The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy

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RxCowboy

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From WSJ:

MARKETS
The Pension Hole for U.S. Cities and States Is the Size of Japan’s Economy
Many retirement funds could face insolvency unless governments increase taxes, divert funds or persuade workers to relinquish money they are owed

By Sarah Krouse
July 30, 2018 1:41 p.m. ET

For the past century, a public pension was an ironclad promise. Whatever else happened, retired policemen and firefighters and teachers would be paid.

That is no longer the case.

Many cities and states can no longer afford the unsustainable retirement promises made to millions of public workers over many years. By one estimate they are short $5 trillion, an amount that is roughly equal to the output of the world’s third-largest economy.

Certain pension funds face the prospect of insolvency unless governments increase taxes, divert funds or persuade workers to relinquish money they are owed. It is increasingly likely that retirees, as well as new workers, will be forced to take deeper benefit cuts.

In Kentucky, a major pension plan covering state employees had about 16% of what it needs to fulfill earlier promises, according to the Public Plans Database, which tracks state and local pension funds, based on 2017 fiscal year figures. A fund covering Chicago municipal employees had less than 30% of what it needed in that fiscal year, according to the same database. New Jersey’s pension system for state workers is so underfunded it could run out of money in 12 years, according to a Pew Charitable Trusts study.

When the math no longer works the result is Central Falls, R.I., a city of 19,359. Today, retired police and firefighters are wrestling with the consequences of agreeing to cut their monthly pension checks by as much as 55% when the town was working to escape insolvency. The fiscal situation of the city, which filed for bankruptcy in 2011, has improved, but the retirees aren’t getting their full pensions back.

“It’s not only a financial thing,” said 73-year-old former Central Falls firefighter Paul Grenon, who retired from the department after a falling wall punctured his lung, broke his back and five ribs, and left him unable to climb ladders. “It really gets you sick mentally and physically to go through something like this. It’s a betrayal, as far as I’m concerned.”

Uncertainty over public pensions is one reason some Americans are reaching retirement age on shaky financial ground. For this group, median incomes, including Social Security and retirement fund receipts, haven’t risen in years. They have high average debt, and are often using savings for their children’s educations and to care for their elderly parents.

The public pension arose from the aftermath of the U.S. Civil War. New York was the first city in the U.S. with a pension fund for injured police officers in 1857 and then for firefighters in 1866. The concept of a public pension plan for government workers became widespread in the early decades of the 20th century. The understanding was employees would accept relatively lower pay in exchange for richer, guaranteed benefits once they retired.

When times were flush, politicians made overly generous promises. Public-employee unions made unrealistic demands. High-profile municipal employees, such as coaches at public universities, have drawn fire for what some consider too-rich retirement benefits, while some first responders scored rich early retirement and disability arrangements.

Extended lifespans caused costs to soar, as did increasingly expensive medical care, which unions put at the center of contract negotiations, among other benefits.

A technology-led stock market boom in the late 1990s produced a brief period of surpluses in pensions, according to figures from Pew, before deficits began to creep higher in the mid 2000s. Deficits accelerated following the 2008 financial crisis, which caused steep losses for many funds just as large numbers of baby boomers began to retire.

State and local pensions lost roughly $35 billion in assets between 2008 and 2009, according to Pew. Liabilities, meanwhile, ballooned by more than $100 billion a year, widening the difference between the amount owed to retirees and assets on hand. Not even a nine-year bull market in stocks could close that gap.

Officials, taxpayers and public-sector employees are increasingly at odds as they figure out what comes next. The board overseeing Puerto Rico, which filed for the largest-ever U.S. municipal bankruptcy in 2017, this year certified an average 10% cut in certain retiree pensions as part of a plan to restore the island to solvency. The governor has vowed not to implement it, a face-off that will likely end in court.

In the Bluegrass State, a judge in June ruled that a reduction in new worker benefits championed by Kentucky’s governor was unconstitutional because of the way lawmakers passed it. The state’s attorney general opposed the cuts. The case could end up at the state Supreme Court.

In California, several cases before the state’s Supreme Court are testing an influential 1955 rule that stipulates benefits for public employees can’t be cut. Gov. Jerry Brown is predicting pension reductions in the next recession if that rule is loosened. A change in that law might persuade other states to reach for deeper benefit reductions.

State and local pension plans in the U.S. now have less than three- quarters of the money they need to meet their promised payouts, their lowest level since at least 2001, according to Public Plans Database figures weighted by plan size. In dollar terms the hole for state and local pensions is now $5 trillion, according to Moody’s Investors Service. Another estimate of unfunded state pension liabilities, from Pew, is $1.4 trillion.

The prospect of lower benefits is particularly daunting for pensioners in their 60s. Those older are likely to die before a large reckoning, while those younger have years left in their careers to make new plans. But many in their 60s have spent four decades assuming a financial promise that is no longer guaranteed.

There are few easy solutions. Cities and states can either raise taxes, cut services or become more aggressive about reducing benefits to retirees. For many years governments were unwilling to take these steps because they weren’t politically palatable, although public appetite to cut public-employee benefits is emerging, in states including Wisconsin. Many governments opted to change benefits for new employees, which in some cases didn’t fully alleviate funding woes.

In San Jose, Calif., voters approved cuts to police pensions in 2012 only to roll back those changes after hundreds of officers quit and the crime rate increased. The measures were revised, with savings coming in part through changes to retiree health care.

San Jose Mayor Sam Liccardo said the bulk of the police departures took place before the pension revamp as a result of earlier hiring freezes, layoffs and pay cuts. He doesn’t see the pension changes as a factor in the crime rate.

San Jose has taken “our medicine perhaps earlier than others have,” said Mr. Liccardo. “This is medicine that hundreds of cities and many states are going to have to take,” he added.

Retirees in other cash-strapped states said they expect to lose some of what they have been promised. “It may sustain itself before I die,” Len Shepard, 68, a retired teacher in Pennsylvania said of the pension system in his state. “But I don’t see how it can continue to do so.”

Central Falls, which sits 7 miles north of Rhode Island’s capital, is one of several former industrial towns that speckle the Blackstone River Valley.

It provided for public workers under a number of pension plans. Under one, firefighters hired after July 1972 could retire after 20 years of service, essentially in early middle age, receiving half of their final base salary. They could earn another 2% a year for up to five additional years of work and 1% a year after that, up to 65% of their end salary if they retired after 30 years.

The city’s required contribution to its police and fire pensions was about $4 million in fiscal year 2011, the last fiscal year before its bankruptcy, or 20% of the total, said Finance Director Leonard Morganis.

Central Falls didn’t pay that year, or in either of the previous two, given the severity of the city’s economic woes. Rhode Island officials then took the rare step of passing legislation that put bondholders ahead of other creditors and pensioners in the event of a municipal bankruptcy.

After the 2011 bankruptcy, an event that received national attention amid predictions of widespread municipal failures, retirees agreed to 55% cuts because they feared facing even deeper cuts later.

The concessions helped Central Falls emerge from bankruptcy in 2012 and create a “rainy day fund” that now holds $2 million. The town hired a grant writer to help secure money for a new firetruck with smaller wheels custom-made for the town’s narrow streets. The truck is emblazoned with an image of Yosemite Sam dressed as a firefighter that reads “The Wild Mile,” the city’s nickname.

Even though the town is on a better fiscal footing, and state contributions blunted the full impact of the cuts, retired workers are still grappling with how their lives were altered in matters big and small. Two men lost their homes to foreclosure after falling behind on their mortgages. Others had problems paying medical bills as they fought terminal illnesses.

Mr. Grenon, the firefighter who retired after he was injured, says the pension reduction left him without enough money each month to cover a $300 prescription lung medication. He has medical coverage but said the medication is beyond what is covered.

George Aissis, a retired Central Falls firefighter, says he has so little left in his checking account he has to buy groceries when they are on sale and use as little power or gas as possible.

The pension settlement cut his income by $1,200 a month to about $2,600, including an additional state contribution. On one recent Wednesday, he said there was $6.01 in his checking account.

“I never used coupons before, but I know about coupons now,” Mr. Aissis said. “You gotta cut back on things when the money is not there.”

Central Falls Mayor James Diossa, in an interview, called the 2011 pension cuts “unfortunate” but said they did alleviate long-term budget pressures for the city. “These aren’t big pensions, but a lot of these folks built their lives around it,” he said. “To see them get cut was devastating.”

Under the changes, many current workers have to work longer than they thought when they signed up and some will get a lower percentage of their final salary than they would have under the old plan.

Some retirees whose income was cut are now arguing their benefits should be restored to prebankruptcy levels.

The person in charge of that effort, 52-year-old former firefighter Don Cardin, acknowledged he and his colleagues have no legal recourse to restore lost benefits since they signed them away in the settlement.

One of his bleaker arguments contends that firefighters tend to have shorter lifespans because of smoke inhalation and other workplace hazards. That means the town, which also covers some health benefits, is unlikely to have to pay the added benefits for more than a decade.

Despite the city’s surplus, the mayor said Central Falls is unlikely to restore the pensions.

What happened in Central Falls is “certainly not going to be a one-off,” said Robert Flanders, who acted as the city’s state-appointed receiver. “Because other cities and towns, not just in Rhode Island but across the country, are still in bad shape.”

Write to Sarah Krouse at sarah.krouse@wsj.com
 

CaliforniaCowboy

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sadly, what articles like this fail to mention is that many of those workers contributed to those plans, so much of it is actually their money. The pension program was the only retirement opportunity that was offered, no 401k matching or other alternatives... it was take it or leave it. Participation was mandatory, not optional.

I'm not a fan of pension programs, per se, but too often those writing articles like this one are from a tax payer perspective, and do not adequately provide coverage of the employee side of the equation.

granted, many of the plans are ridiculous with 100% of pay at retirement, but those employees likely would have made different choices if the options available to them had been different.
 
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sadly, what articles like this fail to mention is that many of those workers contributed to those plans, so much of it is actually their money. The pension program was the only retirement opportunity that was offered, no 401k matching or other alternatives... it was take it or leave it. Participation was mandatory, not optional.

I'm not a fan of pension programs, per se, but too often those writing articles like this one are from a tax payer perspective, and do not adequately provide coverage of the employee side of the equation.

granted, many of the plans are ridiculous with 100% of pay at retirement, but those employees likely would have made different choices if the options available to them had been different.
This is probably my biggest concern as a American is this long train of baby boomers retiring daily with heavy reliance on social programs such as medicare and social security.

Pension plans died with the advent of the 401k and whoever assumed that a vast majority of people would take a responsible approach to their own retirement was just a plain dumbass.

We are going to be crushed by this system we have set up.

Honestly (and i realize that this makes me a a little bit of a monster), I don't want to pay another dime to social security as it is not going to be there when I hit 75 (it will be moved back to 75 by the time I retire or won't exist at all).
 

RxCowboy

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sadly, what articles like this fail to mention is that many of those workers contributed to those plans, so much of it is actually their money. The pension program was the only retirement opportunity that was offered, no 401k matching or other alternatives... it was take it or leave it. Participation was mandatory, not optional.

I'm not a fan of pension programs, per se, but too often those writing articles like this one are from a tax payer perspective, and do not adequately provide coverage of the employee side of the equation.

granted, many of the plans are ridiculous with 100% of pay at retirement, but those employees likely would have made different choices if the options available to them had been different.
If you contributed to it, it is an apple. They are talking about oranges.
 

CaliforniaCowboy

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If you contributed to it, it is an apple. They are talking about oranges.
I don't believe that is true. I am not aware of a public pension plan that employees do not contribute (although there may be some).

For many public pension plans, they are "defined benefit", which is where much of the problem occurs.

Spiking and changes in many plans have already occurred, but it takes time for those changes to affect the overall liability. Many of the plans that made changes are expected to level out over time, but at the moment the are being mischaracterized with articles like this one. (don't get me wrong it's still a huge problem).

It also does not help for them to make alarmist statements like the shortfall is the size of Japan's economy, and not emphasize that the payments will be over a long period of time, not in one year's "economy", and likely those cities and states economies combined are close in size to the economy of Japan. (I'm guessing, of course, but the fact that it was ignored is not great journalism, IMO)

National Association of State Retirement Administrators
Unlike in the private sector, nearly all employees of state and local government are required to share in the cost of their retirement benefit. Employee contributions typically are set as a percentage of salary by statute or by the retirement board.
https://www.nasra.org/contributionsbrief
 
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I don't believe that is true. I am not aware of a public pension plan that employees do not contribute (although there may be some).

For many public pension plans, they are "defined benefit", which is where much of the problem occurs.

Spiking and changes in many plans have already occurred, but it takes time for those changes to affect the overall liability. Many of the plans that made changes are expected to level out over time, but at the moment the are being mischaracterized with articles like this one. (don't get me wrong it's still a huge problem).

It also does not help for them to make alarmist statements like the shortfall is the size of Japan's economy, and not emphasize that the payments will be over a long period of time, not in one year's "economy", and likely those cities and states economies combined are close in size to the economy of Japan. (I'm guessing, of course, but the fact that it was ignored is not great journalism, IMO)

National Association of State Retirement Administrators
Unlike in the private sector, nearly all employees of state and local government are required to share in the cost of their retirement benefit. Employee contributions typically are set as a percentage of salary by statute or by the retirement board.
https://www.nasra.org/contributionsbrief
You are correct. The money that withheld for retirement is generally matched at some rate. It's amazing how the 55% pay out is probably a less than 2% interest rate to the pensioner. Its criminal.
 

RxCowboy

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I don't believe that is true. I am not aware of a public pension plan that employees do not contribute (although there may be some).
I'm right, but I over-stated the case. Many of these public-sector pensions the contribution is made by the employer. Read what they said at the beginning of the article, lower pay but better benefits.
 
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I'm right, but I over-stated the case. Many of these public-sector pensions the contribution is made by the employer. Read what they said at the beginning of the article, lower pay but better benefits.
It depends on the pension. If you are a teacher in Oklahoma (these aren't the exact percentages but they are close) the teacher puts in 7%, the school puts in 9.0% and the state puts in a percentage. A school can put in more if the Board decides to do so. If you cash out of teacher's retirement system you don't necessarily get 100% of the increase on the interest. Its a lot more complicated than the article states.
 

CaliforniaCowboy

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I'm right, but I over-stated the case. Many of these public-sector pensions the contribution is made by the employer. Read what they said at the beginning of the article, lower pay but better benefits.
The article is correct, that "in the beginning" that was the concept, but the unions have long since changed that (as the article also says). Most State and government jobs these days, are decent pay (competitive) AND they get the benefits. Private sector jobs often provide a "bonus" program which can keep the best companies pay scale ahead of other employers (including public employment).

I posted a link that says in all public sector pensions the contributions are SHARED by the employee. I don't know how it started out just after the Civil War, but that's how it is these days. The employer (agency) does contribute, but it's about comparable to what the employee puts in.

There are almost no instances where the pension contribution is provided only by the employer. (according to the link I provided)
 

RxCowboy

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The article is correct, that "in the beginning" that was the concept, but the unions have long since changed that (as the article also says). Most State and government jobs these days, are decent pay (competitive) AND they get the benefits. Private sector jobs often provide a "bonus" program which can keep the best companies pay scale ahead of other employers (including public employment).
Slightly less pay and you have to at least partially fund your own pension and less pay and your employer funds your pension are pretty much the same thing, either way you get less pay. Surely you see that, right?

Regardless, none of this changes what the article says about these pensions being huge unfunded or poorly funded liabilities that governments simply can't afford. Someone is going to end up getting screwed, bigly.
 

CaliforniaCowboy

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Slightly less pay and you have to at least partially fund your own pension and less pay and your employer funds your pension are pretty much the same thing, either way you get less pay. Surely you see that, right?

Regardless, none of this changes what the article says about these pensions being huge unfunded or poorly funded liabilities that governments simply can't afford. Someone is going to end up getting screwed, bigly.
but that's not it.... it is.... slightly less pay and YOU AND THE EMPLOYER fund the pension program. The problem (as your link states) is that many of the programs have not recovered from the huge losses of 2008 (combined with Boomers retiring at the same time).

There were other problems too... which many of the programs have already fixed for new employees (eligibility age, payout amounts, ending spiking, etc.), but those changes will take time to work their way through.

The government CAN afford the pensions, but in most cases they have chosen to under fund, or not meet their obligations, rather than take the hit to their political careers and raise taxes.

The pension plans are all different, so it's difficult to lump them all into one bucket, like this journalist did.

There is a problem, but my issue is with the presentation by the journalist - the alarmist view, and not the analysts view. The lack of effort to explain the employee side of the obligation.

The employees contributed to the fund and got their matching funds (usually), just like every employer retirement program - however, the programs were mandatory. The employees had no other options. The funds were "managed" for them, with no input from the employee/investor.

In addition, the employees are also tax payers - i.e., they also contribute to the solvency of the fund just the same as any other taxpayers. Lastly, some fund participation was in lieu of social security contributions (some were not) - meaning that they are not eligible for social security.

There is a lot of misconception about the pensions, and it's not being explained to the taxpayers - which is why there is a lot of animosity about the plans, and about honoring the plans.
 
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My employer still has a fully funded pension for us older employees. We also have a retire medical benefit. Privately funded pensions are required by law to be funded at a percentage that "guarantees" the money will be there for the retirees. Unfortunately, that same law does not apply to pensions for public employees.
 

CaliforniaCowboy

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My employer still has a fully funded pension for us older employees. We also have a retire medical benefit. Privately funded pensions are required by law to be funded at a percentage that "guarantees" the money will be there for the retirees. Unfortunately, that same law does not apply to pensions for public employees.
glad to hear that some private companies still have pension plans - but it doesn't work that way. If the company starts losing money or goes bankrupt, then they cannot pay your pension. There is no "guarantee" that a company will always make money.

What would happen is that your pension would be turned over to a government insurance program to cover the costs.

What Happens to My Pension if My Company Goes Bankrupt?
A federal corporation, the Pension Benefit Guaranty Corporation (PBGC), was created in 1974 by the Employee Retirement Income Security Act to answer this question. The PBGC is insuring the pension plans of over 44 million private-sector workers and retirees. PBGC guarantees basic benefits that you earn before your plan's termination date or the date your employer files bankruptcy. If your plan terminates without sufficient cash to pay all benefits, the insurance program of PBGC will pay you guaranteed benefits up to the pension limits set by law.


Most companies dropped pensions and adopted the 401k model to move retirement costs into the current year's P/L, and to not kick the liability to accrue down the road to another fiscal period when revenues might not support those costs.
 
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glad to hear that some private companies still have pension plans - but it doesn't work that way. If the company starts losing money or goes bankrupt, then they cannot pay your pension. There is no "guarantee" that a company will always make money.

What would happen is that your pension would be turned over to a government insurance program to cover the costs.

What Happens to My Pension if My Company Goes Bankrupt?
A federal corporation, the Pension Benefit Guaranty Corporation (PBGC), was created in 1974 by the Employee Retirement Income Security Act to answer this question. The PBGC is insuring the pension plans of over 44 million private-sector workers and retirees. PBGC guarantees basic benefits that you earn before your plan's termination date or the date your employer files bankruptcy. If your plan terminates without sufficient cash to pay all benefits, the insurance program of PBGC will pay you guaranteed benefits up to the pension limits set by law.


Most companies dropped pensions and adopted the 401k model to move retirement costs into the current year's P/L, and to not kick the liability to accrue down the road to another fiscal period when revenues might not support those costs.
Our pensions are funded at 120% of the liability. The PGBC is for pensions that pay a monthly benefit. I can take a lump sum payout and walk away tomorrow.
 

RxCowboy

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From http://www.pionline.com/article/201...pension-liabilities-leads-to-credit-downgrade

Connecticut’s high unfunded pension liabilities leads to credit downgrade
BY JAMES COMTOIS · APRIL 17, 2018 2:42 PM

S&P Global Ratings lowered its rating on Connecticut's approximately $18.5 billion of general obligation debt outstanding to A from A+ in part because of its high unfunded pension liabilities.

The ratings agency said in a report that "above-average debt, high unfunded pension liabilities and large unfunded other postemployment benefit liabilities," have created "significant and growing fixed-cost pressures that restrain Connecticut's budgetary flexibility."

The report added, "Should state tax revenue decline, or grow more slowly than currently projected, these large fixed costs will remain an impediment to solving future potential budget gaps."

Connecticut expects to have $5.4 billion of combined costs for debt service, and pension and OPEB contributions in fiscal 2018, totaling 29% of budgeted general fund expenditures, up slightly from 28% in 2017, the report said.

A pension reform agreement made with the state employees' union has helped control fixed-cost growth in the near term by smoothing out a potential spike in pension payments over the next few years and pushing amortization of some unfunded pension liabilities payments into later years, the report said.

Also, the State Employees' Retirement Fund's assumed rate of return was lowered to 6.9% from 8%. The lower return assumption, as well as a drop in the Teachers' Retirement Fund assumed rate of return to 8% from 8.5%, raised actuarial liabilities, which were offset by both plans returning about 16% in 2017.

The two plans are the main components of the $34.2 billion Connecticut Retirement Plans & Trust Funds, Hartford, which is about 45% funded.

Still, the ratings agency's outlook on the state is stable, reflecting an "anticipation that state debt, pension and OPEB ratios will remain high, but near current levels, during our two-year outlook horizon, while at the same time Connecticut's budget will likely remain near structural balance absent an economic downturn," the report said.

S&P Global Ratings also noted in its report that, despite its high unfunded pension liabilities, the state is currently funding its full annual actuarially determined pension contribution and has used limited one-time budget items in its current budget. However, the agency believes Connecticut still faces challenges in achieving long-term structural balance, based on the four-month delay in enacting a fiscal 2018-2019 biennium budget and pushback from lawmakers to additional budget cuts or tax increases.

CONTACT JAMES COMTOIS AT JCOMTOIS@PIONLINE.COM · @COMTOIS_PI
 

RxCowboy

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From the Chicago Tribune:

Editorial: Chicago's pension precipice: It's worse than you thought.
Editorial Board

Chicago taxpayers, prepare for another kick in the teeth. In fact, it might be a good time to grow fond of the toothless grin. Another recent court decision will put taxpayers on the hook for additional city pension debts. Yes, even more than before.

A circuit court judge in March struck down a 2014 state law that eased pressure on the pension fund of Chicago Park District retirees. The law had increased Park District employees’ own contributions to the fund, increased their retirement-eligible age, reduced their annual cost-of-living increases and reduced duty disability benefits. But those changes will be rolled back, due to the ruling.

That means the Park District — you, taxpayers — will have to come up with reimbursements for workers’ higher contributions, plus interest. Going forward the district will have to figure out how to stabilize the retirement fund without those cost-saving changes. Chicago’s pension funds — for municipal workers and laborers, teachers, police and firefighters, and now Park District employees — face serious unfunded liabilities. The Civic Federation estimates the Park District fund has about 39 percent of what it needs to make future benefits payments.

The judge’s ruling came on top of a recent analysis of the Chicago Public Schools teacher pension fund that showed taxpayers will owe another $1 billion to shore up that retirement account, bringing that unfunded liability to $11 billion.

How much more of this will taxpayers tolerate?

Let’s take a look at one metric revealing their confidence in Chicago, and Chicago-area, governance: Chicago was the only region in the nation’s top 10 metro areas that experienced a decrease in population in 2017, U.S. Census Bureau numbers show. The state of Illinois is experiencing a more accelerated exodus. Taxpayers are well aware of the pension and other debts from multiple governments already hanging over them, and they’re fleeing before the avalanche.

When changes to the Chicago Park District retirement system passed the General Assembly, Mayor Rahm Emanuel and others touted the law as a framework for compromise. Many of the unions representing Park District workers agreed to the changes in order to stabilize the funds. We were hopeful those changes would stick.

But workers with Service Employees International Union objected and filed a lawsuit in 2015. With the court ruling last month, they ultimately succeeded in arguing that the law unconstitutionally diminished pension benefits.

Our question is, at what point will taxpayers conclude the debts are insurmountable? That taxing and borrowing won’t save the city’s pension funds? That sticking hardworking taxpayers with the bill, due to irresponsible politicians, won’t fly anymore? That despite all the additional money taxpayers are contributing, the unfunded liability of many funds continues to grow? That urgent change is needed?

Those are the questions. We’re still waiting for politicians in Springfield, in Chicago’s City Hall and in other governments statewide to supply the answers. We don’t know whether those will involve further reductions in public services to pay pension costs, or amending the Illinois Constitution to change its pension benefits guarantee, or maybe electing new politicians to replace those whose generosity with other people’s money created these enormous pension debts.
 

RxCowboy

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#19
An older article, but from zerohedge.com:


America's Pension Bomb: Illinois Is Just the Start


by Tyler Durden
Sat, 07/01/2017 - 20:20
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We've written quite a bit over the past couple of months about the pending financial crisis in Illinois which will inevitability result in the state's debt being downgraded to "junk" at some point in the near future (here is our latest from just this morning: "From Horrific To Catastrophic": Court Ruling Sends Illinois Into Financial Abyss).
Unfortunately, the state of Illinois doesn't have a monopoly on ignorant politicians...they're everywhere. And, since the end of World War II, those ignorant politicians have been promising American Baby Boomers more and more entitlements while never collecting nearly enough money to cover them all...it's all been a massive state-sponsored scam.
As we've noted frequently before, some of the largest of the many entitlement 'scams' in this country are America's public pension funds. Up until now, these public pension have been covered by stealing money set aside for future generations to cover current claims...it's a ponzi scheme of epic proportions...$5-$8 trillion to be exact.
Of course, the problem with ponzi schemes is that eventually you get to the point where the ponzi is so large that you can't possibly steal enough money from new entrants to cover redemptions from those trying to exit...and, with a tidal wave of baby boomers about to pass into their retirement years, we suspect that America's epic ponzi is on the verge of being exposed for the world to see.
And when the ponzi dominoes start to fall, Bloomberg has provided this helpful map to illustrate who will succumb first...


Of course, if you live in a state like South Dakota, you may take some solace from the fact that your public pension is fully funded...don't.
Once the dominoes start to fall, and they will, those "ignorant politicians" we mentioned above will think they're doing the right thing when they attempt to "socialize the issue" with federal bailouts and tax hikes. Unfortunately, this is one crisis that will be too large for even American taxpayers to bailout.
 

CaliforniaCowboy

Federal Marshal
Oct 15, 2003
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So Cal
#20
as it says.... the politicians promised it, and what is not said, the taxpayers let them get away with it. (it = not collecting enough money, or taxes)

it's no different than social security ..... totally underfunded, and will be bankrupt more quickly than most of these State plans.