Here's a scary chart. Cook County will have more annuitants than active employees starting in 2019. This would only get worse with the expected round of layoffs and vacancy reductions in this upcoming budget. pic.twitter.com/7yRBJsVMyM
Puts the lie to Sean Morrison/Richard Boykin/Trib ed board et al who falsely gripe that county workforce hasn’t been cut.
- lake county democrat - Wednesday, Nov 15, 17 @ 12:55 pm:
A reminder that per the 9th Circuit, the local governments (not the state) can declare bankruptcy and the federal bankruptcy law overrides the state constitution per the Supremacy Clause of the US Constitution. Not saying the 7th Circuit would agree, not saying that this would be a wise course of action (definitely not at this point - the County isn’t in CPS shape, and I’m not even sure I’d do it for CPS). But the guarantee of these pensions isn’t quite a 100% lock.
Pensions aren’t Ponzi schemes when the Actuarially Required Contribution is paid every year. This would be a very reasonable number for the County to cover each year, had they done that from the beginning.
Your mortgage isn’t a Ponzi scheme if you pay what you owe each year. But if you don’t, the costs get extremely high.
==Pensions aren’t Ponzi schemes when the Actuarially Required Contribution is paid every year.==
The consequences of which would be no money left to offer raises or offer good health benefits or hire more employees. That’s why most govts don’t pay full ARC.
So what’s the solution? Add to the payroll or kill the annuitants?
Preckwinkle yesterday announced the elimination of 1,000 county positions. Want her to scrap that to make this ratio look “better?”
CDog, you should look up the definition of “Ponzi Scheme” is you wish to use the phrase.
- Robert the 1st - Wednesday, Nov 15, 17 @ 1:28 pm:
A Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors. Tier 1 vs Tier II anyone?
== A Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors. Tier 1 vs Tier II anyone? ==
Amen brother.
Do the math and not sure how you can join Tier II if you are over the age of 35.
Ironically, the Cook County Pension system was over 90% funded in the 90s. But then the unions went to the GA to sweeten the benefits (e.g., a non-cumulative COLA became cumulative) and the County didn’t keep up with the contributions and here we are.
Ron, are you under the impression that you can declare bankruptcy and get out of your mortgage?
That explains a lot.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 2:50 pm:
“CPS (unless the State takes it over”
Perish the thought, RNUG.
To be successful over the long run, a defined benefit pension plan needs to collect about 20 percent of annual revenues from member contributions, an equal amount from employer contributions, and the remaining 60 percent from investment earnings on the accumulated contributions.
Although mixing the revenue (active employee) and expense (annuitant rolls) sides of the financial statement for this kind of comparison is one indicator of a plan’s health (and this plan is sick) it’s not deteterminative as to the plan’s viability. What’s the funded status? What’s the 10-year investment return? Contribution rates?
- Arthur Andersen - Wednesday, Nov 15, 17 @ 3:01 pm:
I just posted a treatise on why this actuarial snapshot is incomplete but it didn’t post. Aargh.
Suffice it to say that one should look at investments, funded status, contribution rates, and more, before drawing conclusions here. Not to say this fund ain’t in some trouble.
Wordslinger you have obviously have a very limited knowledge of real estate and have never heard of a short sale
Turns out you can in fact get out of paying your mortgage even without filing for bankruptcy.
A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.
This happens every day here because Chicago has one of the highest numbers of homes that are not worth what is owed on them because of our terrible tax and business environment.
According to Zillow, which studied 35 major metropolitan areas, about 20.3 percent of Chicago area homeowners still have homes that aren’t worth as much as they need to repay, an improvement over 23.7 percent a year ago. CoreLogic, which studied the 10 largest metropolitan areas
Maybe Springfield could pass some reforms that would benefit middle class workers and relieve some of the tax pressures on them
A “short sale” is also known as “losing your house.” What’s the governmental equivalent in your analogy as it relates to pensions — which is the subject at hand?
Homeowners file Chapter 11 in an attempt to hold onto their homes and cars.
The government equivalent would be the local municipality filing bankruptcy and the pension (or mortgage) being reduced by a process where less than the amount owed to the pensioner is agreed to by both parties.
According to the 9th circuit ruling that is entirely possible at some point in the future for all local governments in Illinois if our leaders don’t right the ship.
See I can actually reply with facts and not snarkiness that is actually totally incorrect. You might want to try that sometime
- Arthur Andersen - Wednesday, Nov 15, 17 @ 3:46 pm:
Just for my curiosity, LP, can you tell us your real estate experience, excluding your personal residence?
Cook County politicians are pretty good about keeping their heads in the sand. AFSCME would have you believe that the county has been horribly unfair to them over the years. For those unions that still think it’s in their best interest to keep bleeding these local governments dry, remember to turn the lights off on the way out of town.
In a bankruptcy, a judge forces creditors to take a haircut (that doesn’t happen in Chapter 11 with homeowners/mortagors). In a write down, a lender voluntarily agrees to a restructuring of mortgage debt.
In your (new) write down analogy, annuitants would have to voluntarily agree to take a haircut, without a court order.
Take your medicine, take a nap or both.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 4:32 pm:
Aside from word’s very valid point, LP, your discussion of short sales glosses over one huge contingency. The mortgagor or mortgagors have to agree. Foreclosures aren’t cheap, but neither are bad examination reports or stock drops because the loss ratio balloons.
From 20-plus years of institional real estate experience on both sides of the house, let me just suggest to you that short sales don’t go through nearly as often as your anecdotal experience might indicate.
To the Post, I wouldn’t want to be the first one in the barrel arguing first responder pensions should be cut (which is where 99% of the problem is in Illinois, and before you ask, LP, I dabbled in pensions, too) because of irresponsible city councils not paying attention to funding.
The stock market is booming and fancy new high rise apartments are popping up like mushrooms in the City. As the Illinois Supreme Court held, you can’t manufacture a fiscal crisis to skip out on a debt. Time to retire your bankruptcy/insolvency fantasies.
- Six Degrees of Separation - Wednesday, Nov 15, 17 @ 11:45 pm:
The IMRF “13th check” is typically about 30% of a normal pension check, or somewhere around 2% of an annual pension. This is on top of the 3% (non-compounded) annual raises for Tier 1 IMRF retirees. It appears this is more costly than the state’s 3% compounding up to a certain number of years, when the state’s formula would then surpass it. So it really depends on the longevity of the retiree as to which plan is the more burdensome on the system.
Exactly, anonymous. No one complains that paying a bill to a private business for past services rendered is some terrible burden. They just think public employees are an easy mark.
City Zen, doth protest too much. Are you seriously contending that a pension set by a statute passed by a legislative body was somehow a complete mystery? Ditto on the union conspiracy theories. Public employee pay rates and pension amounts are all public record and were agreed to by the very same legislators whom you voted for. The exact reason why the “haircut” argument is nonsense. Every voter and every taxpayer is responsible here. You don’t like it? You should have thought about that when you cast your vote. Too late now.
The problem with that argument, Anonymous, is that the generation(s) footing the bill for this did not have a seat at the table when these agreements were made. Those generations aren’t going to accept a lower standard of living with higher taxes simply because their parents and grandparents wrote iou’s to themselves. Pensions will take a haircut simply because society isn’t going to cease to function in order to pay bloated benefits for retirees
Sure, we can give pensions a haircut once the inheritance tax is raised sky high to reflect the bloated benefits people received from parents and grandparents who paid artificially low taxes during the accumulation of that wealth. And, your argument assumes that people who receive pensions aren’t also the ones who are shouldering a higher tax burden and lower standard of living to pay for the prior underfunding. Instead of whining, why don’t you hold current candidates accountable for making payments rather than blaming public servants who worked for years for deferred compensation? How do you think government can function without paying employees? Virginia, there is no Santa Claus.
- cdog - Wednesday, Nov 15, 17 @ 12:44 pm:
Congrats.
Official Ponzi Scheme lapel pin for all.
- Just Visiting - Wednesday, Nov 15, 17 @ 12:45 pm:
What is the over/under on when the Cook county pension plan collapses? 2024?
- Gil Franco - Wednesday, Nov 15, 17 @ 12:46 pm:
A pension is a promise. We don’t need no stinking county services.
- JB13 - Wednesday, Nov 15, 17 @ 12:51 pm:
But the state constitution says it’s fine, so the math can go pound sand. Onward.
- Reality Check - Wednesday, Nov 15, 17 @ 12:53 pm:
Puts the lie to Sean Morrison/Richard Boykin/Trib ed board et al who falsely gripe that county workforce hasn’t been cut.
- lake county democrat - Wednesday, Nov 15, 17 @ 12:55 pm:
A reminder that per the 9th Circuit, the local governments (not the state) can declare bankruptcy and the federal bankruptcy law overrides the state constitution per the Supremacy Clause of the US Constitution. Not saying the 7th Circuit would agree, not saying that this would be a wise course of action (definitely not at this point - the County isn’t in CPS shape, and I’m not even sure I’d do it for CPS). But the guarantee of these pensions isn’t quite a 100% lock.
- chi - Wednesday, Nov 15, 17 @ 12:57 pm:
Pensions aren’t Ponzi schemes when the Actuarially Required Contribution is paid every year. This would be a very reasonable number for the County to cover each year, had they done that from the beginning.
Your mortgage isn’t a Ponzi scheme if you pay what you owe each year. But if you don’t, the costs get extremely high.
- City Zen - Wednesday, Nov 15, 17 @ 12:57 pm:
Your stay in Stroger Hospital may be diminished or impaired.
- City Zen - Wednesday, Nov 15, 17 @ 1:04 pm:
==Pensions aren’t Ponzi schemes when the Actuarially Required Contribution is paid every year.==
The consequences of which would be no money left to offer raises or offer good health benefits or hire more employees. That’s why most govts don’t pay full ARC.
==Your mortgage isn’t a Ponzi scheme…==
No one is foreclosing on a pension.
- pskila - Wednesday, Nov 15, 17 @ 1:13 pm:
stop robbing the pension funds to pay other bills…and you won’t have the problem of paying it.
- wordslinger - Wednesday, Nov 15, 17 @ 1:26 pm:
So what’s the solution? Add to the payroll or kill the annuitants?
Preckwinkle yesterday announced the elimination of 1,000 county positions. Want her to scrap that to make this ratio look “better?”
CDog, you should look up the definition of “Ponzi Scheme” is you wish to use the phrase.
- Robert the 1st - Wednesday, Nov 15, 17 @ 1:28 pm:
A Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors. Tier 1 vs Tier II anyone?
- RNUG - Wednesday, Nov 15, 17 @ 1:29 pm:
== But the guarantee of these pensions isn’t quite a 100% lock. ==
“these pensions” = not SERS / TRS / SURS / GARS / JRS
Most local, municipal and county governments participate in IMRF, and they should be fine.
The ones potentially in trouble are ones like Cook, CPS (unless the State takes it over), and some non-state police / fire pensions.
Overall, any potential conflict on pension protection / bankruptcy would be relatively limited.
- Anon - Wednesday, Nov 15, 17 @ 1:46 pm:
So what’s the solution? Add to the payroll or kill the annuitants?
Maybe stop offering pensions to new hires. In these times, people would still take the jobs if there was a 401(k) instead.
- IMissBentohs - Wednesday, Nov 15, 17 @ 2:12 pm:
== A Ponzi scheme is a fraudulent investment operation where the operator generates returns for older investors through revenue paid by new investors. Tier 1 vs Tier II anyone? ==
Amen brother.
Do the math and not sure how you can join Tier II if you are over the age of 35.
- Anonymous - Wednesday, Nov 15, 17 @ 2:14 pm:
===Puts the lie to Sean Morrison/Richard Boykin/Trib ed board et al who falsely gripe that county workforce hasn’t been cut.===
Headcount is down but payroll is up. https://www.illinoispolicy.org/cook-countys-budget-problems-stem-from-massive-growth-in-payrolls/
- Ron - Wednesday, Nov 15, 17 @ 2:23 pm:
“Your mortgage isn’t a Ponzi scheme if you pay what you owe each year. But if you don’t, the costs get extremely high. ”
No, but people can and do declare BK if they can’t pay their mortgage. Cook County government should do the same.
- Anonymous - Wednesday, Nov 15, 17 @ 2:29 pm:
Ironically, the Cook County Pension system was over 90% funded in the 90s. But then the unions went to the GA to sweeten the benefits (e.g., a non-cumulative COLA became cumulative) and the County didn’t keep up with the contributions and here we are.
- Anonymous - Wednesday, Nov 15, 17 @ 2:29 pm:
Love these alarm bells. Are people advocating euthanasia at a certain age to save taxpayers money? Other solution? Anyone?
- Dublin - Wednesday, Nov 15, 17 @ 2:34 pm:
“No, but people can and do declare BK if they can’t pay their mortgage. Cook County government should do the same”
You still have to pay for you full mortgage if you declare bankruptcy…so, there’s that.
- wordslinger - Wednesday, Nov 15, 17 @ 2:47 pm:
Ron, are you under the impression that you can declare bankruptcy and get out of your mortgage?
That explains a lot.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 2:50 pm:
“CPS (unless the State takes it over”
Perish the thought, RNUG.
To be successful over the long run, a defined benefit pension plan needs to collect about 20 percent of annual revenues from member contributions, an equal amount from employer contributions, and the remaining 60 percent from investment earnings on the accumulated contributions.
Although mixing the revenue (active employee) and expense (annuitant rolls) sides of the financial statement for this kind of comparison is one indicator of a plan’s health (and this plan is sick) it’s not deteterminative as to the plan’s viability. What’s the funded status? What’s the 10-year investment return? Contribution rates?
- Arthur Andersen - Wednesday, Nov 15, 17 @ 3:01 pm:
I just posted a treatise on why this actuarial snapshot is incomplete but it didn’t post. Aargh.
Suffice it to say that one should look at investments, funded status, contribution rates, and more, before drawing conclusions here. Not to say this fund ain’t in some trouble.
- Lucky Pierre - Wednesday, Nov 15, 17 @ 3:02 pm:
Wordslinger you have obviously have a very limited knowledge of real estate and have never heard of a short sale
Turns out you can in fact get out of paying your mortgage even without filing for bankruptcy.
A short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.
This happens every day here because Chicago has one of the highest numbers of homes that are not worth what is owed on them because of our terrible tax and business environment.
According to Zillow, which studied 35 major metropolitan areas, about 20.3 percent of Chicago area homeowners still have homes that aren’t worth as much as they need to repay, an improvement over 23.7 percent a year ago. CoreLogic, which studied the 10 largest metropolitan areas
Maybe Springfield could pass some reforms that would benefit middle class workers and relieve some of the tax pressures on them
http://www.chicagotribune.com/business/ct-underwater-homeowners-chicago-0610-biz-20160608-story.html
- wordslinger - Wednesday, Nov 15, 17 @ 3:29 pm:
LOL, LP, that’s just dazzling.
A “short sale” is also known as “losing your house.” What’s the governmental equivalent in your analogy as it relates to pensions — which is the subject at hand?
Homeowners file Chapter 11 in an attempt to hold onto their homes and cars.
- Shemp - Wednesday, Nov 15, 17 @ 3:31 pm:
Numerous downstate fire/police pension funds that are already like this.
- Lucky Pierre - Wednesday, Nov 15, 17 @ 3:38 pm:
The government equivalent would be the local municipality filing bankruptcy and the pension (or mortgage) being reduced by a process where less than the amount owed to the pensioner is agreed to by both parties.
According to the 9th circuit ruling that is entirely possible at some point in the future for all local governments in Illinois if our leaders don’t right the ship.
See I can actually reply with facts and not snarkiness that is actually totally incorrect. You might want to try that sometime
- Arthur Andersen - Wednesday, Nov 15, 17 @ 3:46 pm:
Just for my curiosity, LP, can you tell us your real estate experience, excluding your personal residence?
- wordslinger - Wednesday, Nov 15, 17 @ 3:51 pm:
LP, homeowners do not reduce their mortgage in Chapter 11. They’re on the hook for the whole nine yards if they want to keep their house.
You never tire of being wrong.
- Lucky Pierre - Wednesday, Nov 15, 17 @ 3:54 pm:
I have owned a few rental properties though the years Arthur and will continue to.
I am not a huge real estate investor by any means.
I have never had a short sale personally but I do know several friends who have.
- Ron - Wednesday, Nov 15, 17 @ 3:55 pm:
see Detroit BK
- Lucky Pierre - Wednesday, Nov 15, 17 @ 3:58 pm:
Wrong again Wordlslinger. It is possible to get a bank to agree to a mortgage write down and stay in your home.
More like on the hook for less than the original yardage. Open mouth, insert foot. Repeat
http://homeguides.sfgate.com/tips-mortgage-write-down-49167.html
- wordslinger - Wednesday, Nov 15, 17 @ 4:17 pm:
LP, what does a write down have to do with bankruptcy?
You’re having difficulty following your own incoherent analogy. I sympathize.
- Lucky Pierre - Wednesday, Nov 15, 17 @ 4:21 pm:
Similar in that there is a lowering of the amount owed, be it a mortgage or a pension, because of financial hardship
Not that complicated or rare, but I am not surprised you are having difficulty following
- Chicagonk - Wednesday, Nov 15, 17 @ 4:25 pm:
Cook County politicians are pretty good about keeping their heads in the sand. AFSCME would have you believe that the county has been horribly unfair to them over the years. For those unions that still think it’s in their best interest to keep bleeding these local governments dry, remember to turn the lights off on the way out of town.
- wordslinger - Wednesday, Nov 15, 17 @ 4:30 pm:
LP, they’re not similar at all.
In a bankruptcy, a judge forces creditors to take a haircut (that doesn’t happen in Chapter 11 with homeowners/mortagors). In a write down, a lender voluntarily agrees to a restructuring of mortgage debt.
In your (new) write down analogy, annuitants would have to voluntarily agree to take a haircut, without a court order.
Take your medicine, take a nap or both.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 4:32 pm:
Aside from word’s very valid point, LP, your discussion of short sales glosses over one huge contingency. The mortgagor or mortgagors have to agree. Foreclosures aren’t cheap, but neither are bad examination reports or stock drops because the loss ratio balloons.
From 20-plus years of institional real estate experience on both sides of the house, let me just suggest to you that short sales don’t go through nearly as often as your anecdotal experience might indicate.
To the Post, I wouldn’t want to be the first one in the barrel arguing first responder pensions should be cut (which is where 99% of the problem is in Illinois, and before you ask, LP, I dabbled in pensions, too) because of irresponsible city councils not paying attention to funding.
- DuPage Bard - Wednesday, Nov 15, 17 @ 4:38 pm:
IMRF 3% Simple COLA all other systems 3% compounded COLA
Change from a compounded to a simple COLA. Not a full fix but will definitely help.
- Ron - Wednesday, Nov 15, 17 @ 4:44 pm:
Detroit pensioners and public employees took massive haircuts in pensions and healthcare benefits.
Cook County needs the same.
- Lucky Pierre - Wednesday, Nov 15, 17 @ 4:51 pm:
I clearly said it would have to be agreed by both parties. It’s right there:
by a process where less than the amount owed to the pensioner is agreed to by both parties.
One way to get the pensions lowered is the threat of privatization of fire departments or other government jobs.
Nothing motivates like the threat of a job with less benefits vs no job to bring the parties to an agreement.
This will eventually have to happen and those that pretend it won’t skipped a few basic math courses.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 4:59 pm:
DuPage, wouldn’t that be a benefit impairment? BTW, IMRF has a “13th check” in lieu of a compounded AAI. Less expensive, but unfunded.
- City Zen - Wednesday, Nov 15, 17 @ 5:18 pm:
==IMRF 3% Simple COLA all other systems 3% compounded COLA==
IMRF has a 13th payment on top of their simple COLA.
- RNUG - Wednesday, Nov 15, 17 @ 5:37 pm:
== Perish the thought, RNUG. ==
There has been discussions about it, -AA-
- Anonymous - Wednesday, Nov 15, 17 @ 5:42 pm:
IMRF. An example of a defined benefit plan that can work. Reason? Contributions were never skipped. 13 payments. Funded at somewhere near 95%.
- Arthur Andersen - Wednesday, Nov 15, 17 @ 5:47 pm:
I know, RNUG. What a nightmare. If that happened, we would be pushin’ up daisies before the computers got integrated, let alone all the other issues.
- cdog - Wednesday, Nov 15, 17 @ 6:48 pm:
Ask the Google “Illinois pension ponzi.”
113,000 hits. Seems to be a popular topic.
- Anonymous - Wednesday, Nov 15, 17 @ 8:19 pm:
The stock market is booming and fancy new high rise apartments are popping up like mushrooms in the City. As the Illinois Supreme Court held, you can’t manufacture a fiscal crisis to skip out on a debt. Time to retire your bankruptcy/insolvency fantasies.
- Six Degrees of Separation - Wednesday, Nov 15, 17 @ 11:45 pm:
The IMRF “13th check” is typically about 30% of a normal pension check, or somewhere around 2% of an annual pension. This is on top of the 3% (non-compounded) annual raises for Tier 1 IMRF retirees. It appears this is more costly than the state’s 3% compounding up to a certain number of years, when the state’s formula would then surpass it. So it really depends on the longevity of the retiree as to which plan is the more burdensome on the system.
- Anonymous - Thursday, Nov 16, 17 @ 7:47 am:
“burdensome”
That wraps everything up about work/wages/retirement
Paying people for their work is a horrible thing to have to do (apparently)
Paying anyone a single dime after they are no longer “contributing” to the work force is heinous and resented by everyone(apparently)
The idea that anyone would have to give anyone anything is sickening (apparently)
The way we have come to loathe each other and devalue each other is telling
THis is exactly why no one should go into public service in particular. Giving yourself to others in your specialty earns contempt (apparently)
- Anonymous - Thursday, Nov 16, 17 @ 8:49 am:
Exactly, anonymous. No one complains that paying a bill to a private business for past services rendered is some terrible burden. They just think public employees are an easy mark.
- City Zen - Thursday, Nov 16, 17 @ 8:53 am:
==The IMRF “13th check” is typically about 30% of a normal pension check==
15 years ago, it was 70%.
==It appears this is more costly than the state’s 3% compounding up to a certain number of years, when the state’s formula would then surpass it.==
I think the over/under is 20 years. I think I’d rather have 3% compounded and roll the dice.
- City Zen - Thursday, Nov 16, 17 @ 9:00 am:
==No one complains that paying a bill to a private business for past services rendered is some terrible burden. ==
Because I knew the actual cost of that service prior to agreeing to pay.
- Anonymous - Thursday, Nov 16, 17 @ 12:19 pm:
City Zen, doth protest too much. Are you seriously contending that a pension set by a statute passed by a legislative body was somehow a complete mystery? Ditto on the union conspiracy theories. Public employee pay rates and pension amounts are all public record and were agreed to by the very same legislators whom you voted for. The exact reason why the “haircut” argument is nonsense. Every voter and every taxpayer is responsible here. You don’t like it? You should have thought about that when you cast your vote. Too late now.
- Anon - Friday, Nov 17, 17 @ 11:07 am:
The problem with that argument, Anonymous, is that the generation(s) footing the bill for this did not have a seat at the table when these agreements were made. Those generations aren’t going to accept a lower standard of living with higher taxes simply because their parents and grandparents wrote iou’s to themselves. Pensions will take a haircut simply because society isn’t going to cease to function in order to pay bloated benefits for retirees
- Anonymous - Tuesday, Nov 21, 17 @ 1:46 pm:
Sure, we can give pensions a haircut once the inheritance tax is raised sky high to reflect the bloated benefits people received from parents and grandparents who paid artificially low taxes during the accumulation of that wealth. And, your argument assumes that people who receive pensions aren’t also the ones who are shouldering a higher tax burden and lower standard of living to pay for the prior underfunding. Instead of whining, why don’t you hold current candidates accountable for making payments rather than blaming public servants who worked for years for deferred compensation? How do you think government can function without paying employees? Virginia, there is no Santa Claus.