Illinois Ranks Worst For Pension Debt Rate (Look Around Folks)

The bad news about the fiscal-shape of Illinois continues to roll in.  Now, Moody's rates Illinois pension date rate the worst in the country.  By a mile.

Let's all remember who is in charge here in Illinois, ok?  Those three up there in the top photo?  Speaker Mike Madigan (and his Super Majority), Senate President John Cullerton (and his Super Majority) and Governor Pat Quinn.  They *control* Illinois.  And...this is what we get:

Illinois’ pension liability as a percentage of state revenue is far and away the nation’s highest, according to a new report from a major credit-rating agency. 

The state’s three-year average liability over revenue is 258 percent, Moody’s Investors Service says. 

The next closest? Connecticut, at about 200 percent.

The Moody’s report averaged the Illinois percentage from 2010 through 2012. In 2012 alone, the state’s rate was 318 percent. 

The state has a $100 billion deficit in the amount of money that should be invested in the portfolios of five state-employee pension accounts. Lawmakers adopted an overhaul plan last fall that cuts benefits and increases worker contributions to significantly cut that debt.

But the law has been challenged in court. A Sangamon County judge indicated last week he wants the case moved swiftly to appellate courts, suggesting the Illinois Supreme Court’s rejection in July of a law affecting retiree health insurance could prove a model for the pension challenge. 

Moody’s points out that even if the pension overhaul gets constitutional approval from the state’s high court, it still will take decades for Illinois government to dig out of its financial hole.

Something Stinks About DuPage Forest District Chief ERI Deal

News out of DuPage County this morning is that Arnie Biondo, the Executive Director of the DuPage Forest Preserve District - which is separate from the DuPage County Board - is taking an Early Retirement package just seven months after he started and via a tool that he helped convince the board to pass.

Listen...we totally get that this *technically* is legal and everything went according to the rules.  But...how can we, as taxpayers, not be totally fed up with this kind of stuff?  The only way we change this is get folks into spots on local government who can help shut these type of situations down.  The worst part?  I have a feeling that the majority of the board is made up of Republicans.

We need a change here, guys.  That's the only way we're going to win taxpayers trust again.

From the Daily Herald:

DuPage County Forest Preserve commissioners ended two weeks of speculation on Executive Director Arnie Biondo's employment status by naming his replacement Tuesday. 

John Lapinski, 53, the trial court administrator for DuPage County's chief judge, has signed a three-year contract that will pay him $160,000 a year, officials said. He will assume his new duties on Oct. 1. 

Biondo, who signed a three-year contract in December with a $188,000 annual salary, will take advantage of the early retirement program he helped implement a few months ago. 

"Our previous executive director, Arnie Biondo, took it upon himself and made the decision to avail himself of the early retirement program, and he is going to take that next step in his life," DuPage County forest preserve President Dewey Pierotti said.
Biondo's retirement is effective Sept. 2. He has been on paid leave for the past several weeks and will remain so until his departure date. District spokeswoman Susan Olafson said the exact worth of Biondo's retirement package has not yet been determined.
He'll be getting his retirement through the Illinois Municipal Retirement Fund, she said, "so that's all he'll be receiving. There are a host of considerations before IMRF provides us with a final calculation." 

Neither Lapinski nor Biondo attended Tuesday's meeting. 

Biondo's departure comes just weeks after the search firm that found him asked commissioners to evaluate his performance. The results of that survey haven't been released, but not everyone was happy with his performance.

What's interesting to us is that government funded comms people are wading into the comment section of the story and trying to defend the deal.

Sandack: "Ruling Ramifications Will Be Nothing Short Of Financially Devastating For The State & For Municipalities"

State Representative Ron Sandack is out today with an op-ed in Illinois Review regarding the far-reaching ramifications of the recent Illinois Supreme Court ruling on health care benefits for retirees.

Sandack also importantly notes that the State of Illinois isn't the only party that has to deal with the fall-out, but municipalities around the State will have some tough decisions to make.

From the piece:

Severe cuts to services, raising taxes significantly or amending our IL Constitution might be our only options for fixing Illinois' financial crisis after the Illinois Supreme Court ruled on July 3 that health insurance premiums are a benefit that is protected by the Illinois Constitution. It is a devastating blow to the State, which was relying on retiree contributions to their health care costs as a means for helping shore up the massively-underfunded state pension systems.

...Many believe Thursday's ruling sets the stage for the recently passed pension reform bill, SB01, to be found unconstitutional. While I fully respect the court's decision, I was admittedly surprised by the justices' expansive interpretation of the constitutional language as it relates to health care and how it will likely relate to our pension reform bill. 

With this ruling guiding future decisions, I believe the ultimate ramifications will be nothing short of financially devastating for the State and for municipalities that also must provide for employee pensions.

Naperville City Council: Abandoning Pensions for Council Members

Some sensible news coming out of the City of Naperville where the members of the City Council have formally decided to not allow future members of the City Council to participate in the Illinois Municipal Retirement Fund Pension program.  

From the Daily Herald:

It’s the end of the line for pension benefits for Naperville City Council members. 

Members of the council last week deleted pensions from the list of benefits they receive and amended the city code to reflect the change. As of March 4, council members no longer are eligible to participate in the Illinois Municipal Retirement Fund. 

...Future council members cannot contribute to or receive benefits from IMRF because a resolution passed Tuesday says their position no longer requires enough work each year to be eligible.

If pension obligations are already our biggest problem when it comes to government finances, this is asmall, but smart step that we here at the Truth Team would like to see followed by other local units of government.  Good for you, Naperville.  

The news coming out of DuPage County is getting better.  First it was Dan Cronin eliminating a unit of government, now it is pensions going away for elected officials.

Nobel Prize Winner: Illinois In *much* worse shape than people think

There's been lots of crowing - and complaining - about the recently passed (and signed) Pension "Reform" legislation by the Illinois General Assembly.   There were plenty of folks who said that the bill doesn't go far enough and compared it to putting a 'band-aid on a bullet hole'.  

Everyday, we learn more and that analogy might end up being appropriate.  And that the 'reform' that passed was a step in the right direction - but clearly was NOT enough.  

First, it was the news that the State income tax hike - passed in 2009 - as a "temporary" income tax hike appears to be headed to being a permanent 67% increase.  

Now, news is coming out that we weren't getting the full story on the breath of the pension problem.  

Everybody is an expert these days, but some are a bit smarter than others.  Chicago Magazine recently sat down with University of Chicago "Market Maven" and Nobel Prize winner Eugene Fama where they talked about Illinois and the state of bonds.

More bad news for Illinois as Dr. Fama 'lifts the kimono' a bit in talking about how Illinois discounts liabilities and what the implications are for Illinois' pensions problem:

How do you feel about buying Illinois bonds?Well, in the short term, they’re OK. In the long term, I wouldn’t touch them. The [state’s] pension liability is much worse than [the reported $100 billion that] people think. 

How so?States discount their liabilities—I think Illinois uses a discount of 7.5 percent [it’s between 7 and 8]—arguing that’s the expected [annual] return on their portfolio. But the expected return on a portfolio is totally irrelevant. What counts is, How risky are the claims that you have to meet? You’ve made a promise to your employees that you’ll pay them a certain fraction of their income that is usually indexed. Which means it’s a risk-free real outcome. What’s the risk-free real rate? Is it anywhere near 7.5 percent? It isn’t. Historically, it’s like 2 percent. A 2 percent discount rate would approximately triple Illinois’s pension liabilities.

Julie Eggers on Illinois Insurance, Pensions

State Representative Candidate Julie Bigham Eggers laid out her 'no perks plan' where she has signed a pledge stating that if elected to the Statehouse, she'd refuse the taxpayer-funded pension and healthcare program that all Illinois State Representatives and State Senators receive.  She went a bit further and even said she'd refuse the salary.

Then, she pressed her opponent Jerry Costello Jr. to do the same thing.

“The State of Illinois is broke and in desperate need of repair. Illinois’ deficit is $43.8 billion. Illinois’ pension debt is $83 billion. $126 billion – That’s how much Illinois is in debt thanks to our elected officials at our state capitol. Illinois legislators haven’t earned nor deserve the lavish Pension and Cadillac healthcare benefits paid for by the taxpayers. By signing this pledge, I will refuse to accept any taxpayer funded pension and healthcare benefits." 

“The state is broke and we cannot afford benefits like these for elected officials,” said Julie Bigham Eggers. “I will also refuse the part-time salary of $67,836 offered to me if elected State Representative. I ask my opponent Jerry Costello II (A.K.A Jerry Costello Jr.) to join me in signing the ‘No Perks Pledge’ to refuse to accept any taxpayer funded pension and healthcare benefits. I await his response.”

You can see the story on her site and download the signed pledge here.

SunTimes: "Mike Madigan's January pension scenario could lead to big property tax hike"

Dave McKinney, reporting from the DNC in Charlotte, picks up on Illinois House and Senate GOP Leadership's thoughts on Chicago Speaker Mike Madigan's bad plan to jam a bad pension bill down  the throats of Illinois residents.

"We fear that Democrat leaders' recent comments about passing a pension reform bill in January with Democrat-only votes will lead to a massive property tax increase, just like they shoved through the largest income tax increase on Illinois residents two years ago," Cross and Radogno's joint statement said.

That's the Chicago way, isn't it?  Speaker Mike Madigan knows that when he can't get his way, he'll just take his ball and go home and do whatever he wants.  Regardless of what the people of Illinois want.

You can read the full Cross & Radogno statement here.