Posted on 09/17/2016 10:35:16 AM PDT by Lorianne
It has gotten so bad that the phrase “Pension Crisis” made it into Wikipedia. It’s the perplexing reality that municipal, state, federal, and corporate pensions in the US and similar schemes around the world are so badly underfunded that it will be impossible to fulfill the promises by a wide margin. By many trillions of dollars.
With state and municipal pension funds in the US, the situation is particularly tricky because the beneficiaries are voters and employees of the government, and politicians of all stripes bought their votes with promises of low contributions and rising benefits. They got away with it for decades because no one cares about “underfunded pensions.” Even the term makes people’s eyes glaze over.
But someone is going to pay. And it’s not going to be the politicians.
This is how they will pay for it in Chicago – the city whose credit rating Moody’s cut by two notches to junk in April last year, and whose interest payments, despite historically low interest rates, have continued to skyrocket as it borrows more and skids deeper into the sinkhole of its own making.
On Wednesday, the City Council approved Mayor Rahm Emanuel’s scheme to bail out its largest and worst-off pension fund, the Municipal Employees’ Annuity and Benefit fund, which would otherwise be insolvent within ten years – and a lot quicker if markets have a hissy fit.
Despite seven years of rampant asset price inflation, and asset bubbles nearly everywhere, the fund’s obligations are only 20% funded. It forms part of Chicago’s $34 billion in retirement debt, accumulated over the decades by politicians making promises to buy votes and support from special interest groups. But neither the beneficiaries nor taxpayers via the city contributed enough to pay for those promises.
To save this one pension fund out of its four pension funds from insolvency, the city is jacking up water and sewer levies by 33%, phased in over a few years. Property owners in Chicago will pay, one way or the other, $3 billion into the fund by 2022, up from $1 billion under the prior scheme. Despite these billions of dollars involved, the fund covers only 77,000 workers and retirees.
Beyond 2022, additional revenues must be extracted from the hapless people to keep bailing out the fund for decades to come.
In theory, the scheme will be 90% funded in 40 years – “in theory,” because in practice, long-term projections like this never work out. There are recessions and market crashes that draw a red line through optimistic assumptions.
Even this won’t be a cure but it would “head off a financial disaster,’’ explained finance committee chairman Edward Burke before the vote.
The other three pension funds of the city will also be bailed out. For residents and property owners, it will be like, to coin a new phrase, “Chicago water torture”: one drop at a time, whereby the drops are getting more frequent and bigger.
Trump needs to vocally define everything he inherits.
He who lives by the government Ponzi scheme starves by the government Ponzi scheme.
AND ALL of them could be VOIDED tomorrow if we used CONTRACT LAW already in Practice.
Every Last one of these Defined Benefit Plans are MATHEMATICALLY IMPOSSIBLE to fulfill, which means they were FRAUDULENT from DAY ONE
FRAUD EVISCERATES ALL CONTRACTS!!!
People will soon realize that they don’t have to pay if they leave Illinois.
Typical....your home becomes nothing but an ATM machine for the government to raid.
This is all but criminal. The bailout is all but criminal.
Until you run out of other people's money.
They just need a good slogan...
“Chicago water: it’s got more electrolytes!”
The unions and the politicians they paid to get elected are the ones that agreed to these contracts, even though a third party, the taxpayers, are on the hook to pay for them.
In theory, the taxpayers voted for the politicians so they are part of the contract.
Government: The home invasion robbery that never ends...
Fraud is still Fraud, regardless of the Players.
ALL of them can be VOIDED tomorrow using Basic Existing Contract Law. and all the VICTIMS should have a Right to SUE for DAMAGES, EVERY PERSON on the Negotiating Team as well as the persons that APPROVED said FRAUDULENT CONTRACT!
The cities will chase off all the responsible, ethic and hard-working taxpayers leaving behind a SHARK TANK.
Unless some enterprising market could emerge for a cheaper source of water from rainwater tapping systems.
Many suburban municipalities will likely be impacted as well because they purchase Lake Michigan water from Chicago.
I don’t know. Defined benefit plans were the norm for a long time. Of course if you have crooks managing them, they are bound to fail. By crooks I include politicians, union bosses, and shady corporate types.
For what it’s worth, I am currently drawing on a defined benefit plan. 14 1/2% of my gross salary was deducted from my pay. In addition, my employer (a public school) also paid in 14 1/2 %. I own all of the money I paid in and can withdraw it if I wish. (Of course, I’d be giving up my pension if I did so). When all of the money I paid in is drawn down, then the plan starts on the employer’s part. If I outlive both sets of cash, I still get my pension. My plan appears to be sound—not even whispers of problems with it—but then I’m not in Illinois.
The one downside is that Social Security penalizes me 60% of what I could draw from them from jobs I had before going into teaching. This is so I’m not “double dipping”.
I wasn’t disagreeing with you, just pointing out the fact that in negotiating these contracts with public employees, the politicians and the unions are working against the taxpayers.
US unfunded liabilities is up to 103 Trillion.
http://www.usdebtclock.org/
Yup.....over five thousand dollars a year in property taxes for my small ranch house.
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