By: Mark Glennon*

 

I’m fed up with the entirely fictional debate about the Illinois budget being played out in the press. One cause is the the state’s failure — at all levels — to give us meaningful, current numbers. Let’s start with two:

 

First, Governor Rauner’s office, Senate Republicans and Senate Democrats alike are consistently claiming that the pending pension bill, Senate Bill 11, would save about $1 billion per year. The press repeats that claim without challenge. But the bill is built primarily on the goofy “consideration” theory about pension reform. Yes, it’s “goofy,” because it can’t work “by definition” for the reasons explained in sworn filings by the City of Chicago before the Illinois Supreme Court. For details, see our earlier articles on this going back almost two years, linked here and here. Worse, we now have somebody in the Governor’s office referring to the bill as “comprehensive pension reform.”

 

Hogwash — it’s not comprehensive pension reform and I’m beyond skeptical that it will save much if anything. Put up the actuarial report or other analysis that indicates how much would be saved.

 

Second, we’re tired of waiting for reasonable reporting on a staggering liability going entirely ignored by the state and the press — the unfunded liability for pensioner healthcare. I have FOIAd for the latest, but the most recent report available is almost three years old — the FY2014 actuarial report linked here. I’m talking about an entirely unfunded debt that increases the commonly reported pension liability by something like 50%, though we really don’t know because the state doesn’t report the numbers on any timely, usable basis. That liability is constitutionally guarantied, just like pensions themselves.

 

We finally got the financial statements for the state yesterday for the fiscal year that ended last June 30. But they are of little value for the reasons described today by Truth in Accounting:

 

The Illinois balance sheet is based upon amounts at three different times. Most of the amounts are as of June 30, 2016, but the state’s largest liabilities, the unfunded pensions, are based upon June 30, 2015 valuations. The 2016 unfunded liabilities are at least $20 billion more than what was reported on the balance sheet. The unfunded retiree health care liability is based upon a June 30, 2014 valuation. [Emphasis added.]

 

Get the actuarial report for pensioner healthcare liabilities done and publish it. We know it’s massive. Stop hiding it.

 

That would be just a start towards some honest financial reporting.

 

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

 

 

 

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nixit

As confusing as these reports are, it seems odd that the insurance programs use a discount rate of 4.5% whereas the pension systems assume a 7.5% discount rate. Any idea why?

Mike
“Historically, these assets have been invested in cash and other short term investments according to the current investment policy, and benefit obligations are effectively funded on a pay-as-you-go basis. Consequently, according to GASB Statement No. 43, the interest discount rate used to calculate the present values and costs of the OPEB must be consistent with the assets supporting liabilities, which for this case is expected to be the long-range expected return on short-term fixed income instruments. The plan sponsor has selected an interest discount rate of 4.5 percent for this purpose.” – TEACHERS’ RETIREMENT INSURANCE PROGRAM OF THE STATE OF ILLINOIS. GASB NO. 43 ACTUARIAL VALUATION REPORT… Read more »
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