It’s hard to see thousands of people rallying to the cry, “no unsustainable pension systems,” but it might do more good than yelling about “science.”

– Steven Greenhut

By: Mark Glennon*

Substitute Illinois for California in a nice article this week by Steven Greenhut and it more than works. The math for Illinois is worse than Greenhut wrote about California, an it’s long time somebody started protesting about it. Let’s start with what Greenhut wrote:

The impact of ignoring math won’t mean that planet Earth dissolves in a giant fireball, as some global-warming activists claim, but it will mean that cities will continue to face “service insolvency” – when there’s enough money to pay the bills, but not to provide an adequate level of public services. Other cities will no doubt face actual insolvency….Most legislators aren’t at war with science. They remain at war, however, with basic numbers….

He asked, “Don’t they know that inadequate contributions and overly optimistic rate-of-return predictions multiply the size of the shortfall and have a cascading effect?”

Oh, jeez, most lawmakers in Illinois wouldn’t understand the question.

And do they, or voters, know that pensioners who retired before age sixty (as most do) will see their pensions doubled in about 24 years, thanks to the 3% automatic annual COLA that’s constitutionally guarantied? Or that pensions dropping towards funding levels of 20% or 30%, as so many in Illinois are, can’t be rehabilitated and won’t get paid?

The plain fact is that pension obligations in Illinois are impossible, and only a state constitutional amendment or federal bankruptcy can reduce those obligations to fiscally sustainable, fair levels.

Those who do understand exploit the public’s ignorance. That’s how they get elected.

Progressives can carry signs, Greenhut wrote, “although it’s hard to come up with pithy comments that rhyme with ‘unfunded liabilities,” ‘service insolvency,’ ‘3 percent at 50’ and ‘assumed rates of return.'”

But in Illinois, it goes beyond pensions.

Price and simple economics just don’t matter. Despite Illinois’ severe financial problems, less than 3 percent of bills passed by the 99th General Assembly and enacted into law have fiscal notes, as described in a report from Illinois Policy Institute from this month. In other words, taxpayer cost is ignored.

Look at the math behind claims that a progressive income tax could solve our problems in Illinois. It’s blatantly dishonest and demagogic. As we documented recently, under widely discussed proposals, the top 6% of households would face a long term liability just for state pensions and related healthcare of $700,000 each plus an annual tax increase of at least  $36,000 to cover other budget deficits.

Take higher education as another example. A study by Pew Charitable Trusts found Illinois to be among the states that simply don’t know what they spend.

Or how about unfunded healthcare liabilities for pensioners? I study these things but I have little idea what they total. Just for state liabilities it’s something over $50 billion, but the state hasn’t published an actuarial report on them since June 2014.

And don’t dare question the cost of anything with a “green” label.  Billions have been heaped on Illinois consumers with no measurement of cost.

Most importantly, when has anybody — anybody — ever put forth even the broad outline of a fiscal plan to solve the state and local consolidated fiscal crisis Illinois faces? Nobody has. Nobody has one. Nobody asks to see one.

The underlying secret to all this straight out of Rules for Radicals by Saul Alinsky in 1971. It’s now mainstream Illinois doctrine, and I couldn’t agree more with this premise:
The moment one gets into the area of $25 million and above, let alone a billion, the listener is completely out of touch, no longer really interested because the figures have gone above his experience and almost are meaningless. Millions of Americans do not know how many million dollars make up a billion.
Innumeracy and economic ignorance are a plague on the electorate. There’s only one thing worse: Politicians who exploit it. They control the narrative in Illinois and that’s why a protest will never happen.

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.




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The root cause of most underfunded pensions is legislative pension benefit hikes to pensions that were already underfunded, and the same is true for salary hikes that occurred while pensions were underfunded. Take TRS, the pension system for public teachers and administrators outside Chicago for example. TRS produces a document titled, Evolution of the TRS Benefit Structure. Every benefit hike since the fund was created in 1939 occurred while TRS already underfunded, because TRS has always been underfunded. Rather than admit this, blame has been placed on the state not making its full annual pension contributions. Well, does the horse pull the cart, or does the cart… Read more »
It’s extremely hard to explain the public sector compensation package to a public sector employee because the pension portion of their compensation package is an entirely assumed benefit. It doesn’t matter if the market is tanking, retirees outnumber members, or the legislature is handing out free pension enhancements…it’s assumed that as long as they pay their X%, they get whatever the rule of the day is, regardless of the actual cost. In their mind, it is completely separate from their salary, as if you can bargain one with no impact on the other. I’m guessing I’m one of the few folks here that advocates for full pension… Read more »
Tough Loive
Quoting nixit …. “I’m guessing I’m one of the few folks here that advocates for full pension funding, only to show just how expensive it is” Well, I’d sure suggest that we “CALCULATE” what the full contribution would be under reasonable and appropriate valuation assumptions & methodology (suggesting the assumptions and methodology be that REQUIRED by the US Gov’t in the valuation of Private Sector pensions Plans). However, I would NOT (not even close) recommend that Taxpayers actually pay the huge amount that would result from that calculation. Doing so would just memorialize the HUGE theft that has been perpetrated upon Taxpayers in granting these ludicrously generous… Read more »
Tough Loive

Quoting ….”The benefits and salaries determine the contributions.
Benefits and salaries come first, then contributions are calculated.”

Exactly, and it amazing how many commentating on pension don’t seem to grasp that.

And YES …. “The public sector workers are responsible for the underfunded pensions, not the taxpayers.” ….. because although the Elected Official granted these grossly excessive pensions, it’s the WORKERS who are indeed the FINANCIAL BENEFICIARIES of those excessive pension “promises”.

Tough Loive
Anyone with even mediocre math abilities and BASCI functionality with an Excel spreadsheet can VERY easily show that Ill pensions are 2 to 4 times (4 to 6 times for Safety workers) greater in value upon retirement (including the formula -cost, the young age at retirement, and the financial cost of COLA increases) than the pensions (or other retirement mechanisms) typically granted Private Sector worker by their employers.. And, with (on average for all jobs taken together) little difference in “cash” wages, there is ZERO justification for ANY (yes ANY) greater pensions …or better benefits. THAT is the ROOT CAUSE of the problem (GROSSLY EXCESSIVE pension/benefit “generosity”)… Read more »
Another aspect of the math is observed when you consider the ratio of obligations to resources. The numerator is increasing much faster than the denominator. The numerator can be viewed as a bunch of poker chips in the bankruptcy game. The more one can claim — particularly if the claim is “contract rights” — the greater one’s hoped-for helping of the final spoils. Think of it as the “last meal” or the “terminal trough.” We suppose that the piggies aren’t thinking ahead, but my sense is that they know where the road leads and they intend to be at the banquet with knives, forks and ladles.

Mark – As Creative Director of Wirepoints, may I suggest a few slogans:

“We Are DONE” (play on
“Pensions ARE taking candy from a baby” (stick figure picture of old guy reaching into baby carriage, pulling out $)
“Pensions for ME but not for THEE”

Other effective ways are to associate the opposition with things they’re against:

“Pension debt is YUGE” (or BIGLY)
“TRUMP LOVES PENSIONS” (love trumps hate)
“PENSIONS + WALL STREET” (inside a heart)

We’re also going to need a catchy name, like #PensionHole.

S and P 500
Spot on. Another misunderstanding people have is that governments can’t run out of money. That may be true for the federal government which can print money if it wants to, but states and cities have to balance budgets with real money. What may surprise people is that cities, states and school districts report their assets and debts on balance sheets just like IBM or Walgreens. Balance sheets can easily be found on the “CAFR” that the city releases every year (Comprehensive Annual Financial Report). The CAFR for 2015 for Chicago has a nice photo of Mr. Rahm Emmanuel and a balance sheet with $42 billion in assets… Read more »