Tag: Illinois

Executive Summary: Communities in crisis: More than half of Illinois cities get “F” grades for local pensions

Mary Pat Campbell
Executive Summary: Communities in crisis: More than half of Illinois cities get “F” grades for local pensions

Graphic:

Excerpt:

Workers’ retirement security has declined in an alarming number of Illinois cities. In 2003, just 21 of 175 cities analyzed had less than 60 cents on hand for every dollar they needed to fund future benefits of their city workers. By 2019, 99 of the 175 cities were below 60 percent funded. A 60 percent funding level is often seen as a point of no return from which pension funds can’t recover. 

City taxpayers have increasingly paid more to pensions over the past 16 years, and yet the pension shortfalls they are on the hook for are far larger today. Pension contributions of the 175 cities have nearly quadrupled to $960 million in 2019 from $250 million in 2003, and yet local pension shortfalls still tripled to $11.8 billion, up from $3.4 billion in 2003.

Pension costs as a share of city budgets have doubled, crowding out spending on core government services. City pension contributions as a share of general budgets have doubled to 17 percent in 2019 from 8 percent in 2003.

Most local pension funds have turned upside down – they now have more retirees drawing benefits than active workers contributing. In 2003, only 15 cities had more pensioners drawing benefits than active workers making contributions into the fund. In 2019, that number rose to 112 cities. 

Publication Date: 5 May 2021

Publication Site: Wirepoints

Op-ed: New Jersey’s fiscal mess might lead to statewide property tax. You’re forewarned, Illinois

Mary Pat Campbell

Link: https://www.chicagotribune.com/opinion/commentary/ct-prem-opinion-edit-fixing-illinois-chicago-budget-new-jersey-tax-20210423-a7dxpc5g4nhkrjgfbyzkrzvjxy-story.html

Excerpt:

Connecticut has opened the door for a statewide property tax that has no upper limit. It offers a “new” tax revenue source for states such as New Jersey that have failed to address their structural deficits and continue to live beyond their means. Many New Jersey homeowners refer to their local property tax bills as a second mortgage, since the burden often rivals or exceeds the monthly payments on their home purchase.

A review of New Jersey’s modern history of taxes shows citizens should rightly be concerned.

Our state enacted a personal income tax in 1976 to support public schools and provide property tax relief. The tax began with a simple two-rate structure consisting of a 2.0% rate on income below $20,000 and a 2.5% rate on income above $20,000. In 45 years, 8 brackets have been introduced without any substantive update to account for inflation, making this more burdensome over time. The only meaningful change has been to establish a new top rate of 10.75%, the 3rd highest in the nation.

Author(s): REGINA M. EGEA

Publication Date: 23 April 2021

Publication Site: Chicago Tribune

PRITZKER PRESSURES BIDEN FOR TAX CHANGE WORTH $2.5 MILLION A YEAR TO GOVERNOR

Mary Pat Campbell

Link: https://www.illinoispolicy.org/pritzker-pressures-biden-for-tax-change-worth-2-5-million-a-year-to-governor/

Graphic:

Excerpt:

Of course, no one can know the true extent to which Pritzker has been able to reduce his tax bills through loopholes and carve-outs over the years, because he refuses to release his full tax returns. In recent years it has been revealed Pritzker went to great lengths to avoid paying taxes, removing toilets from his Gold Coast mansion to skimp on his property tax bill by $331,000 and establishing shell corporations in the Bahamas in a likely attempt to avoid U.S. income taxes. The toilet ploy earned him a federal investigation.

The letter, which pushes for tax reforms that would almost exclusively benefit the wealthy, comes less than six months after Pritzker’s progressive income tax amendment was rejected by voters and is a significant departure from his previous stance on taxation.  In the letter, Pritzker claims the cap hurts middle-class taxpayers and is “untenable” during these dire economic times. Because the data is clear on who directly benefits from the SALT deduction, one can only assume the governor is implying higher taxes on the wealthy also hurt Americans with lower incomes.

That is precisely the argument opponents of the “fair tax” made after the governor first unveiled his tax-the-rich scheme in 2019.

Author(s): Orphe Divounguy, Bryce Hill

Publication Date: 23 April 2021

Publication Site: Illinois Policy Institute

Pension obligation bonds: Some Illinois city leaders want to gamble with taxpayer funds – Wirepoints

Mary Pat Campbell
Pension obligation bonds: Some Illinois city leaders want to gamble with taxpayer funds – Wirepoints

Graphic:

Excerpt:

Like so many local government leaders throughout Illinois, Wheaton city officials are desperate to do something about the city’s uncontrollable police and firefighter pension costs. The unfunded liabilities of the city’s public safety pension funds have jumped to $56 million over the past 15 years, and that’s despite major increases in taxpayer contributions into the funds.

Wheaton officials’ solution to the problem? Borrow more money. They’re considering a scheme using Pension Obligation Bonds, or POBs, that would let them gamble with taxpayer money in an attempt to improve pension finances. It’s simply a bad idea, especially in Illinois, where fiscal mismanagement and corruption are rampant.

Several Illinois cities have recently borrowed tens of millions via POBs, including the cities of McHenry and Freeport, and so has the Addison Fire Protection District, which took on $34 million in new debt. They’re all betting they can earn more in the financial markets than the interest costs of the loan they took out.

Official Wheaton board minutes reveal the city is also considering borrowing millions via POBs. Bankers from Baird and Marquette Associates have presented the idea, with Baird showing examples of Wheaton borrowing $56 million, equal to the city’s entire public safety pension shortfall.

Author(s): Ted Dabrowski

Publication Date: 20 April 2021

Publication Site: Wirepoints

What Makes You More Likely to Get Side Effects From COVID Vaccine?

Mary Pat Campbell
What Makes You More Likely to Get Side Effects From COVID Vaccine?

Excerpt:

Chicago’s top doctor, Chicago Department of Public Health Commissioner Dr. Allison Arwady, broke it down Thursday, saying in Facebook Live that younger people are more likely to experience side effects “because younger people have more robust immune system broadly.”

And, according to Loafman, the body’s immune system is what creates the symptoms.

“That’s simply a reflection of the immune response, just the way we have when we get ill,” he said.

Publication Date: 13 April 2021

Publication Site: NBC Chicago

How much will your city get from Illinois’ share of the Biden stimulus and how will they spend it? – Wirepoints

Mary Pat Campbell
How much will your city get from Illinois’ share of the Biden stimulus and how will they spend it? – Wirepoints

Graphic:

Excerpt:

There’s little doubt that Illinois politicians are salivating over the $13.7 billion windfall they’re about to spend. Those billions are Illinois’ share of the $350 billion in aid dedicated to state and local governments, a key part of President Biden’s $1.9 trillion stimulus package passed earlier this year. The state of Illinois itself will get $7.75 billion and the remaining $6 billion will go directly to counties and cities.

The numbers are big. Take the city of Berwyn, Illinois, which is set to receive $32 million in stimulus dollars, according to a data release from the Illinois Municipal League. The city’s take is equal to a whopping 81 percent of its 2019 general budget. Peoria expects $46 million, or nearly half of its $100 million budget. And the city of Chicago will get nearly $2 billion, worth 60 percent of its general budget, based on financial data from the Illinois Comptroller. 

Even the state, which nearly broke even in revenues in 2020 compared to 2019, will get more than $7.75 billion, nearly a fifth of its budget.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 13 April 2021

Publication Site: Wirepoints

Federal cash infusion won’t erase Illinois’ chronic fiscal strains

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202104131450SM______BNDBUYER_00000178-cc00-d414-abf8-efa2047e0001_110.1#new_tab

Excerpt:

S&P Global Ratings warns of the pressures posed by the Illinois? burdensome pension tab even as it maintains scheduled contributions despite glaring structural woes cited in the recently published three-year budget forecast from the legislature?s non-partisan Commission on Government Forecasting and Accountability.

When applying fiscal 2022 proposed spending levels, the state?s roughly $5 billion bill backlog could jump to $9.9 billion, and $10.6 billion by the end of fiscal 2024, and a $1.2 billion fiscal 2022 deficit rises to $1.9 billion or $2.3 billion if spending grows by five- and 10-year historical rates of 2.7% or 3.2%, respectively.

The numbers look bleaker with the backlog skyrocketing to record levels of between $19.1 billion and $20.5 billion based on a fiscal 2021 spending base.

Author(s): Yvette Shields

Publication Date: 13 April 2021

Publication Site: Fidelity Fixed Income

Relief from SALT cap for Illinois pass-through businesses may be on the way – Wirepoints

Mary Pat Campbell
Relief from SALT cap for Illinois pass-through businesses may be on the way – Wirepoints

Excerpt:

It’s Senate Bill 2531. The bill is sponsored by Sen. Win Stoller (R-Germantown Hills) and it has picked up additional sponsors from both parties. It would allow a small business to elect to be taxed at the entity level, instead of letting the income pass through to their personal return. The owner would then claim an offsetting credit on their state return. It passed the Senate Revenue Committee with a vote of 9-0 and now goes to the Senate floor for further consideration.

We hope and expect the bill will become law. While we support the $10,000 federal SALT cap, it’s entirely appropriate for Illinois to facilitate exceptions recognized by the IRS, just as other states are doing. At least fourteen other states have passed or are in the process of passing similar legislation. The legislation could help up to 400,000 Illinois small business owners save thousands of dollars annually on their federal tax filings, according to Stoller.

Author(s): Mark Glennon, Ted Dabrowski

Publication Date: 17 April 2021

Publication Site: Wirepoints

Moody’s: New Chicago firefighter pension law is “credit negative”

Mary Pat Campbell

Link: https://capitolfax.com/2021/04/12/moodys-new-chicago-firefighter-pension-law-is-credit-negative/

Excerpt:

House Bill 2451 eliminates a formula based on birth date that provided lower pension COLAs to certain retired firefighters. As a result of the new law, all retirees that are considered “Tier 1” members of the FABF will now receive a 3% COLA annually on their pension, with no cumulative cap. Before House Bill 2451, retired firefighters in Tier 1 would have received a 1.5% COLA, subject to a 30% cumulative cap, if born on or after January 1, 1966. Members of the FABF receive Tier 1 benefits if hired before January 1, 2011, while those hired on or after January 1, 2011 receive less generous Tier 2 pension benefits.

One potentially advantageous effect of House Bill 2451 is that it forces immediate recognition of 3% COLAs for Tier 1 members. The state law governing Chicago firefighter pension COLAs has been amended on several occasions in the past to alter the birth date that would determine eligibility of a Tier 1 retiree for a 3% COLA versus a 1.5% COLA. The most recent such change occurred in 2016, when the law was updated to provide a 3% COLA to all Tier 1 firefighters born before January 1, 1966, compared to January 1, 1955, before the change. That change, in addition to several other provisions, triggered a roughly $227 million (4.5%) increase to the actuarial accrued liability reported by the FABF as of the December 2016 actuarial snapshot.

Author(s): Rich Miller

Publication Date: 12 April 2021

Publication Site: Capitol Fax

Public Pension Plans Are Thirsty for Liquidity

Mary Pat Campbell

Link: https://www.plansponsor.com/public-pension-plans-thirsty-liquidity/

Excerpt:

Chicago’s municipal pension plan recently redeemed $50 million from a large-cap equity fund. Seems like a non-event. Happens all the time. But the reason the pension plan did so is chilling: It was done specifically in order to make pension benefit payments. This should be a cautionary flag to underfunded pensions and to the state and municipal governments that sponsor them.

….

First, when pensions are underfunded they have a tendency (or need) to take on more risk in order to try to generate higher returns.

For example, underfunded pension plans are increasing their allocations to private equity. Nothing wrong with that. But that means more of the portfolio is illiquid. It would be very unlikely that private equity positions would be sold to “make payroll,” specifically because they are so illiquid. But this leaves fewer assets that are liquid enough to be sold, and that increases the pressure on those liquid assets to be sold at a decent price. Moreover, if the plan has significant assets in liquid securities, such as large-cap equities or Treasurys, those assets can easily be sold, but then the portfolio will be out of balance and will require additional trading and rebalancing anyway.

Secondly, the pension plan must keep more cash on hand than it otherwise would. If your policy portfolio calls for a 3% allocation to cash, that is designed for diversification and dry powder. But a pension plan sponsor should be providing significant amounts of cash into the pension each year. If the sponsor is not making its contributions, then the pension plan has to carry more cash than it otherwise would.

Author(s): Charles Millard

Publication Date: 7 April 2021

Publication Site: Plansponsor

Pritzker Lobbies For Huge Federal Tax Cut For The Rich With Dishonest Letter To Biden – Wirepoints

Mary Pat Campbell
Pritzker Lobbies For Huge Federal Tax Cut For The Rich With Dishonest Letter To Biden – Wirepoints

Graphic:

Excerpt:

The SALT cap increased “taxes on hardworking families,” says the letter. That’s “untenable given the dire economic conditions caused by the pandemic.” It goes on to say, “In short, middle-class Americans are struggling under this federal tax burden, while corporations – which are still able to fully deduct SALT as business expenses – are profiting because of the same law. The negative impacts of the SALT cap on middle class families are particularly egregious when you consider that in the states most affected by this cap, the federal government already takes more in federal taxes than the states receive in federal support, effectively subsidizing federal payments to other states.”

Tax analysts on the right and the left have documented why that’s completely false. The cap on SALT deductions was a windfall for the middle class and hammered high income taxpayers. The conservative Tax Foundation explained why here, and the liberal Institute on Taxation and Economic Policy, ITEP, wrote this in an article opposing elimination of the cap:

ITEP estimated that this would cost more than $90 billion in a single year. We found that 62 percent of the benefits would go to the richest 1 percent and 86 percent would go to the richest 5 percent. There is no state where this is a primarily middle-class issue. In every state and the District of Columbia, more than half of the benefits would go to the richest 5 percent of taxpayers. In all but six states, more than half of the benefits would go to the richest 1 percent. 

Author(s): Mark Glennon

Publication Date: 5 April 2021

Publication Site: Wirepoints

Moody’s warns pension benefit increase for Chicago firefighters a ‘credit negative’ – Quicktake

Mary Pat Campbell
Moody’s warns pension benefit increase for Chicago firefighters a ‘credit negative’ – Quicktake

Graphic:

Excerpt:

Anybody who’s been following Chicago knows the last thing the city needs is more debt. Chicagoans are being swamped by pension debts, already the biggest per-capita burden of any major city in the country. By signing the new legislation into law, Pritzker has shoved more debt onto ordinary Chicagoans.

Not surprisingly, Moody’s has called the action “credit negative…because it will cause the city’s reported unfunded pension liabilities, and thus its annual contribution requirements, to rise.”

…..

Two important facts to note about the city’s pension shortfalls. First, Chicago officially says its four city-run pension funds – police, fire, municipal and laborers – are short by some $31 billion. But Moody’s puts the number at nearly $47 billion using more realistic, market-based assumptions. 

Second, those debt numbers don’t include the Chicago Public Schools. When you add its $23 billion (Moody’s, 2018) pension shortfall, the total burden on Chicagoans for Chicago-only debts jumps to $70 billion. Divvy that between Chicago’s 1.04 million households and you’re talking about $67,000 in debt each. And that number far underestimates the real household burden considering nearly 20 percent of the city’s population don’t have the means to contribute a dime to that pension shortfall. 

Publication Date: 10 April 2021

Publication Site: Wirepoints