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Ryan talks about the impasse

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Illinois

* Former Gov. George Ryan has a proper diagnosis of the impasse…

“It seems to me what you’ve got today are two guys very set in their ways and have programs that they just won’t give up on. Gov. Bruce Rauner wants to destroy the unions, and it’s Madigan’s lifeblood. Madigan has to save the unions; otherwise, he doesn’t survive. And it’s just as simple as that.

“So I don’t know how they ever come to an agreement until you sit down and figure it out, be flexible and understand what the needs of everybody are that you are working with.”

Yep, and they won’t sit down together until they’re both ready.

* This suggestion was more than a little weird, though…

“First off, the biggest problem we got with the budget right now is the interest they are paying on the debt. If I were the governor, I think I would call in the pension board and I’d say we are never going to be able to pay the full debt back, so let’s eliminate half the debt right now and write it off.

“If that’s not constitutional, it might be worth changing the constitution. That would dramatically reduce the amount of interest that they’re paying. The bond ratings would go up and the interest would go down.”

* I asked RNUG for his take…

I think George has been indulging in some medical herbs.

Seriously, not enough details.

Is he talking about actually negating the State’s obligation to pay the pensions when due? That would be unconstitutional. And if they changed the Constitution, that would only apply to new hires. And there’s still Federal and State Contract Law. Until law is changed specifically to say that pensions are not a contract, the State would still be on the hook. (Boy, wouldn’t the 1.4% love that nationally!)

Is he, in effect, suggesting the State keep the pension funds somewhere around the current 40% or so instead of trying to acheive full funding of 80% - 100%? That is the State’s choice now but the Federal reporting requirements would still apply, so they would be reported as under funded.

Or is he, in effect, suggesting the payments be calculated bat a lower interest rate and a lesser amount than than the full debt? And if the fund come up short, the State would have to switch to paying pensions on an “as you go” basis from GRF?

From legal (not financial) standpoint, as long as the State agrees they must pay the pensions when due, the State can finance or not finance the pension funds any way they want to. The only real constraints are from the bond rating agencies and the Feds … and other than the reporting requirements, I don’t see the Feds interfering, so it’s just the bankers keeping the State in check.

* Back to Ryan…

“Second: The other thing involves the vendors, who are owed billions. I would call those service vendors in — not those who have products — and tell them we are going to pay you 60 cents on the dollar, there is no way we can get out of this mess and you gotta help us. They’d have to take their lumps, but still be back to do business with the state.”

I think that is the biggest fear by vendors today. Only it might not be as much as 60 percent.

posted by Rich Miller
Tuesday, Feb 21, 17 @ 1:19 pm

Comments

I realize this is Rauner talking — not Rauner — but it *seems* like some thing(s) that Rauner must be thinking — or must have thought.

Wow — true fiscal conservatives. Better to welch than pay in full.

That’s today’s GOP in a nutshell. Of course, with savvy businessmen like Trump and Rauner — who needs fiscal conservatism? All we need is a never-ending campaign, donors, and a base looking for constant chum.

Comment by Bobby Catalpa Tuesday, Feb 21, 17 @ 1:26 pm
I think Ryan is on to something. The Governor could include it as part of the “workin’ together” proposal. Easily sold to the public as the “shortchangin’ to savings proposal”.

Fool me once, shame on you; fool me twice, shame on me.

Comment by Under Influenced... Tuesday, Feb 21, 17 @ 1:28 pm
To the Post…

From former Governor Ryan…

===…Gov. Bruce Rauner wants to destroy the unions, and it’s Madigan’s lifeblood. Madigan has to save the unions; otherwise, he doesn’t survive. And it’s just as simple as that.===

That’s the whole 60/30 thingy in a nutshell.

Rauner wants what Madigan knows he (Madigan) has the votes to prevent.

Rauner does not have 30, and in the House’s case 60, votes to get all he (Rauner) wants.

So, Rauner has used Dunkin and other parliamentary moves in the 99th GA to stop overrides (that’s the “game”, ugh) but GHR and Rich are right, in the end, they need to move on, together, and until they both move together, we all are stuck.

Then this…

===”…They’d (vendors) have to take their lumps, but still be back to do business with the state.”===

The rub here is obvious, 60 cents to the dollar, or 10 cents to the dollar… How will vendors survive? Vendors may (some have already, or done layoffs, or… ) not see their survival happening with 60 cents, let alone 10 cents and a signed contract that was never going to be worth it’s full weight.

Yikes.

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 1:31 pm
ok, now someone call up federal inmate #40892-424 and he can tell us what he would do if he was still governor.

Comment by Homer J. Quinn Tuesday, Feb 21, 17 @ 1:33 pm
–“Second: The other thing involves the vendors, who are owed billions. I would call those service vendors in — not those who have products — and tell them we are going to pay you 60 cents on the dollar, there is no way we can get out of this mess and you gotta help us. They’d have to take their lumps, but still be back to do business with the state.”

I think that is the biggest fear by vendors today. Only it might not be as much as 60 percent.–

Or keep running them out of business for lack of payment by reneging on contracts, as the state is doing now.

That way, they never come back at all for a dime.

Squeeze the beast is the plan, and it’s working, because it’s taking advantage of those who will ruin themselves financially to carry out their missions.

The Superstars know that and are acting accordingly.

It’s called bad faith.

Comment by wordslinger Tuesday, Feb 21, 17 @ 1:34 pm
How many service providers and businesses would we kill with this proposed haircut?

Comment by Precinct Captain Tuesday, Feb 21, 17 @ 1:35 pm
Really Mr. Ryan? Stiff the pensioners or stiff the vendors? Those are your ideas?

The answer is going to involve more revenue. A lot more revenue. Spending cuts too, but I think the Courts have shown that stiffing pensioners isn’t possible. Stiffing vendors is, but only because there are no real conservatives left in Illinois apparently.

Comment by 47th Ward Tuesday, Feb 21, 17 @ 1:36 pm
If you only paid me enough ( or less than enough) money for my product/services to cover my cost, then why should I ever do business with the state again? People are in business to make a profit. Can’t do that by selling or providing at a loss. Plus you’ve now proven your contracts are worthless.

We’d be better off to borrow money to get us current. We’d surely pay less interest on loans than we are paying to vendors, etc.

Comment by Thoughts Matter Tuesday, Feb 21, 17 @ 1:36 pm
Making vendors take the hit is essentially to tax them unjustly. We should all have to share in the pain, and that can be done with a fair tax structure and increased revenue.

Comment by a priori Tuesday, Feb 21, 17 @ 1:37 pm
Which service vendors are you going to call in?

AT&T?

Walgreen’s?

Because you can’t call in the human services providers. They have already sold their debt obligations, essentially, to a company run by Jim Edgar.

Good luck stiffing them.

No, I think you can ease the debt load going forward by reducing the prompt payment interest on the $11 billion in unpaid bills you currently have, but that is about it.

Comment by Free Set of Steak Knives Tuesday, Feb 21, 17 @ 1:40 pm
>How many service providers and businesses would we kill with this proposed haircut?

Don’t think of it that way. Think of it as a clean slate to hand out new contracts to a lot of grateful, large corporations. Looks much better now, doesn’t it?

Comment by Earnest Tuesday, Feb 21, 17 @ 1:42 pm
Aren’t these Rauner’s “job creators” we’re talking about?

Comment by Finally Out Tuesday, Feb 21, 17 @ 1:44 pm
Not all vendors are equal, some are small businesses that barely getting buy and have maxed out their line of credit with the banks.

Then there are some vendors and contracts that you wonder how they ever won the lottery. For instance, this story http://www.sj-r.com/news/20170218/dhs-moving-into-former-barneys-furniture-store about how DHS is leasing a building for $2.4 million over 5 years, and a company out of Chicago just purchased it in January for $575,000. Sign me up to be that vendor!

Comment by Ahoy! Tuesday, Feb 21, 17 @ 1:47 pm
Why is anyone surprised that Ryan wouldn’t blink twice about stiffing vendors and people with pensions. The man is a convicted felon and that isn’t even counting what he did while Sec. of State. Man had blood on his hands before he ever became Gov.

Comment by Sparky791 Tuesday, Feb 21, 17 @ 1:51 pm
One thing’s for sure….
A whole bunch of you won’t be quoting George Ryan anymore. /s

Comment by A guy Tuesday, Feb 21, 17 @ 1:53 pm
The fiscal suggestions are preposterous. But Ryan does know about negotiating. And, if you want to reach agreement, you have to respect the boundaries of the other party. Ryan is saying, correctly, that Madigan CAN’T throw the unions under the bus. Not “won’t.” CAN’T. Until Rauner, Madigan ultimately agreed to a budget every year. Sure some were terribly out of balance, but they were enacted by the Senate and signed by the Governor. And they didn’t contain things that the Speaker simply could not agree to….those were dropped to get the deal. Negotiations 101.

Comment by formerpro Tuesday, Feb 21, 17 @ 1:53 pm
Dont give them any idea’s George

Comment by Foster brooks Tuesday, Feb 21, 17 @ 1:55 pm
Just another typically unrealistic comment by an ex-con gov. Why not get Rod’s opinion also.

Comment by NeverPoliticallyCorrect Tuesday, Feb 21, 17 @ 1:55 pm
===A whole bunch of you won’t be quoting George Ryan anymore.===

Why not? He’s right about Rauner and Madigan.

Further,

This is Ryan dealing with Rauner’s mess. How Ryan would handle it pales in comparison to Rauner allowing it to occur.

It’s no different than Rauner complaining about “decades”

Ryan is dealing with Rauner. The Rauner problems of vendors and NO budget.

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 1:59 pm
- A Guy -

Let’s also keep in mind, and not forget…

Rauner’s unbalanced and phony budget is $4-7 billion out of whack, not unlike budgets of “decades” gone by, LOL

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 2:01 pm
OK, Willy. In that case, keep quoting him. I’m not so sure many of our fellow posters here are going to have the uber forgiving heart that pounds in your chest. lol

Comment by A guy Tuesday, Feb 21, 17 @ 2:02 pm
If someone wants you dead and you want to stay alive, is an acceptable compromise to let him half-kill you?

Comment by Nero's Fiddle Tuesday, Feb 21, 17 @ 2:07 pm
It would destroy the credibility of the state. Paying vendors pennies on the dollar only works once. Surviving vendors will either price potential 40% losses into their bids, insist on cash up front, or limit their losses by only providing much smaller deliverables to limit their losses. It’s like a company that formerly built high quality products that destroys their brand equity by lowering costs and quality. Come to think of it, it’s exactly what the CEO class would do in this situation.

Comment by AC Tuesday, Feb 21, 17 @ 2:08 pm
I know in fantasyland the King can wave his wand and change whatever he wishes to change. However, in the real world if I’m into Vinny for 25K, I don’t think waiving 15K + the vig is up to me…without some kind of understanding between me and Vinny, mostly Vinny.

Comment by Slippin' Jimmy Tuesday, Feb 21, 17 @ 2:11 pm
Finally, someone who talks about welshing on the state’s obligations to someone besides retirees! Like a breath of fresh air. But why is it that none of these people suggest we welsh in our bonds? I haven’t tried to look it up, but it wouldn’t surprise me if total state and local bonded debt is in the same ballpark as the pension plan underfunding, so we should be talking about “reforming” that debt, too.

Comment by Whatever Tuesday, Feb 21, 17 @ 2:11 pm
But - A Guy -… lol

Rauner’s budget, grossly out of balance by $4-7 billion, “exactly” like “decades” of budgets Rauner’s railed on is being held up by Rauner’s inability to count to 60 in the House, as GHR points out. Should we all blame Geo Ryan for that grossly out of whack budget Rauner proposed?

Rauner is the status quo I guess.

Worrying about quoting Ryan is the least of the worries.

Rauner is everything he claims he’s not. So, there’s that.

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 2:14 pm
Georgie, I hardly knew ye.

I don’t think our bond ratings would go up if we used any means to wipe out $60 billion in pension debt, including changing the constitution. I suspect Gov. Ryan is thinking back to the old “pay as you go” days where the current year’s benefit payout (or a percentage of it) was the pension approp. That dog won’t hunt with an $8 billion annual pension payout.

Comment by Arthur Andersen Tuesday, Feb 21, 17 @ 2:18 pm
== I think that is the biggest fear by vendors today. Only it might not be as much as 60 percent. ==

Yep. Right now it’s looking like some of the vendors may end up with 0% on a lot of the contracts unless the GA rides to their rescue with a budget that explicitly includes paying for those questionable contracts.

Comment by RNUG Tuesday, Feb 21, 17 @ 2:26 pm
I’m surprised nobody focused on this paragraph from George:

“The governor is the top guy. He is the leader. House Speaker Mike Madigan is not. The governor has to make things happen. If he doesn’t get everything he wants, he’s got to figure out how much he can get. To get something done. He’s got to take the wheel. He’s got to have a plan. It’s like everything in life.”

Comment by Chicago Cynic Tuesday, Feb 21, 17 @ 2:30 pm
I have never figured out why the state, despite it many problems cannot refinance its debt at a lower rate. A few years ago and probably even now I can get a 15 year home loan at 2-3%, yet the state on its capital plan bonds is paying 5%. Surely I am not a better credit risk than the state of Illinois? My means of paying back a loan is limited, while the state has much less limited resources.

I just don’t get why a supposed finance whiz like Rauner hasn’t been out hustling for a lower rate for the state.

Comment by A Jack Tuesday, Feb 21, 17 @ 2:31 pm
=== Surely I am not a better credit risk than the state of Illinois?===

According to the ratings agencies, you are.

And don’t call me Shirley.

Comment by Rich Miller Tuesday, Feb 21, 17 @ 2:32 pm
A Jack, Is your credit rating at the level of Junk?

That’s why.

Comment by A guy Tuesday, Feb 21, 17 @ 2:35 pm
- Chicago Cynic -

I was slyly waiting in the weeds with it, lol

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 2:35 pm
Shirley.

Comment by A guy Tuesday, Feb 21, 17 @ 2:35 pm
==I was slyly waiting in the weeds with it, lol==

I’m willing to bet weed was involved.

Comment by A guy Tuesday, Feb 21, 17 @ 2:37 pm
RNUG is right and not just about pensions; Ryan’s idea of paying 60 cents on the dollar, too.

Try that and you will be in Federal court for breach of contract in so many suits and in so many places it’ll make your head spin.

Ryan is the typical Illinois pol, he views every problem as just something to be “fixed,” and the rigidity of arithmetic is really hard for him to deal with.

Comment by Anonymous Tuesday, Feb 21, 17 @ 2:41 pm
Someone maybe RNUG? OW? Please help me understand if what the former Gov is saying to be true in this angle… I have believed we passed the tipping point as well on pensions. What if the state tries to get out of pensions. The state Supreme Court says no, it’s in rhe constitution. They appeal to the federal Supreme Court and argue… we can never pay this. We can’t file bankruptcy.. stiff the pensions now including earned. I realize it sounds tin foil hat time. But a former governor just said it as well.

Comment by Echo The Bunnyman Tuesday, Feb 21, 17 @ 2:42 pm
No, it wasn’t - A Guy -

How’s that grossly unbalanced, Status Quo Rauner budget?

Maybe it’s you who needs the weed to reconcile this? lol

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 2:44 pm
I’m not a fan of Ryan, but at least Ryan is calling attention to the vendors that Rauner has been and continues to screw out of money.

You rarely read or hear about social services and the vendors Rauner has put out of business. Why?

Comment by Anonymous Tuesday, Feb 21, 17 @ 2:47 pm
- Echo -

Geo Ryan referred to the “Constitution”

He coulda been spit balling, but the constitution part brought it back around.

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 2:47 pm
Does refusing to pay your obligations get job creators excited? /s

Comment by Biscuit Head Tuesday, Feb 21, 17 @ 3:01 pm
== believed we passed the tipping point as well on pensions. ==

The only place we have passed the tipping point on is the backbone to raise taxes to pay for the pensions … and under the current rules, that first happened in 1975 and most recently at the end of 2014 when the temp increase was allowed to expire.

Comment by RNUG Tuesday, Feb 21, 17 @ 3:02 pm
- Echo The Bunnyman -,

Go read the actual Kanerva decision. That makes it clear the IL SC believes the problem is lack of political will in the GA to fix the problem, not lack of resources. Ditto with SB-1 but it’s more clearly laid out in Kanerva. It clear and well laid out. I suspect SCOTUS would reach a similar conclusion, especially because the Feds usually defer to the State when it comes to issues between the State as an employer and said employees.

Comment by RNUG Tuesday, Feb 21, 17 @ 3:08 pm
@ Echo (2:42) - The state could not get this case before the US Supreme Court. There is no federal question involved here - the matter was decided on the basis of the state constitution. The only way pensions could end up in federal court is if the state courts allowed the state to walk away from the pension obligation. Then, someone could sue in federal court under the Contracts Clause of the federal constitution. But as long as the state courts tell the state “pay up” on the basis of state law there is no federal case. The U.S. Supreme Court literally has no jurisdiction over purely state law matters.

Comment by jdcolombo Tuesday, Feb 21, 17 @ 3:13 pm
@ Echo -

The U.S. Supreme Court does not get involved in cases that turn on an interpretation of a state constitution.

“a former governor just said it as well. ”

A former governor who was not a lawyer, and therefore may not be cognizant of United States Supreme Court jurisprudence.

Comment by JoanP Tuesday, Feb 21, 17 @ 3:14 pm
==The state Supreme Court says no, it’s in rhe constitution. They appeal to the federal Supreme Court and argue… we can never pay this.==

If state law says the state cannot renege on its pension obligations, what basis could the federal courts have for saying federal law trumps state law? Bankruptcy law trumps state law, but Congress chose not to allow it to apply to states. I can’t think of any other way current federal law would allow this.

Comment by Whatever Tuesday, Feb 21, 17 @ 3:14 pm
So George has become a stoner in his gold years cool.
He should recognize the so far BibBrain has not convinced anyone that F* the unions + balanced budget. BigBrain has convinced all that he talks out of all orifices thus zero trust and/or credibility and full expectations that he will launch his attack ads right after he signs bills.

Comment by Annonin' Tuesday, Feb 21, 17 @ 3:16 pm
I asked because THIS governor proposed magic beans a few years ago to change the pension obligations. So 2 years later. High bills. No real change. I don’t see a way out that is ethical for pensions. The debt is so deep with a “fiscally ” responsible governor that recommends more unpaid spending. Makes you wonder what the real end game is.

Comment by Echo The Bunnyman Tuesday, Feb 21, 17 @ 3:23 pm
Willy, you’re arguing with yourself. At no point did I weigh in on the budget. Merely stated George Ryan was proposing solutions that our fellow posters here would find offensive…and that he wouldn’t be quoted here any more by a good number of them.

Then you went on the whole Rauner budget rant…
Weird dude, weird.

Comment by A guy Tuesday, Feb 21, 17 @ 3:33 pm
Oh, - A Guy -

I was amused with your comment about Ryan credibility…

… given the Rauner budget hypocrisy you seemingly ignore now.

It ain’t weird. It’s odd that you are concerned about Ryan’s credibility. It’s actually comical.

You keep worrying about Ryan and commenters quoting Ryan. Maybe you should be worrying about Rauner’s hypocrisy and your own defending.

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 3:36 pm
For as long as I can remember, I’ve been hearing politicians claim that we can cut our way out of fiscal problems, or by “eliminating waste and fraud.” Yeah, whatever.

However, lately, I’ve noticed more and more people seriously suggesting that states should simply walk away from debt obligations. Point out to these people that states can’t declare bankruptcy, and they say “that should be changed.”

Republicans style themselves as the party of fiscal responsibility. When did stiffing people become responsible?

Rauner hasn’t actually verbalized anything like this (though his cavalier attitude toward the state’s astronomical debt implies that he’s thought about it). I think it’s only a matter of time until Illinois, or some other state, gets a governor that campaigns on a promise of stiffing the state’s creditors.

Comment by tobias846 Tuesday, Feb 21, 17 @ 4:00 pm
Ok, maybe I am more credit worthy than the state of Illinois. But is Illinois really a bigger credit risk than AIG who borrowed money in 2015 at 3.875%. Granted the Feds bailed out AIG, but they can’t be better than Illinois with a BBB+ rating.

I still think the administration could get us a better deal than 5% if they tried.

Comment by A Jack Tuesday, Feb 21, 17 @ 4:00 pm
==It ain’t weird. It’s odd that you are concerned about Ryan’s credibility. It’s actually comical.

You keep worrying about Ryan and commenters quoting Ryan. Maybe you should be worrying about Rauner’s hypocrisy and your own defending.===

Now you’re just bogarting the good stuff dude.

I want a real budget from anywhere and everywhere.

There I said it. Now pass it back dude.

Comment by A guy Tuesday, Feb 21, 17 @ 4:09 pm
===I want a real budget from anywhere and everywhere===

Oh - A Guy -….

From GHR…

===“The governor is the top guy. He is the leader. House Speaker Mike Madigan is not. The governor has to make things happen. If he doesn’t get everything he wants, he’s got to figure out how much he can get. To get something done. He’s got to take the wheel. He’s got to have a plan. It’s like everything in life.”===

A former governor knows… the Governor is the leader here.

Hey. I used the quote. How do you like them apples?

Comment by Oswego Willy Tuesday, Feb 21, 17 @ 4:12 pm
I’d say we are never going to be able to pay the full debt back…

Ryan, like Rauner, is confusing “never going to be able to pay” with “don’t wanna pay”.

Comment by DuPage Tuesday, Feb 21, 17 @ 4:13 pm
George. Lead by example
Voluntarily give up 60% of yoour pension. Or did you already?

Comment by blue dog dem Tuesday, Feb 21, 17 @ 4:23 pm
== Makes you wonder what the real end game is. ==

If I had to guess with my conspiracy theory tin foil hat on, it is to get some state, Illinois being the guiena pig, in such debt that you can force the US Congress to allow states to take bankruptcy.

And if you achieve that is Illinois with the toughest pension protection around (plus NY and AZ), you just cracked open the state pension piggy bank nationwide to be raided by the same hucksters that destroyed companies in order to raid the private pension funds.

The state pension funds are the only pile of cash left that they haven’t been able to raid.

Comment by RNUG Tuesday, Feb 21, 17 @ 4:26 pm
== George. Lead by example
Voluntarily give up 60% of yoour pension. Or did you already? ==

I’m not sure that was totally voluntary

Comment by RNUG Tuesday, Feb 21, 17 @ 4:30 pm
How about a budget that funds the debt the state has incurred? Or is that off the table now?

Comment by CCP Hostage Tuesday, Feb 21, 17 @ 4:45 pm
I agree union-busting vs support is the core policy dispute, but the biggest political hurdle for both, is owning and defending the required tax increase. Taxpayers will mostly hate it, regardless of party. Ownership must be publicly shared, and each side must have their own “yeah buts” to mitigate the pain.

Comment by walker Tuesday, Feb 21, 17 @ 4:47 pm
RNUG. Thanks… there’s an end game where this is never paid… I am sure of that!

Comment by Echo The Bunnyman Tuesday, Feb 21, 17 @ 5:14 pm
Are Illinois tax payers still paying off the interest payments on bonds that were used to pay for Governor Ryan’s Illinois First public works program?

Comment by Enviro Tuesday, Feb 21, 17 @ 5:53 pm
It would seem that is what is going to happen. RUNG has it I think. Take this all the way to the end and states can declare bankruptcy. It then becomes like any other corporation or business we just missed the boat so now all of you have to simply give it up. If Illinois can declare that it cannot pay the retiree’s and the promise means nothing in the end. This is great the current crisis is avoided and we just start back at square one. Of course this means those old folks and those just ready to check out are simply out of luck. Laws are nothing except to the current situation right.

Comment by Cleric dcn Tuesday, Feb 21, 17 @ 5:57 pm
RNUG @ 4:26 PM
RNUG is that really you? I remember you using Detroit as the only example where pensioners got dinged and it was only to the tune of 4% or so. You thought that if the worst came to be and BK court decided Illinois pensioners would still be left relatively whole in the 10% cut range. I know its all speculation at this point, but your scaring me! My most pessimistic side tends to think the worst sometimes but that would truly have a negative cascading effect across the US. I know there are a lot of non state employees on board with it though. You can just sense some commenters glee oozing out.

Comment by Lurker Tuesday, Feb 21, 17 @ 6:37 pm
Lurker — Detroit is a nice example of how allowing locals to file bankruptcy can backfire on the 1.4% — the retirees took a hit, but the bondholders took a bigger hit. Current legislation that would allow Illinois locals to declare bankruptcy also contains a provision giving bondholders a security interest in the local’s property if bankruptcy is declared. This may not be constitutional, or it might be contrary to bankruptcy law, but it is a blatant attempt to let the 1.4% get all of theirs before the retirees get anything.

Comment by Whatever Tuesday, Feb 21, 17 @ 7:49 pm
Not certain if this is what he’s saying but this is what it looks like to me:

Illinois has a $130 bil pension debt. The annual interest payment on that debt is about $9.5 billion per year. That’s a massive interest payment that needs to be made before the principal is paid down in the annual payments.

Currently, Illinois does not cover the interest payment on the pension debt, which is why the debt keeps going up. Each year the unpaid interest gets ‘capitalized’ into the debt. It’s just like if you don’t pay the interest on your mortgage, your mortgage debt will go up.

The interest payment is based upon the average assumed investment return of about 7.25% across state pensions. Illinois assumes it will get 7.25% per year on a $130 bil investment that doesn’t exist (it’s the unfunded portion).

So how much does Illinois need to sink into pensions just to cover the interest/missed investment return? The state is missing $130 bil in investment assets and assuming a 7.25% return on those non-existing assets. So the “interest” payment is $130 bil x 7.25%, or about $9.5 bil per year.

Ryan seems to be saying change the constitution so that you can cut the pension debt in half and thus be able to finance the interest on the debt. The interest would fall to about $4.75 bil per year if the UL were cut in half.

Comment by Lucci Wednesday, Feb 22, 17 @ 5:49 am
Just voodoo math. Lets just lower the life expectancy to say, 70 years, and the problem goes away as well.

Comment by Blue dog dem Wednesday, Feb 22, 17 @ 6:39 am
Advice from the man responsible for the JRT…how many of his faithful had to settle for less on their contracts?

Comment by notbuyingit Wednesday, Feb 22, 17 @ 8:39 am
Blue dog dem:

If Ryan is attempting to point out that the interest on the pension debt is massive, he’s not engaging in voodoo math. It’s often misunderstood why the UL keeps increasing. The reason is that annual pension payments do not cover the annual interest on the pension debt.

Another way to say this is that Illinois is in a form of debt default on pensions (and has been for decades). If Illinois failed to pay the interest on a bond payment, the state would be considered in default.

Illinois consistently fails to pay the interest on pension debt. This is not officially a debt default because the law in Illinois allows the state to fail to cover the annual interest payment on the debt. The payments made are statutory, and the state sets the terms on what is a required annual payment.

However, if the state did the same thing on bonded debt, the state would be considered in default. It’s debatable whether the state will ever be able to get over the hump and pay not just the annual interest on the pension debt but also pay down the principal. I think COGFA reports show the state is scheduled to begin covering all the interest on the annual payment plus some principal in the year 2026 or something like that, but a lot can happen between now and then. Just in the most recent year the pension debt grew by $20 bil due to assumption changes, missed returns, etc making it ever harder to finance over the long run.

It’s certainly possible that the state could lose control of the ability to pay for pensions if there is a recession and/or stock market declines that blow out the UL even further, or if the tax base continues to leave Illinois at such a rapid rate, etc.

Comment by Lucci Wednesday, Feb 22, 17 @ 8:55 am
Many of the vendors nor providers could survive receiving anything less than 100% of the amounts they are due on expenditures they’ve made in good faith. Talk of that makes me even more glad that Ryan is no longer Gov.

Felons lose their pensions, don’t they?

Comment by logic not emotion Wednesday, Feb 22, 17 @ 10:49 am
Sorry. NOT many

Comment by logic not emotion Wednesday, Feb 22, 17 @ 10:50 am