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* Greg Hinz…
Each Illinois taxpayer is on the hook for $45,500 in unfunded liabilities—more than most residents earn after taxes in an entire year.
That’s the bottom line of yet another report that whacks Illinois’ pension-impacted finances but presents the numbers in a way the average taxpayer may more easily grasp.
Today’s report from a division of Truth in Accounting—a Chicago-based, bipartisan think tank whose board includes DePaul University researcher Bill Obershain, Democratic strategist Rick Jasculca, conservative activist Dan Proft and financial analyst Terry Savage—categorizes the Land of Lincoln as a “sinkhole state” and finds it in the third-worst shape of any of the 50 states.
The group came up with its figures by dividing total net state debt (liabilities minus available assets) by 4.1 million, the combined number of individual and company tax returns filed in 2015. Illinois’ per-taxpayer debt of $45,500 is exceeded only by New Jersey’s $59,400 and Connecticut’s $49,000—and well above that in some surrounding Midwest states such as Ohio at $5,000, Wisconsin at $4,600 and Indiana at $2,400.
The full report is here.
posted by Rich Miller
Monday, Sep 19, 16 @ 11:36 am
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If excessive debt is bad, presumably that includes the gargantuan backlog of overdue State bills.
Comment by anon Monday, Sep 19, 16 @ 11:39 am
–Each Illinois taxpayer is on the hook for $45,500 in unfunded liabilities–
This makes it sound like everyone is getting a bill for this. That’s not true. So stating it with the built in fallacy is just simply playing the Rauner game of Perfidy.
Comment by Honeybear Monday, Sep 19, 16 @ 11:43 am
–That’s the bottom line of yet another report that whacks Illinois’ pension-impacted finances but presents the numbers in a way the average taxpayer may more easily grasp.–
Because they’re not brainiacs likes Proft and Savage.
I suspect anyone with a mortgage understands the concept of unfunded liability.
Comment by Anonymous Monday, Sep 19, 16 @ 11:43 am
If Dan Proft is involved in this, then I disregard any findings/conclusions that they come up with. The man is Toxic!!
Comment by Big Joe Monday, Sep 19, 16 @ 11:46 am
yeah we are almost leadin’ here too. BigBrain will be so proud.
Comment by Annonin' Monday, Sep 19, 16 @ 11:48 am
What do they mean by “pension-impacted finances?” The pension is only a problem because for decades upon decades, the pension was underfunded so that taxpayers could obtain the benefit of freed up funds. Had the state merely utilized the same funding strategies as other similar pensions, there wouldn’t be a problem.
Comment by Delimma Monday, Sep 19, 16 @ 11:53 am
What is an unfunded liability:
My understanding an unfunded liability is total of future costs. With that do you and I consider ourselves to have an unfunded liability for the total of out outstanding mortgage balance? No
As long as we can pay that bill monthly and have a 6 month reserve that is considered sound.
If you and I had to meet the standards of a pension system we would have to have a fund equal to the total amount of our mortgage balance. That is just crazy
The state retirement system MADE Money last year. That means retirement premiums and interest earned was more than cost of benefits.
THERE IS NOT A BENEFITS CRISIS THERE IS A CRISIS OF PENSION FUNDS BEING REQUIRED TO MEET UNREALISTIC STANDARDS.
Guys wall street want more money is all it is.
There is no sky is falling tomorrow issue here
Comment by Publius Monday, Sep 19, 16 @ 11:53 am
The one thing I still can’t understand about our state pension system is why the 3% automatic annual increase is called a cost of living increase. It is totally unconnected to the cost of living and should be called an automatic pension increase. I am not aware of any other pension system that provides such a sweet deal.
Comment by striketoo Monday, Sep 19, 16 @ 11:56 am
The difference between this debt and a mortgage is that it is not backed up with real estate or other securities. It is backed up only with the promise of taxpayers agreeing (or not) to pay it. But, the tax payers have made no such agreement. They are free to leave the state.
Comment by Keyser Soze Monday, Sep 19, 16 @ 11:58 am
- The one thing I still can’t understand about our state pension system is why the 3% automatic annual increase is called a cost of living increase. It is totally unconnected to the cost of living and should be called an automatic pension increase. I am not aware of any other pension system that provides such a sweet deal. -
It is correctly described as the Automatic Annual Increase (AAI) in the SURS Article
Comment by Retired SURS Employee Monday, Sep 19, 16 @ 12:01 pm
Publius just defined why comments by the uninformed should be disregarded. Pensions are heads I win, tails you lose.
Comment by Really Monday, Sep 19, 16 @ 12:02 pm
Honeybear, just curious, what was your major in college?
This state is not coming back. Recessions come along every 8-10-12 years and they will provide the 1-2 punch this state doesn’t need. They can’t raise taxes enough to help without causing all sorts of devastation.
More and more people will get SNAP and public assistance. Dems in Chicago will keep raising all kinds of taxes, stifling growth!
Comment by Piece of Work Monday, Sep 19, 16 @ 12:07 pm
== The one thing I still can’t understand about our state pension system is why the 3% automatic annual increase is called a cost of living increase. It is totally unconnected to the cost of living and should be called an automatic pension increase. I am not aware of any other pension system that provides such a sweet deal. ==
Only people who don’t understand it or those who are being linguistically sloppy call it a COLA.
The flat 3% came into being because the State wanted an easily predictable / budget-able number as opposed to a variable like the Federal CPI-U or one of the other measures of inflation.
As far as being a sweet deal, it appears that way today in 0%-1% inflation. It wasn’t so sweet in the days of 8%-13% inflation (late 70’s, early 80’s). If you average it over the period the Feds have kept records (1913 to current), it is right around 3% … the same number the State planners decided to use for the AAI. It has been, mostly, equal or a bit lower since 1992.
Source: http://www.bls.gov/cpi/cpid1608.pdf
see Table 24, pages 68 & 70
Comment by RNUG Monday, Sep 19, 16 @ 12:16 pm
=== more and more people will get SNAP===
Last year the drop in the nation’s poverty rate was the biggest since 1968, per the Census Bureau.
Comment by anon Monday, Sep 19, 16 @ 12:25 pm
As usual, RNUG correctly describes the AAI. I’d only add that, at least with SURS, a portion of the employee’s contribution (0.5%) is specifically allocated toward paying for the AAI.
Comment by Retired SURS Employee Monday, Sep 19, 16 @ 12:30 pm
“This state is not coming back.” Pretty bold statement, POW. So what does our armageddon-ish future look like to you if it is not coming back? Provide some specifics, like is there a bidding war for our smoldering remains among Wisconsin and Indiana? Is former Mayor Daley retained to oversee the distribution of any remaining assets of value to whichever private entity hires the greatest number of his family and close associates? Does President Trump give us away us a gift to his new BFF Vladimir Putin?
Describe the future of Illinois as you see it.
Comment by Original Rambler Monday, Sep 19, 16 @ 12:31 pm
Do they include the tollway as an asset?It is worth billions.The Ontario funds are buying infrasructure. Why don’t we put it in TRS and wipe 20 billion in pension debts….as well as keeping it from being sold.
Comment by illinois manufacturer Monday, Sep 19, 16 @ 12:32 pm
What a dumb “statistic.”
Hinz says the debt cited here is mostly unfunded liabilities in public pension systems. But dividing those liabilities by the number of income tax returns filed in one year makes zero sense, since that debt doesn’t have to be paid down only by state income taxes, and it will be paid out over decades, not in one year.
Here’s a more valid way to look at it. Illinois now has more than 280,000 millionaire households (http://www.chicagobusiness.com/article/20160521/ISSUE01/160529986/were-rich-illinois-has-more-millionaires-than-ever). If these millionaires paid the state an extra 2 percent per year on a million bucks, the debt would be retired completely in just three decades.
Comment by Reality Check Monday, Sep 19, 16 @ 12:35 pm
Ah, the joys of living in one of the deepest blue states! Keep that Madigan and Cullerton love alive! Continue to boo and hiss at the other side. Because…it works so well!
Comment by Beeker Monday, Sep 19, 16 @ 12:36 pm
Beeker:
The victim support group is down the hall. Thanks.
Comment by Demoralized Monday, Sep 19, 16 @ 12:39 pm
anon @ 12:25. SNAP benefits have increased between 40%-50% during the 8 years of Obama. Are you trying to peddle the “Obama has cut the deficit” type meme?
Rambler, how do you see Illinois in 10-20 years? How will they possibly recover?
Comment by Piece of Work Monday, Sep 19, 16 @ 12:39 pm
Ah, we all got our fix of Demo’s “victim” line. Our day is complete.
Comment by Piece of Work Monday, Sep 19, 16 @ 12:40 pm
Piece:
I wouldn’t have to do if if people didn’t act like it. Cut out the victimhood and it won’t be necessary.
Comment by Demoralized Monday, Sep 19, 16 @ 12:48 pm
So glad that I moved myself, my family, and my time, talents, treasure, and taxes to another state — one that is deep red but very fiscally sound.
Comment by GlimmerGirl Monday, Sep 19, 16 @ 12:51 pm
Demo, you should really bring more to the table.
So, how does Illinois come back? Curious about your thoughts.
Comment by Piece of Work Monday, Sep 19, 16 @ 12:54 pm
=== - Demoralized - Monday, Sep 19, 16 @ 12:48 pm:
I wouldn’t have to do if if people didn’t act like it. ===
You sound like the victim right here.
Comment by Cadillac Monday, Sep 19, 16 @ 12:56 pm
So $1,140 a year for 40 years. That is about 2% of a median income. That is why a 3% or even 3.75% tax rate was never sufficient. If only we could have kept the 5% rate…the past 20 months will make it more likely 5.75%. Thanks, Rauner!
Comment by thechampaignlife Monday, Sep 19, 16 @ 12:59 pm
If I’m not mistaken, this body of work also used a “risk-free” rate in discounting future liabilities, e.g, around 3%. I may be wrong (feel free to do so) but when I read about this over the weekend I thought that was a feature.
Oh, and good luck getting a State-level CAFR in less than 90 days.
Comment by Arthur Andersen Monday, Sep 19, 16 @ 12:59 pm
- really-
Please inform, what is the unfunded liability?
Comment by Publius Monday, Sep 19, 16 @ 1:00 pm
@Piece of Work, instead of repeatedly harassing another commenter, why don’t you engage with my rational suggestion at 12:35 — merely ask another 2 percent per year of the state’s 280,000 millionaire households.
And remember, millionaire tax flight is a myth that has been conclusively debunked (http://taxprof.typepad.com/taxprof_blog/2016/05/study-shatters-myth-that-millionaires-migrate-to-low-tax-states.html ).
Comment by Reality Check Monday, Sep 19, 16 @ 1:01 pm
Ah, the old answer a question with a question routine.
I’m not the Governor or any sort of elected official. But there are actuarially workable solutions which many posters smarter than me have set forth frequently and in more detail. They usually involve changes in benefits - WAIT, that’s been done already and a mix of increased revenue as well as reduced spending. Couple that with a recovering economy, lengthened ramp, and the inevitable reduction of Tier 1 participants and in 10-20 years this will be well in our rear view mirror.
That’s my version of recovery. Now, on to our version of doom and gloom. Let’s not forget your exact word, “This state is not coming back.” So what will this geographical part of middle America be in 10-20 years? And if you are a resident and truly believe this, what are you still doing here?
Comment by Original Rambler Monday, Sep 19, 16 @ 1:01 pm
unfunded liability
The amount, at any given time, by which future payment obligations exceed the present value of funds available to pay them. For example, a pension plan’s payment obligations, including all income, death and termination benefits owed, are compared to the plan’s present investment experience, and if the total plan obligations exceed the projected plan assets at any point in time, the plan has an unfunded liability.
Comment by Publius Monday, Sep 19, 16 @ 1:02 pm
Pensions are people too!
Comment by Almost the Weekend Monday, Sep 19, 16 @ 1:05 pm
Two very simple things should be done immediately. Eliminate the pension protection clause in the horrendous Illinois Constitution and have all teacher pensions be the obligation of the school districts that created them while allowing municipal bankruptcy.
Comment by Ron Monday, Sep 19, 16 @ 1:08 pm
- Ron -
“Pesky Constitution!”
Comment by Oswego Willy Monday, Sep 19, 16 @ 1:11 pm
@Ron, better add “Eliminate the contract clause in the horrendous U.S. Constitution” if you expect your brilliant legal strategy to succeed.
Comment by Reality Check Monday, Sep 19, 16 @ 1:14 pm
Reality, did you say the problem would be solved in 30 years if they just taxed millionaires more?
Does anyone mention the looming nearly $20 TRILLION in debt? That real estate taxes, sales taxes, water/sewer taxes,etc. keep going up? And, what happens when the next recession hits?
Comment by Anonymous Monday, Sep 19, 16 @ 1:16 pm
Illinois has $20 trillion in debt? LOL. Show your math.
Comment by Reality Check Monday, Sep 19, 16 @ 1:17 pm
=I wouldn’t have to do if if people didn’t act like it. Cut out the victimhood and it won’t be necessary.=
That’s all most posts here are. Most are coming from the TA agenda’s victims. You only feel the need to call out those your perceive to vote different than yourself. Knock it off already.
Comment by Robert the 1st Monday, Sep 19, 16 @ 1:18 pm
Piece - Demoralized often gets filtered when he tries to reply to me. He has some looney personal vendetta.
Comment by Beeker Monday, Sep 19, 16 @ 1:22 pm
Why wouldn’t we want future generations of Illinoisans to be freed from this grotesque pension “right”. This will eliminate the ability of future fools in the state from overpromising. I didn’t say it would eliminate current t obligations, but why risk the future to the inevitable idiots in state government?
Comment by Ron Monday, Sep 19, 16 @ 1:33 pm
Thankfully, like a home purchase, it isn’t necessary to pay the entire balance today. Presuming a 3% interest cost, this amounts to annual payments of around $2,320 per taxpayer, definitely not a small amount, but not an impossible sum. It sounds to me like we need to bond the money while raising taxes and holding the line on spending. Obviously, the longer we delay, the more difficult solving this issue will become. Unfortunately, I suspect we will continue waiting until our fiscal crisis becomes impossible to solve.
Comment by AC Monday, Sep 19, 16 @ 1:35 pm
Assuming the methodology is consistent across states, the surprising number is the difference in amounts across the States. Indiana at $2400 and Ohio at $5000 are so much smaller.
I agree with the commentators who say that it is not all due at once and that people can avoid it by leaving the State. Still, whoever is left in the State has to pay enough in taxes to eventually knock that number down.
Uncertainty about who will pay it must contribute to businesses deciding to not come into the State. They know somebody will pay it, and they fear it might be them.
Comment by Last Bull Moose Monday, Sep 19, 16 @ 1:36 pm
I should add that my numbers are based on 100% funding and a 30 year amortization.
Comment by AC Monday, Sep 19, 16 @ 1:36 pm
We have a big fiscal challenge meeting our contractual and expected obligations.
That said, this specific group makes accounting choices, not used in any but a couple of states, neither reqired by law nor any government accounting association or board — designed to make the situation look as bad as possible. I admire their idealism, but not their usefulness.
Comment by walker Monday, Sep 19, 16 @ 1:40 pm
Why is this news??? How many times to we have to watch the same bad movie??? You spend 35 years massively underfunding your pension systems and holly smokes, you owe a bunch of money? Lucky we don’t have to pay it back all at once. But pay it back we must. As long as we want to tout “bi-partisan think tank” how about bi-partisan UNANIMOUS Supreme Court???
Comment by formerpro Monday, Sep 19, 16 @ 1:45 pm
$45000 with no timeline is a deliberate misrepresentation. $1000 a year for 45 years would be more truthful.
Comment by DuPage Monday, Sep 19, 16 @ 1:46 pm
AC, did you calculate tax liability per person or per taxpayer? There is a huge difference.
Comment by Thunder Fred Monday, Sep 19, 16 @ 1:49 pm
And how will taxpayers react when the bill comes due for higher taxes? Of course, they will move and let those who can not pay the bill!
Comment by Anonymous Monday, Sep 19, 16 @ 2:12 pm
==Had the state merely utilized the same funding strategies as other similar pensions, there wouldn’t be a problem.==
Then there would have been less money to fund operating costs, such as salaries and salary increases, insurance premiums, promotions, etc. Any one of these would have meant less take home pay over a career. Some would have led to smaller pensions.
There are 2 sides to the problem.
Comment by City Zen Monday, Sep 19, 16 @ 2:14 pm
Why not institute a wage freeze on all public workers? Liabilities can’t grow from wage inflation then.
Comment by Ron Monday, Sep 19, 16 @ 2:17 pm
=== by 4.1 million, the combined number of individual and company tax returns filed in 2015. ===
Fun with numbers!
Respectfully, my wife and I are both “taxpayers”, even though we file taxes jointly, not 1/2 a taxpayer each.
Respectfully, your report is malarkey.
And a strange waste of time, since there is a nonprofit dedicated to tracking per capita debt for the US and every state in real time:
http://www.usdebtclock.org/state-debt-clocks/state-of-illinois-debt-clock.html
It says the debt per citizen is $11,578.
Malarkey, Respectfully.
Comment by Juvenal Monday, Sep 19, 16 @ 2:22 pm
I based it in their “per taxpayer” number, per person would be much lower. All of these numbers have issues, some of them may be exaggerated, but I doubt they’re that far off. We could target 80% rather than 100% funding and we could increase the repayment period (though more than 30 years doesn’t help much), but the bottom line is we need a plan as a state.
Comment by AC Monday, Sep 19, 16 @ 2:26 pm
I’m curious has anybody compared ill. Welfare benefits to other states . You see the pension money went somewhere . I guess all the free stuff isn’t really free is it
Comment by Reality Monday, Sep 19, 16 @ 2:27 pm
==Why not institute a wage freeze on all public workers? Liabilities can’t grow from wage inflation then.==
I’d bet Rauner could avoid potential labor unrest if he put that on the table, combined with allowing AFSCME to keep their contract language and health insurance, but I doubt that wouldn’t be enough for him. Rauner seems to want it all.
Comment by AC Monday, Sep 19, 16 @ 2:32 pm
Piece of Work, you are a piece of work. It’s called an ad hominem logical fallacy and I’m not taking the bait. My argument is valid. Attacking me and my Northwestern University degree isn’t going to win the point. Sorry
Did you catch it? What you didn’t catch the logical fallacy I just used? Come on, appeal to authority! The fact that I went to Northwestern University has nothing to do with the argument.
Comment by Honeybear Monday, Sep 19, 16 @ 2:33 pm
—Why not institute a wage freeze on all public workers? Liabilities can’t grow from wage inflation then.—
Ummmmm…..wages are frozen.
Comment by Honeybear Monday, Sep 19, 16 @ 2:35 pm
Is all money due to pensioners payable tomorrow? If so, funds are short. As said above by someone, it’s like saying you have to have 90% of the cost of your home on hand in order to get a mortgage! If that were the case, everyone would live on the streets!
And besides, the AAI is bought and paid for by every worker. It’s no gift. Neither are pensions. Bought and paid for by employees. ONly the state stepped out on that contractual obligation, not workers.
Comment by Anonymous Monday, Sep 19, 16 @ 2:36 pm
==Ummmmm…..wages are frozen.==
An important point. Wage costs drive pension costs. All the Rauner administration had to do to keep salary costs fixed was to keep negotiating rather than run away from the bargaining table. With overtime costs, the state could save even money by hiring more tier 2 employees, which would help the pension calculations as well. But, that wouldn’t help expand privatization, which appears to be a lot more important to Rauner than saving money.
Comment by AC Monday, Sep 19, 16 @ 2:44 pm
Reality Check - you fail at basic math as well as English. Bring a millionaire is quite different then having a million dollar income. Do you really think Illinois has 280 thousand tax payers with a million dollar per annum income. If that were the case the State would have the biggest surplus of any State in the Country. Geez
Comment by Sue Monday, Sep 19, 16 @ 3:17 pm
HoneyBear——Impressive, Northwestern is an outstanding university. What was your major?
Comment by Anonymous Monday, Sep 19, 16 @ 3:24 pm
Anonymous @ 3:24 was me
Comment by Piece of Work Monday, Sep 19, 16 @ 3:26 pm
==And besides, the AAI is bought and paid for by every worker. It’s no gift.==
Changing the formula from simple to compounded interest was indeed a gift.
Comment by City Zen Monday, Sep 19, 16 @ 3:34 pm
Slightly off-topic, but an interesting way of framing the debt in comparison to assets rather than income. Doesn’t make catching up Illinois’ pension debt any easier though.
https://np.reddit.com/r/dataisbeautiful/comments/538g77/all_of_the_worlds_physical_currency_gold_silver/d7radqq?context=3
Comment by Earnest Monday, Sep 19, 16 @ 3:42 pm
@Sue, I didn’t say anything about income. You wrongly assumed that. So I guess it’s you that fails.
Comment by Reality Check Monday, Sep 19, 16 @ 3:48 pm
What was yours and where did you matriculate?
Comment by Honeybear Monday, Sep 19, 16 @ 3:51 pm
UIUC Business
Comment by Piece of Work Monday, Sep 19, 16 @ 4:10 pm
City Zen
Quit whatever it is you’re doing for employment and jump on the road to rich! Right now! You have no one to blame if you don’t!
Comment by Anonymous Monday, Sep 19, 16 @ 4:19 pm
Reality - so what is it the state is going to tax 2 percent of. Go back and read your post
Comment by Sue Monday, Sep 19, 16 @ 4:20 pm
==Quit whatever it is you’re doing for employment and jump on the road to rich! Right now!==
And become a Tier 2 employee paying for the pensions of my Tier 1 co-workers?! No thank you.
Comment by City Zen Monday, Sep 19, 16 @ 4:23 pm
Remember when Republicans believed in the rule of law?
Comment by Liberty Monday, Sep 19, 16 @ 4:31 pm
== And become a Tier 2 employee paying for the pensions of my Tier 1 co-workers?! ==
Mostly, you would be paying entirely for your pension with zero state contributions. If the pension analysts are right, you might also offset a few percentage points of the Tier 1 employees current pension costs … but that is not for certain, especially if the State has to raise the salary cap on Tier 2.
Comment by RNUG Monday, Sep 19, 16 @ 4:34 pm
== Remember when Republicans believed in the rule of law? ==
And honoring contracts?
Comment by RNUG Monday, Sep 19, 16 @ 4:35 pm
RNUG- you are kidding suggesting Dems are the folks who believe in the rule of law aren’t you. Your candidate for president excluded right?
Comment by Sue Monday, Sep 19, 16 @ 4:38 pm
Sue, I believe both parties should follow the law. However, as an adult, we know they don’t … and are often left to choose between the lesser of the two.
Here’s another rethorical question: would you rather vote for someone who bought political influence or someone who sold it? That’s pretty much what the national race could be boiled down to this year …
Comment by RNUG Monday, Sep 19, 16 @ 5:06 pm
RNUG- you are 100 percent on that score. God save us from this lunacy
Comment by Sue Monday, Sep 19, 16 @ 5:10 pm
According to people like you CityZen, any/every public employee is in the same echelon as our govenor. Tier I, Tier II—–all overpaid, right?
Comment by Anonymous Monday, Sep 19, 16 @ 6:10 pm
The correct way to look at the debt, as stated somewhere above, is similar to a mortgage payment, with a long-term outlook on payoff. For a $45K, 30 year mortgage at 5%, one would owe what per year - maybe $2400? Note that is in addition to the break-even tax rate required to keep the state from incurring even more debt, which ain’t exactly low to begin with. The questions are, why should new residents be forced to pay for debt they did not incur, and why would current residents choose to stay in the state, unless they had a good enough gig that “it was worth staying”? My guess is that those who can leave, and do not have the “it’s worth it” mindset, will leave, and the same calculus will be used by potential new residents. If you’re offered a good enough job in Illinois, you’ll come in spite of the additional taxes.
Comment by Tom K. Monday, Sep 19, 16 @ 9:30 pm