Illinois Governor Seeks to Sell State Buildings and other Assets to Pay Pensions

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Governor Prtizker released details of his plan to save Illinois. He made three of three of the worst possible choices.

Intergenerational Theft

The Chicago Tribuner reports Gov. J.B. Pritzker's administration considering selling state buildings and land to pay for pensions.

Bear in mind, assets like tollways are supposed to fund road maintenance, not pensions.

That's just the beginning of the Illinois madness.

Trifecta of Madness

Wirepoints funder Mark Glennon comments on the Illinois Trifecta: Prtizker Administration’s Pension Plan for Illinois Will Center on Three Strokes of Folly.

What follows is a guest post by Mark Glennon.

Deputy Governor Dan Hynes today released the first details of the Pritzker Administration’s plan for addressing Illinois’ pension crisis.

The administration will pursue three of the worst ideas available:

  • First, the state will borrow to pay off pension debt by offering a $2 billion pension obligation bond. We and many others have already written very extensively on why pension obligation bonds are irresponsible. Some of those articles are linked below. One credit card to another solves nothing and adds risk.
  • Second, the state will kick the can on its ramp for taxpayer pension contributions out seven years. The new goal for reaching 90% funding (which is still inadequate) will be 2052. Your grandchildren will fully understand why pensions are called “intergenerational theft.
  • Third, the state will gift public assets to the pensions. The particular assets and their value remain to be identified, but speculation has centered on the Illinois Tollway, the Illinois Lottery and government office buildings. The concept goes by the name “asset transfer.” We explained why it’s a sham in an article just yesterday. A pension actuary writing in Forbes did the same.

The combined effect of the first two is odd. All $2 billion from the bond offering will go immediately to the pensions, but the regularly scheduled pension contribution for the upcoming fiscal year will drop by $800 million.

That $800 million will be needed by the administration to balance the upcoming budget, to which it has firmly committed. Pritzker’ budget speech will be on February 20 and will have the details.

We have no idea how Pritzker will be able to claim a balanced budget, even with that $800 million and even using all the gimmicks available under the phony budget accounting rules used by the state. Those phony accounting rules show the upcoming budget to be $3.2 billion short, according to the Pritzker administration.

But see my colleagues’ article showing why, if the state were truly paying its bills, the shortfall would be $9 billion. In other words, the true shortfall amounts to almost one-fourth of the budget, almost three times the government number Pritzker is using, which most of the press falls for. We can’t say this often enough: The budget numbers the regular press focus on are junk, and shortfalls of the magnitude Illinois faces cannot be fixed without drastic, structural remedies.

The pension specifics were part of a speech delivered by Hynes at the City Club, the full text of which is linked here.

Also in the speech, Hynes repeatedly trumpeted a progressive income tax as the gold at the end of the rainbow. “The fair income tax will change the arc of this state’s finances in a very positive way – forever,” he said. He already has some of it spent. The state, he says, will dedicate $200 million per year out of the additional revenue from a progressive income tax to pensions, in addition already scheduled taxpayer contributions.

Good grief. $200 million per year is almost meaningless. Currently, pension and related healthcare contributions are running about $6 billion short of what actuaries say they should be, as my colleagues piece today explains.

And the progressive tax requires a constitutional amendment that the public will have to vote on, which can be no earlier than 2020. We think its chances are slim. Pritzker and his party seem drunk on their overwhelming election success last year, believing their own you-know-what about the progressive utopia they painted for voters. In reality, the “fair tax” panacea for our fiscal crisis is myth, which is why Pritzker has never offered specifics.

We’ve documented why repeatedly. It either won’t raise much money or the rates would be absurdly high, even for the middle class. Pritzker’s own budget advisor during his transition offered a specific set of rates that he admitted would raise just $2 billion per year, not even enough to cover the current budget deficit.

Reality is on the march. So is math. In its first skirmish with them today, the Pritzker administration fled the battlefield.

Mark Glennon is founder of Wirepoints.

Short Synopsis

The taxpayer exists to support the pensions of civil servants.

Mike "Mish" Shedlock

Comments (37)
No. 1-13
Schaap60
Schaap60

Is there a term that can more accurately replace "civil servant"?

Tengen
Tengen

What's next? Guided tours to retrace Ferris Bueller's steps in the Art Institute of Chicago? Blues Brothers tours, complete with Illinois nazis?

Maybe they could rip the Steve Bartman seat out of Wrigley and auction it off, or Billy Corgan could busk for cash. The possibilities are endless!

leicestersq
leicestersq

The mystery of all of this is why bondholders are willing to pay for the debt to make all of these shenanigans possible. The whole thing can come crashing down in an instant and bondholders will not be repaid. Why are they supporting this madness? I would very much like to know.

Snow_Dog
Snow_Dog

“Reality is on the march. So is math.”

Reality? Reality is Joe Sixpack doesn’t understand math. He went to public schools and was graduated without learning much of anything useful.

Not to worry. He knows civil servants are there to serve him, because he’s a citizen. LMAO.

Realist
Realist

I continue to be shocked by the inability of the US to manage both pensions and health care.

2banana
2banana

Public unions are, by far, the largest all time money donors in political campaigns.

They give 99-1 to democrats. No democrat could be elected without their support.

Democrats will not touch one public union pension while there still is a taxpayer asset to tax (or raise taxes) or a public asset to sell or monitize to Wall Street.

It will end the same in the end - misery, ruin and bankruptcy. And with all public assets that can be sold to Wall Street.

It is insanity. But will allow Democrats to remain in power a few years longer.

Eventually, democrats are going to demand a Federal bailout (just like GM). Because a "promise is a promise" - no matter how fiscally irresponsible.

ReadyKilowatt
ReadyKilowatt

Maybe they can sell the buildings to the guys who sold the worthless bonds and other investments the pensions are using. Then they can just avoid the middle man and just extract rents directly from the taxpayers.

St. Funogas
St. Funogas

Every time I read the latest pension story, it really brings out the evil side of me. The side that is really, truly, enjoying watching the S.S. Illinois turning hard to starboard so they can sail straight for the iceberg. When stupidity is this blatant, this obvious, and this insane, it is no longer maddening, but supremely entertaining. I don't even feel sorry for anyone who lives there. If they are so stupid and lazy they keep voting instead of heading to Springfield with torches, pitchforks, and AK-47's, they deserve everything that is coming! Someone needs to update the Anarchist Cookbook and start selling it on the streets of Chicago.

jivefive99
jivefive99

Remember the PBS Chnl 11 Frontline special of not too long ago that revealed that the overwhelming majority of people do NOT save and invest very effectively for their retirement. Pensions are "guaranteed" income each month, despite how well your other investments in your retirement portfolio do. Reduce or getting rid of pensions leaves large numbers of old people with compromised retirement income -- an even BIGGER problem than Illinois' problem. Despite grandiose brags from people on how well their stock market and real estate picks are doing, most people struggle to stay even in their investments.

ksdude
ksdude

So when they can't make the payments on the building they sell the investors sue them in court and they are paid with pension funds?

Guinny_Ire
Guinny_Ire

You're writing is returning back to the quality I once associated with it.

When we were taught history in school so long ago, it was rife with stories of those in power who attempted to overturn power or take advantage of the people or both. They were imprisoned or arbitrarily executed. History is written by the victors but there must be a grain of truth in what we learned. What I do know is I can no longer remember the last public servant to see jail time other than your state governor, the Bush aide, and in the public sector, the Enron execs. I'm having a very hard time finding anyone after the early 2000s. Illinois should start the first public witch hunt of those elected and appointed who enriched themselves via pensions and other perks and go after them as criminals. They should set the example and who know, maybe California will follow their example.

They'll sell Chicago real estate instead.

Stuki
Stuki

Retail bondholders are confident they can always sell, if at a slight discount, to bondholders closer to the Federal government than themselves. And so on, up the chain, until the bonds, now bought at a meaningful discount, are owned by someone who gets to place Hank Paulson on TV to babble about "tanks in the streets..." And then, by the magic of debasement theft and laws supporting indentured servitude, all the lies and trash, are suddenly money good.

The whole pyramid of these profiteers, are confident the population is dumb and indoctrinated enough to, again, fall for the sham that tanks in the streets is somehow a bad thing, compared to where we are currently at. And so far, Americans have done nothing to disprove their faith in our ignorance, stupidity, pliability and lack of any backbone whatsoever.

Americans can stop this idiocy dead in it's tracks by voting in someone who ends the Fed yesterday, and defaults on all Federal debt today. Done. One problem solved. Just as easy as that. No factories nor farms nor roads nor machinery nor skills harmed one bit.

Chris P
Chris P

Stuki There are two things you won't mess with in this country or end up dead. The Fed and military budget.