political approach. If they continue with this approach I am afraid retirees are going to end up as collateral damage, and the Illinois Constitution will be trashed in the process
Comment by Earl Shumaker Thursday, Aug 8, 13 @ 4:25 pm
Earl Shumaker,
I’m waiting for Martire to retool his proposal to include a spending reduction/freeze element, which I think is gaping hole in the plan.
Comment by Cincinnatus Thursday, Aug 8, 13 @ 4:44 pm
Thanks for the comment, Cincinnatus
I agree that spending most definitely should be included. It is amazing to me that even though the politicians say we are broke they continue to spend, spend, spend.
Comment by Earl Shumaker Thursday, Aug 8, 13 @ 4:58 pm
Steve @ 1:38pm : Start applying a state income tax for public sector pensions.
Then you will be pleased to know that taxing all retirement income is being considered as an option to help increase state revenue.
Comment by Ruby Thursday, Aug 8, 13 @ 5:57 pm
What is really sad is people are stupid enough to listen to a guy like this Tobin.
Comment by Chuck Thursday, Aug 8, 13 @ 6:36 pm
“I’m waiting for Martire to retool his proposal to include a spending reduction/freeze element”
During one of the Chicago Tonight episodes a few months back, Martire was on with Anders Lindall, John Tillman from the IPI and maybe Laurence Msall, when he actually agreed that some of the cuts proposed by the IPI and Civic Committee may need to be done. I don’t think that he would be the one to propose them, though. The policy I’ve seen him present at workshops and events is for raising tax revenue.
Comment by Grandson of Man Thursday, Aug 8, 13 @ 7:00 pm
Tobin’s academic studies at Wingnut State and Tinfoil College sure didn’t include actuarial science.
He wants us to believe adding 200 new cops will add $38 billion to the pension and benefit liability.
$38 billion is more than the TOTAL pension obligation of SERS.
I’m just gonna ignore the health care piece after that.
Comment by Arthur Andersen Thursday, Aug 8, 13 @ 7:52 pm
-Ruby-
I not happy that anyone’s taxes will go up . I know once they start taxing pensions: many more seniors will leave the state to go to no income tax states.
Comment by Steve Thursday, Aug 8, 13 @ 7:52 pm
Sorry, but not only can’t a state go bankrupt, but a state which has a thriving city like Chicago has the resources. North Michigan Ave is thriving with new development, tourists, condos, etc. Slightly less dramatic but incredible nonetheless is the development near the former projects.
In other words, this ain’t Detroit. Sorry to disappoint all you teapublicans.
(btw- the bankruptcy filing in Detroit had more to do with the extreme ideological agenda of the appointed city “manager” and the governor of Michigan who appointed him then the financial situation of the city itself)
Comment by low level bureaucrat Thursday, Aug 8, 13 @ 8:24 pm
Can someone please get Tobin a toll collector’s job and allow this gentleman to progress with his life.
Comment by Rolo Tomassi II Thursday, Aug 8, 13 @ 8:54 pm
As always, reform means refusing to pay your just debts.
Comment by Excessively Rabid Thursday, Aug 8, 13 @ 9:53 pm