Citizens must be accurately informed for government to work

Link: https://www.news-gazette.com/opinion/columns/sheila-weinberg-citizens-must-be-accurately-informed-for-government-to-work/article_5d93e9cf-73c5-54c9-b762-133f91a94824.html

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An example of questionable disclosure practices is found in the Illinois budgeting and financial reporting process, specifically regarding pension contributions. In 1994, then-Gov. Jim Edgar led an effort to pass a bipartisan bill to solve the state’s $15 billion pension deficit. The plan would resolve the deficit within 50 years. The plan was structured to pay down the debt very slowly in the first 15 years and accelerate at the end. This ensured that sitting politicians in the early days of the plan would not be required to make the necessary tax increases or budget cuts to pay down the debt in a meaningful way.

This program is shown in charts to look like a skateboard ramp, appropriately named the “Edgar Ramp.” The problem is, the plan doesn’t work.

It is so unsuccessful that the Illinois pension deficit has grown from $15 billion to $317 billion as of June 30, 2020, according to Moody’s Investors Service. The state’s latest bond offering document emphasizes, “The state’s contributions to the retirement systems, while in conformity with state law, have been less than the contributions necessary to fully fund the retirement systems as calculated by the actuaries of the retirement systems.”

The latest Illinois Annual Comprehensive Financial Report discloses cash-flow problems, significantly underfunded pension obligations, other post-retirement benefit deficits and multiple references to debt-obligation bonds.

Author(s): Shiela Weinberg

Publication Date: 7 Aug 2022

Publication Site: News Gazette

The Government Pension Reckoning Cometh

Link: https://www.wsj.com/articles/the-government-pension-reckoning-cometh-equable-institute-report-11660084312?st=j8a7o7efyyvjtdp&reflink=article_email_share&utm_source=Wirepoints+Newsletter&utm_campaign=24f39fc2e0-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-24f39fc2e0-30506353#new_tab

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The California Public Employees’ Retirement System reported a negative 6.1% return for the year, which includes a 21.3% positive return on private equity and 24.1% return on real estate as reported through the second quarter of 2022. What will happen if real-estate prices start to fall and some leveraged private-equity buyouts go south amid rising interest rates?

Collective-bargaining agreements limit how much workers must contribute to their pensions, so taxpayers are required to make up for investment losses. Employer retirement contributions—that is, taxpayers—make up 20% of government worker compensation. That amount has soared over the past decade as pension funds tried to make up for losses during the 2008-2009 financial panic.

A recent report by the Equable Institute found that state and local pension plans now are only 77.9% funded on average, which is about the same as in 2008. But some like Chicago’s are less than 40%. Advice to taxpayers in Illinois: Run.

Author(s): WSJ Editorial Board

Publication Date: 9 Aug 2022

Publication Site: WSJ

Ken Griffin talks the pension crisis, a once-secret meeting with Pritzker

Link: https://www.chicagotribune.com/opinion/commentary/ct-opinion-ken-griffin-illinois-pension-jb-pritzker-desantis-20220809-jnrzlzbpvbfcnjauz522qcvi4m-story.html?utm_source=Wirepoints+Newsletter&utm_campaign=24f39fc2e0-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_895ee9abf9-24f39fc2e0-22956053

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Ken Griffin, founder and CEO of Citadel, spoke in his Chicago office to Editorial Page Editor Chris Jones on Aug. 2. This transcript has been edited for length.

Gov. J.B. Pritzker has said you and he met privately and that you agreed to drop your opposition to his graduated tax proposal if he took on pension reform in Illinois. True?

The Illinois pension crisis is rooted in the issue that politicians of the moment are able to make promises to the public sector workers, where the cost of those promises are borne by taxpayers, far into the future. So we have an intrinsic lack of accountability within the state when it comes to that dynamic between the leaders in Springfield and the public sector unions. (Former Gov.) Bruce Rauner and I actually would speak about this problem from time to time because it’s pretty well known that Bruce felt the state should move to a defined contribution program for the state employees.

And there are elements of that I think are attractive, but because the state employees do not participate in Social Security, a strictly defined contribution proposal leaves the state employee, in my opinion, at undue risk of adverse events if they do not invest their money successfully. … And there’s another issue, which is that the costs of the promises made by cities and counties are not borne by the cities and counties directly, they’re socialized across the entire taxpayer base of the state. So it’s pretty easy for the behavior of a number of Illinois cities to offer incredible increases in pay in final years to boost pension benefits, and that cost comes back to all Illinois taxpayers.

So these are some of the areas in which the average man in the street is really being handed a very significant bill. And the most tragic part of this whole story is that when the state hires people early in their careers, they’re not even placing that much value on these pension plans.

Twenty-two-year-olds don’t make lifetime career decisions on pension benefits. So, from my perspective, as a state we’re much better off having higher starting salaries to attract really good people to serve in the public sector. And, as with Bruce, my advice to the governor was consistently that either the state should mirror the benefits of Social Security as a baseline or, even better, go back to the federal government and get into Social Security again. We should reverse our opt-out from decades ago. And then to the extent that a city wants to offer benefits in excess of the Social Security baseline amount, that’s pay-as-you-go through a 401(k)-equivalent program. …

The proposal that I gave to J.B. to solve the state’s pension problems is exactly what I just shared with you. … It would, in all likelihood, require us to amend the constitution for the state to head in this direction. It might be for new employees only. I’m very sensitive to a promise made and earned. That’s your benefit. That’s a very different talking point than you’re 22 years old and it’s your first day working for the state.

But, big picture, we get the state into a program that looks like what I just described. And it’s gonna accelerate, in all likelihood, the costs of the current system. It may require revenue increases.

And like many of the business leaders in this city, I was very direct. I said, “If you’re willing to engage in pension reform, I’m willing to publicly support you in a tax increase.” It wasn’t graduated versus not graduated. It was just a tax increase.

I would’ve assumed that this meeting would’ve been private for the rest of my life until J.B. decided to open the door and talk about this. What he did talk about in terms of fiscal reform for the state was to restructure the state’s (information technology) budget.

And he felt he could achieve $50 million in budget savings for the state of Illinois by taking an ax toward our IT budget for the state, and that was going to be his victory lap for fiscal discipline in the state of Illinois. Here we have a multibillion-dollar problem on the left and 50 million (dollars) on the right. I was like, “J.B., we’re not having the same conversation here.”

To be clear, that was a fracturing moment between the two of us. … He does not want to use his political capital for good. He wants to maintain that capital to maintain the certainty of staying in power.

Author(s): Chris Jones

Publication Date: 10 Aug 2022

Publication Site: Chicago Tribune

AMENDMENT 1 WOULD GUARANTEE $2,100 PROPERTY TAX HIKE FOR TYPICAL ILLINOIS FAMILY

Link: https://www.illinoispolicy.org/amendment-1-would-guarantee-2100-property-tax-hike-for-typical-illinois-family/

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Amendment 1 would grant government unions unprecedented bargaining powers as a “fundamental right,” including the power to override voters and state lawmakers. Proponents are selling it as a constitutional ban on passing right-to-work laws – laws that protect employees’ rights to keep their jobs without having to pay fees to a union. Illinois is not among the 28 states that currently have right-to-work laws, so that aspect has little meaning.

The amendment does include three other provisions that together would severely weaken taxpayers’ voices in state government and make it easier for government union bosses to make unaffordable demands in collective bargaining contracts. First, virtually anyone would have a fundamental right to collective bargaining if they could be considered an employee in any context, including even prisoners. Second, bargaining would be expanded beyond just wages, hours and working conditions to include broad new subjects covering public policy decisions or how to run a businesses. Third, the amendment prevents lawmakers from ever limiting or scaling back on these rights in any way.

Even without these provisions, powerful government unions helped public sector wages grow 60% faster than the private sector in Illinois from 1998 to 2019.

Peer-reviewed research shows stronger government worker unions cause the cost of government to increase, with powerful unions putting even more upward pressure on benefits than on wages. Government worker retirement benefits, which flow mostly to government union workers, have left Illinois local governments with $75 billion in pension debt and are already the primary cause of rising property taxes. Government unions helped Illinois politicians build the state and local pension crisis by supporting both unaffordable benefits as well as irresponsible funding games that pushed costs into the future.

Nationwide data from 2010 to 2019 show a significant statistical association between the percentage of government workers who are members of a government worker union and each state’s average effective property tax rate.

Author(s): Adam Schuster

Publication Date: 15 Jun 2022

Publication Site: Illinois Policy Institute

Pension spiking costs continue to hit Illinois taxpayers

Link: https://www.thecentersquare.com/illinois/pension-spiking-costs-continue-to-hit-illinois-taxpayers/article_b899de84-a53e-11ec-b683-6bf4098dc466.html

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School districts sent $8,839,754.35 to the Teachers’ Retirement System of the state of Illinois to cover the cost of excess salary and excess sick time payments given to educators at the end of their careers in years 2018-2019 and 2019-2020, according to records obtained by The Center Square. That’s on top of the more than $50 million in penalties districts have paid to TRS since the 2005 law passed, including $23.8 million since fiscal 2014. But districts only paid a fraction of what they actually owed due to exemptions built into the 2005 law.

“In the first 10 years of the program, 2005 to 2015, the excess salary contributions levied against school districts totaled $149.5 million, or an average of $14.95 million per year,” said Dave Urbanek, director of communications for the Teachers’ Retirement System of the state of Illinois. “However, because of exemptions to the 6% threshold built into the law at that time, districts paid only $39 million during that decade, or an average of $3.9 million per year.”

State Sen. Craig Wilcox, R-McHenry, said some local taxpayers probably aren’t aware of how school districts are spending tax dollars. The majority of school district funding in Illinois comes from local property taxes. Most national analyses show Illinois residents pay, on average, the second highest property taxes in the U.S., behind only New Jersey.

Author(s): Brett Rowland

Publication Date: 18 Mar 2022

Publication Site: The Center Square

TAXPAYER PENSION COSTS EXCEEDED ILLINOIS PROJECTIONS BY $13.7 BILLION SINCE 2013

Link: https://www.illinoispolicy.org/taxpayer-pension-costs-exceeded-illinois-projections-by-13-7-billion-since-2013/

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Unrealistic assumptions and missed investment returns have meant Illinois taxpayers paid $13.7 billion more for public pensions than state leaders projected five years earlier. Unless the estimates improve, taxpayers will pay an extra $21.3 billion during the next decade.

Illinois does a particularly poor job of figuring out how much money is needed to pay its public pensions: The past decade has seen the projections miss by 16%, which meant taxpayers needed to give $13.7 billion more than was estimated.

Author(s): Justin Carlson

Publication Date: 17 Jun 2022

Publication Site: Illinois Policy Institute

New Illinois Law Authorizes $1 Billion in Pension Obligation Bonds and Extends Buyout Option

Link: https://www.ai-cio.com/news/new-illinois-law-authorizes-1-billion-in-pension-obligation-bonds-and-extends-buyout-option/

Excerpt:

Illinois Governor J. B. Pritzker signed into law House Bill 4292 last Thursday [May 5]. The bill extends state employees’ ability to exercise pension buyout options to June 2026, as opposed to the previous deadline of 2024. Buyout options allow pension recipients to take a lump sum of money now as opposed to waiting to retirement to receive the pension. The hope is that doing so could decrease the state’s struggling pensions’ unfunded future liabilities.

Illinois’ state budget for fiscal year 2023 also authorized an additional $500 million in payments to the state pension fund and $1 billion in pension obligation bonds. 

…..

Illinois’ pension funds are among the worst funded in the country. As of fiscal year 2021, the state’s pension plans were 46.5% funded, significantly lower than the national average of 72.8%, according to the National Association of State Retirement Administrators.

Author(s): Anna Gordon

Publication Date: 9 May 2022

Publication Site: ai-CIO

Court Rejects Legal Challenge to Illinois Pension Consolidation

Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/

Excerpt:

An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the state’s 650 firefighter and police officer pension funds, rejecting the plaintiff’s claims that a law enacting the move violated the state’s constitution.

In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposes—one for police and one for firefighters. The move is intended to help improve the financial stability of the pension funds and ease pressure on local governments to raise taxes to fund those pensions.

However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. B. Pritzker, who signed the bill into law. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause.

The plaintiffs claimed that they had a contractual and enforceable right to exclusively manage and control their investment expenditures and income, including interest dividends, capital gains and other distributions on investments, which they said the consolidation infringed upon.

Author(s): Michael Katz

Publication Date: 27 May 2022

Publication Site: ai-CIO

CHICAGO CASINO REVENUE DOESN’T ADDRESS 91% OF CITY PENSION DEBT

Link: https://www.illinoispolicy.org/chicago-casino-revenue-doesnt-address-91-of-city-pension-debt/

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The Chicago City Council approved a casino development in the River West neighborhood. The generated revenue will exclusively pay for pension debt, but only an estimated 9% of what the city needs.

The Chicago City Council approved a $1.7 billion casino in a 41-7 vote May 25. The River West development is being touted as a pension solution, but even the highest projections show only a drop in the bucket.

“This one casino project will pay for approximately 9% of our $2.3 billion pension contribution and reduce the likelihood that the city will need to raise property taxes in the future for pensions,” said Jennie Huang Bennet, chief financial officer for the city.

Author(s): Dylan Sharkey

Publication Date: 31 May 2022

Publication Site: Illinois Policy

Census: Illinois cities combined lose 104,000 people in 2021

Link: https://www.thecentersquare.com/illinois/census-illinois-cities-combined-lose-104-000-people-in-2021/article_5a261c26-dc63-11ec-8881-f30cf9c72ea4.html?utm_source=Master+List&utm_campaign=e66598c836-MICHIGAN_B2C_NEWSLETTER&utm_medium=email&utm_term=0_d03ba9ddf1-e66598c836-74692253

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Cities and towns in Illinois lost more than 104,000 people in the 12 months up to July 1, 2021, according to new U.S. Census data released Thursday. Nearly half of Illinois’ losses were from Chicago.

The report for the entire country shows populations continue to shift to towns in the South and West regions of the United States.

“Arizona, Texas, Florida and Idaho all had several places among the 15 fastest-growing cities or towns,” the report said.

Of the 15 largest cities, New York lost nearly 305,500 people. Chicago lost 45,175 people, which was larger than Los Angeles’ loss of 40,537 people. Chicago is the third most populous city behind New York and L.A..

Author(s): Greg Bishop

Publication Date: 26 May 2022

Publication Site: The Center Square

Illinois Pension Funds Are Slow To Pull Out of Russian Assets

Link: https://www.bettergov.org/news/illinois-pension-funds-are-slow-to-pull-out-of-russian-assets?eType=EmailBlastContent&eId=55511662-b854-49ee-8d24-b2010db00a33

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Despite strong rhetoric from Gov. J.B. Pritzker and other top state officials demanding public pension funds divest more than $100 million in Russia-based assets, state lawmakers now say they won’t act until the Fall veto session.

A key legislative proposal to force the pullout in the wake of the Russian invasion of Ukraine died in a Senate committee awaiting a vote.

Senate President Don Harmon, D-Oak Park, declined to be interviewed for this report, but his staff suggested the Senate had too little time before the session closed on April 9. The House bill — which passed by a vote of 114-0 on April 5 — was never taken up in the Senate chamber.

….

Using pension investment decisions as a way to prompt social change has long been controversial. In the past, Illinois funds have divested from companies and funds related to Sudan, Iran and businesses that boycott Israel following direction from lawmakers.

The Illinois State Board of Investments creates a prohibited list of companies for the funds to consider. The most recent list does not contain companies or funds connected to the Russian invasion.

“How, as a society, should we think about our pension systems assets?” Amanda Kass, Associate Director of the Government Finance Research Center at the University of Illinois – Chicago, asked. “I also see this kind of scrutiny of investing in Russian assets as part of this larger movement.”

Author(s): Jared Rutecki

Publication Date: 5 May 2022

Publication Site: Better Government Association

AFSCME asks state board of investment to divest holdings with Russia ties

Link: https://www.wandtv.com/news/afscme-asks-state-board-of-investment-to-divest-holdings-with-russia-ties/article_78c20944-9e7c-11ec-90ff-0f1777a90bee.html

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As the Russian invasion of Ukraine continues, the AFSCME union in Illinois has asked the state board of investment to divest all holdings in assets tied to Russia. 

A letter from the executive director of AFSCME Council 31 was sent to Illinois State Board of Investment Chairman Terrence Healy. Council 31 Executive Director Roberta Lynch referred to the invasion as a “genocidal slaughter of civilians.” 

….

The state investment board governs investment policy for the State Employees Retirement System, as well as to other Illinois public pension funds that AFSCME members participate in.

Publication Date: 7 Mar 2022

Publication Site: WAND