Ten fiscal and financial stories ignored by Illinois media in 2014 – WP Original
By: Mark Glennon*
One raison d’être for WirePoints is the Illinois media’s poor understanding of our fiscal and economic problems, which contributes to public ignorance about them. 2014 was more of the same.
Something’s wrong when a few of us writing on nights and weekends see these stories while they go otherwise unreported. Here are a ten of them, which, all humility aside, we emphasized. Many of these relate to public pensions, which is appropriate because they account for the lion’s share of Illinois’ crisis:
Suicidal property tax rates dooming some Illinois communities. When real, effective, annual property tax rates reach 5% and even 9%, and commercial rates reach 11% and even 15%, forget recovery. Owners and investors know confiscation when they see it. The Civic Federation did the hard part collecting the data but its work went unnoticed. We wrote about it here.
A $224 million Thanksgiving Eve pork binge with money from the 2009 Jobs Now program. That program of borrowed money was supposed to be for stimulus at the depth of the recession five years ago, but much of it has gone into political pork. Governor Quinn avoided scrutiny by making the announcements on the evening before a holiday, figuring the media would be too juiced to catch it. (OK, OK, I was, too, but at least I noticed what happened and wrote about it here that night.)
Illinois on a massive, stealth pension holiday. “Pension holidays” refers to the years that Illinois skipped or reduced contributions to its pensions, most recently by Governor Blagojivich, or so most people probably think. In fact, pensions for the state and most municipalities are systemically shorted year in and year out, growing the unfunded liabilities continuously even when the phony assumptions used by the government turn out correct. An actuary explained how that works in one of our pieces linked here, and claims otherwise by Illinois politicians go unchallenged by the media, as we wrote here.
40-year-old mortality data used to calculate contributions to municipal pensions. Hat tip to the tiny Forest Park Review which reported the story, but larger publications ignored it. The bigger story, of which this is just a chapter, is widespread distortion in pension actuary work and manipulation of many assumptions that hide pension problems. That full story remains to be told. Actuaries are paid by the elected officials who want to understate pension problems, which is why the officially reported pension numbers always used by the press are not reliable. We will continue to address that scandal next year.
“Illinois Math” exposed. One bright spot in the pension mess was a vastly improved actuarial report for the Teachers’ Retirement System, Illinois’ largest pension. As we wrote here, the report conspicuously flagged how newer plan participants are forced to subsidize the unfunded liabilities for older ones, and how the unfunded liability for just that one pension jumped by almost $6 billion despite great investment returns for the year. The report ridicules “Illinois Math” traditionally used for pensions, and even defines it in the glossary.
Pension reform bill means squat. SB1, the reform bill now awaiting Illinois Supreme Court review, over which Illinois is obsessed, would reduce the unfunded liabilities of four state pensions by only about 12%. If upheld by the court, the ruling would lead to endlessly complex litigation and judicial activism for municipalities and most of the other 671 Illinois public pensions, as we described here.
More retired police and firefighters on pensions than working in Chicago. The firefighters’ fund has just 24 cents for every dollar it owes pensioners, and the policemen’s fund just 30 cents. Honoring promises made will be exceptionally difficult with upside down demographics like that.
Chicago’s new treasurer making huge mistake by diverting pension and treasury money into economic development and direct investments. Pensioners and reformers alike should stop this as we wrote here.
An enemies list compiled by teachers unions to strip First Amendment rights from financial workers advocating pension and education reform. The media is usually pretty good about sticking up for First Amendment rights, at least for itself. Not for financial professionals, evidently. The national media provided the facts but Illinois ignored them, even though two of the primary targets were major Chicago firms. Our two stories on it are linked here and here.
Medicaid. Count us among the guilty on this one. Medicaid already consumes almost $7 billion, roughly 20%, of Illinois’ budget and it’s growing rapidly, in part because of Obamacare. It may well be the second 800-pound gorilla in the room along with pensions. It’s immensely complex, thanks again to Obamacare, and we all better start figuring it out.
Wishing for a happier new year.
*Mark Glennon is founder of WirePoints