Tag: Illinois

The Chicago Park District’s 30% Funded Pension Plan – And More Tales Of Illinois’ Failed Governance

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2021/06/07/the-chicago-park-districts-30-funded-pension-planand-more-tales-of-illinois-failed-governance/?sh=7ce1216054fa

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The Illinois legislature ended its regular legislative session on May 31, in a flurry of legislation passed late into the night. One of those bills was a set of changes to the 30% funded pension plan of the Chicago Park District. Were these changes long-over due reforms, or just another in the long line of legislative failures? It’s time for another edition of “more that you ever wanted to know about an underfunded public pension plan,” because this plan illustrates a number of actuarial lessons.

80% is not OK. Governance – who gets to set the contributions? Funded status can collapse very quickly and be very difficult to rebuild. Need to use actuarial analysis not just legislator’s brainstorms

Author(s): Elizabeth Bauer

Publication Date: 7 June 2021

Publication Site: Forbes

Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

Mary Pat Campbell
Illinois 2022 budget: The state’s financial cliff will be waiting after the federal largesse runs out – Wirepoints

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Wirepoints calculates that retirement costs will consume 26 percent of the 2022 budget. The state is set to contribute $9.4 billion in General Funds to pensions, pay $777 million in pension bond costs, and pay an estimated $1 billion in retiree health costs.

In total, that’s $11.2 billion of the $42.3 billion budget consumed by retirement expenditures.

On top of the payments from the General Fund, another $1.2 billion in pension payments will come from other budget funds, meaning the state’s total retirement costs will be an estimated $12.4 billion in 2022.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 2 June 2021

Publication Site: Wirepoints

With $300 billion state pension liability, lawmakers approve Tier III plan for one unit of Chicago government

Mary Pat Campbell

Link: https://www.thecentersquare.com/illinois/with-300-billion-state-pension-liability-lawmakers-approve-tier-iii-plan-for-one-unit-of/article_a2582218-c487-11eb-9e8a-fff0c619781e.html

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State Rep. Kelly Burke, D-Evergreen Park, did have one measure for Chicago Park District pensions. House Bill 417 brought a variety of changes, including bonding for paying pensions.

“They also create a Tier III for district employees where new employees will pay 11% of their salaries, instead of 9%, into the pension fund,” Burke said.

State Rep. Martin McLaughlin supported Burke’s bill, but said it neglects the statewide pension crunch as Democrats continue to pass new spending and new programs.

Author(s): Greg Bishop

Publication Date: 3 June 2021

Publication Site: The Center Square

New IRS migration data: Illinois third-biggest loser of people, biggest loser of incomes, to other states in 2019 – Wirepoints Special Report

Mary Pat Campbell
New IRS migration data: Illinois third-biggest loser of people, biggest loser of incomes, to other states in 2019 – Wirepoints Special Report

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Wirepoints’ analysis uses national state-by-state migration data compiled by the Internal Revenue Service. The IRS reviews tax returns annually to track when and where people move. It also aggregates the ages, income brackets and adjusted gross incomes of filers. 

That data shows Illinois continued to be a national outlier in 2019 when it comes to losing people and the money they earn:

Illinois lost 81,770 net tax filers and their dependents in 2019. Illinois’ losses were the third worst in the country, with only California and New York losing more residents, 165,355 and 152,703, respectively.

On a per capita basis, Illinois also ranked 3rd-worst for out-migration, with net losses of 0.64 percent of its population. Only Alaska and New York fared worse, with losses of 1.02 percent and 0.78 percent of their populations, respectively.

Author(s): Ted Dabrowski, John Klingner

Publication Date: 3 June 2021

Publication Site: Wirepoints

Op-ed: Illinois pension reform: Arizona provides a model worth another look

Mary Pat Campbell

Link: https://www.chicagotribune.com/opinion/commentary/ct-opinion-illinois-pension-reform-arizona-20210525-eb5z573ajbfdlhemyj25yij22i-story.html

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Which is why every politician and every voter in Illinois ought to know how Arizona managed its 2016 reform of the 48% funded Public Safety Personnel Retirement System, which had a cost-of-living adjustment calculation that everyone agreed was broken, including the unions themselves. But Arizona shares with Illinois a constitutional protection against pension changes, specifically stating that “public retirement systems shall not be diminished or impaired.”

So how did they implement this change? In a two-step process, the legislature passed reform legislation and then placed on the ballot a constitutional amendment which inserted a new clause into the state constitution: “Public retirement systems shall not be diminished or impaired, except that certain adjustments to the public safety personnel retirement system may be made as provided in Senate Bill 1428, as enacted by the fifty-second legislature, second regular session.”

This meant that the citizens of Arizona could vote on this pension change without having to worry about whether they were authorizing any unknown future changes to pensions that they might not have wanted.

Author(s): Elizabeth Bauer

Publication Date: 25 May 2021

Publication Site: Chicago Tribune

Forensic Investigation Of Chicago Police Pension Fund Underway

Mary Pat Campbell

Link: https://www.forbes.com/sites/edwardsiedle/2021/05/25/forensic-investigation-of-chicago-police-pension-fund-underway/?sh=6f9aac8c3ed9

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The Chicago Policemen’s Annuity and Benefit Fund (PABF) —commonly referred to as the Chicago Police Pension Fund—is one of the worst funded public pension plans in the United States today, with a funding ratio of only 23 percent.

A group of retired and disabled officers, along with widows, has long questioned the trustees and management of the struggling pension. Dissatisfied with the responses they received, the group formed the CPD Pension Board Accountability Group.

Funds were raised to commission an independent forensic audit of the pension and an expert in pensions was retained recently to conduct the review. As Forbes readers will recall, in my recent book, Who Stole My Pension?, I encourage pension stakeholders to band together to fund independent forensic investigations by pension experts of their own choosing—to get a second opinion as to whether the pension fiduciaries and Wall Street “helpers” they have hired to manage investments are doing a good job.

Author(s): Edward Siedle

Publication Date: 25 May 2021

Publication Site: Forbes

Illinois looks to its own coffers to pay off MLF loan

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202105211243SM______BNDBUYER_00000179-8fa2-d80e-a97d-8fa3c5720001_110.1#new_tab

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Illinois will dip into its growing pot of tax revenues to pay off the remaining $2.175 billion of outstanding debt borrowed through the Federal Reserve?s Municipal Liquidity Facility to manage last year?s COVID-19 tax blows.

The Treasury Department?s interim guidance, released May 10, barring debt repayment as an eligible use of American Rescue Plan dollars threw a wrench ? at least temporarily ? into Chicago’s and Illinois? plans to pay down debt issued last year. Illinois borrowed through the MLF and Chicago issued notes ahead of a planned scoop-and-toss borrowing to stave off deep cuts and layoffs as tax revenues plummeted. Both planned to pay off the debt with ARP funds.

Both planned to lobby the Treasury Department for a guidance change during a 60-day comment period, but Illinois was under the gun to make repayment plans ahead of a May 31 deadline to pass a fiscal 2022 budget. The state is receiving $8.1 billion from the ARP.

Author(s): Yvette Shields

Publication Date: 21 May 2021

Publication Site: Fidelity Fixed Income

‘Unsustainable’ pension woes hang over Chicago, Lightfoot says: In a speech to potential investors, the mayor combines optimism about the city’s future with a dire warning

Mary Pat Campbell

Link: https://www.chicagobusiness.com/greg-hinz-politics/chicagos-recovery-clouded-unsustainable-pension-woes-lightfoot-tells-investors

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Coupling a boatload of optimism with a dire warning, Mayor Lori Lightfoot told investors from around the country that Chicago is well positioned to recover from the COVID-19 pandemic and is a good place for them to allocate their cash.

But her remarks May 6 were far different on the subject of underfunded city pension funds, a problem that has bedeviled mayors for the past two decades.

Though workers deserve what they’ve been promised, she said, “that promise will not be met” unless Springfield lawmakers come to the table with financial aid or other reforms.

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Lightfoot did not use the word “default.” But some financial experts have warned that some of the city’s four pension funds, particularly those covering firefighters and police, may have trouble paying promised benefits within a few years if they don’t get help.

Author(s): Greg Hinz

Publication Date: 10 May 2021

Publication Site: Crain’s Chicago Business

Treasury Rescue Won’t Bail Out Chicago, New Jersey From Debt

Mary Pat Campbell

Link: https://news.yahoo.com/treasury-lifeline-won-t-bail-190632365.html

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(Bloomberg) — The U.S. Treasury Department is sending a message to states and cities that the billions in aid from the American Rescue Plan should provide relief to residents, not their governments’ debt burdens.

The department on Monday released guidance on how state and local governments can use $350 billion in funding from President Joe Biden’s $1.9 trillion rescue package. The funds are intended to help states and local governments make up for lost revenue, curb the pandemic, bolster economic recoveries, and support industries hit by Covid-19 restrictions. In a surprise to some, these funds can’t be used for debt payments, a potential complication for fiscally stressed governments that had already etched out plans to pay off loans.

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Illinois Governor J.B. Pritzker had suggested using some of the state’s $8.1 billion in aid to repay the outstanding $3.2 billion in debt from the Federal Reserve’s emergency lending facility and to reduce unpaid bills. Illinois was the only state to borrow from the Fed last year, tapping it twice. On Tuesday, Jordan Abudayyeh, a Pritzker spokesperson, said the administration is “seeking clarification” from the Treasury on whether Illinois can use the aid to pay back the loan from the Fed.

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The rule could also affect New Jersey, which sold nearly $3.7 billion of bonds last year to cover its shortfall during the pandemic. Assembly Republican Leader Jon Bramnick, a Republican, in April had called for Governor Phil Murphy, a Democrat, to use some of the federal aid to pay down the state’s debt.

Author(s): Shruti Date Singh, Amanda Albright

Publication Date: 11 May 2021

Publication Site: Yahoo Finance

Harvey, Illinois’ ARP relief dragged into pension fund conflict

Mary Pat Campbell

Link: https://www.bondbuyer.com/news/harvey-illinois-arp-relief-dragged-into-pension-fund-conflict#new_tab

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A Harvey, Illinois, pension fund claims it’s entitled to share in the Chicago suburb’s American Rescue Plan funds and wants to block the distribution of aid until a judge decides.

The financially stressed suburb south of Chicago, which has battled over the last decade with its public safety pension funds, the city of Chicago, and bondholders about its obligations, settled a legal dispute with its police and firefighters’ over past due payments in 2018.

The Firefighters Pension Fund is now staking a claim on Harvey’s share of the $350 billion for local, state and tribal governments in the coronavirus relief package President Biden signed in March, arguing Harvey’s share is subject to the 10% claim on city tax funds that flow through the state and are sent directed to the fund the city agreed to in a 2018 settlement.

Author(s): Yvette Shields

Publication Date: 14 May 2021

Publication Site: Bond Buyer

Illinois fires first salvo in lobbying effort to revise ARP guidance

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202105131555SM______BNDBUYER_00000179-66e7-df04-a57d-f6f7664e0001_110.1

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Illinois? borrowing through the Federal Reserve?s Municipal Liquidity Facility provided a lifeline for critical services during the COVID-19 pandemic, so the state should be allowed to use its incoming federal coronavirus relief money to pay it off, Comptroller Susana Mendoza tells the federal government.

The state?s $3.8 billion of short-term borrowing, including $3.2 billion through the Federal Reserve?s Municipal Liquidity Facility ?was essential for the continued performance of government services during the most fiscally challenging times for the state?s cash flow during the pandemic, all directly related to the COVID-19 crisis,? Mendoza wrote in a letter to Treasury Secretary Janet Yellen.

?We want to promptly repay federal taxpayers for the crucial help they provided us during the pandemic,? wrote Mendoza, the elected constitutional officer who manages state debt, pension, and bill payments. The state?s updated American Relief Plan share is $8.1 billion.

Mendoza fired off the letter Wednesday, two days after the release of a 151-page guidance on how states, local governments, and tribes can spend their shares of the $350 billion Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund that?s built into the American Rescue Plan.

The guidance imposes a sweeping ban on using funds to cover principal and interest repayment, even when the borrowing was directly related to the COVID-19 crisis.

Author(s): Yvette Shields

Publication Date: 13 May 2021

Publication Site: Fidelity Fixed Income News

New report has bleak economic outlook for Illinois

Mary Pat Campbell

Link: https://www.thecentersquare.com/illinois/new-report-has-bleak-economic-outlook-for-illinois/

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A ranking of each state’s competitiveness and economic outlook places Illinois near the bottom.

The American Legislative Exchange Council’s “Rich States, Poor States” report ranked Illinois 47th in the country based on 15 factors, such as income tax rates, property tax burden and debt service as a share of tax revenue.

“Generally speaking, states that spend less, especially on income transfer programs, and states that tax less experience higher growth rates than states that tax and spend more,” according to the report.

Author(s): Kevin Bessler

Publication Date: 13 May 2021

Publication Site: The Center Square