Unfunded pensions are why Chicago will be the next Detroit

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Unfunded pensions are why Chicago will be the next Detroit

[cap­tion id=“attachment_86229” align=“alignright” width=“242”] Chicago’s South Side[/caption]

By John Ruberry

I’ve been say­ing that Chicago will be the next Detroit for years, and on Thurs­day, syn­di­cated talk radio show host – and for­mer Tea Party con­gress­man–Joe Walsh, was mak­ing the same pre­dic­tion on his program.

Walsh was dis­cussing a just-​released pen­sion study which the Chicago Sun-​Times reported on.

Stan­dard & Poor’s sur­veyed pen­sion oblig­a­tions in New York, Los Ange­les, Chicago, Philadel­phia, San Fran­cisco, San Diego, San Jose, San Anto­nio, Phoenix, Jack­sonville, Dal­las, Hous­ton, Colum­bus, Indi­anapo­lis and Austin.

Chicago per­formed the worst across the board — reg­is­ter­ing the high­est annual debt, pen­sion post-​employment ben­e­fits costs as a per­cent­age of gov­ern­men­tal expen­di­tures and the high­est debt and pen­sion lia­bil­ity per capita.

And there is more:

The report noted that the “median weighted pen­sion funded ratio of 70 per­cent” for the 15 cities “under­lies a wide range of posi­tions with Chicago only 23 per­cent funded across all plans and Indi­anapo­lis the most well-​funded at 98 percent.”

Chicago’s pen­sion bur­den is $12,400 per per­son – more than dou­ble that of New York City and it has the low­est bond rat­ing of those 15 sur­veyed cities. The S&P report says that in 2015 Chicago “only made 52 per­cent of its annual legally required pen­sion contribution.”

If you are look­ing for more bad news you came to the right place. More than five times as many peo­ple live in New York and Los Ange­les com­bined – but there were more mur­ders in Chicago last year than the total in both of those cities. As for Chicago’s pop­u­la­tion, it’s at a 100-​year-​low. Lead­ing the exo­dus are mid­dle class blacks.

[cap­tion id=“attachment_96011” align=“alignleft” width=“207”] CPS school on the West Side that closed in 2013[/caption]

Chicago’s jobs pro­gram for peo­ple with edu­ca­tion degrees, bet­ter known as Chicago Pub­lic Schools, has been cited by other mid­dle class ex-​Chicagoans, includ­ing your hum­ble blog­ger, for decades as the main rea­son they aban­doned the city. CPS bonds are rated as junk. Lack of money may lead to the last thir­teen days of the school year being can­celled – and the CTU may add a four­teenth with a one-​day strike in May to protest that early shut­down. Yep, I don’t get it either.

CPS offi­cials have been bat­tling the union for years to force teach­ers to pay more into their own pen­sion funds. Yeah, they can afford it – of teach­ers in the largest school dis­tricts, CPS teach­ers rank in the top three in pay. But hey, the union mem­bers prob­a­bly are think­ing, “Why should we pay more when we have so many tax­pay­ers who can foot the bill?”

But that’s the mind­set that got Chicago into its mess. Oh that, and public-​sector unions con­tribut­ing heav­ily into the cam­paign funds of Demo­c­ra­tic politicians.

Crit­ics of my Chicago-​is-​the-​next-​Detroit hypoth­e­sis point out that large cor­po­ra­tions have been mov­ing their cor­po­rate head­quar­ters into Chicago of late, the most promi­nent exam­ples are ConA­gra relo­cat­ing its HQ from Omaha to Chicago and McDonald’s, which will move back to the city after four decades in sub­ur­bia. But no one can say how many of these cor­po­rate big shots will live in Chicago.

Two years ago Chicagoans were slugged with the largest prop­erty tax increase in the city’s his­tory to pay for, yes, unfunded pen­sion lia­bil­i­ties. Last year Chicago water and sewer taxes were hiked. Remem­ber what what I wrote ear­lier, Chicago’s pen­sions are only 23-​percent funded. Does any­one think that there aren’t addi­tional mas­sive tax increases in Chicago’s future? And when the pro­duc­ing seg­ment of Chicago is even more depleted – chased out, that is – how will Chicago pay for street repair, schools, and snow removal – as well as ade­quate police and fire protection?

The Illi­nois Supreme Court recently ruled that public-​worker pen­sions can­not be reduced.

[cap­tion id=“attachment_95046” align=“alignright” width=“234”] Blog­ger in down­town Chicago[/caption]

Here’s what I base my Chicago dystopia pro­jec­tion on. Defend­ers of the sta­tus quo place blind faith into their hope that Chicago can some­how hang on until enough pen­sion­ers die, which prob­a­bly won’t be until the mid­dle of the cen­tury. They offer no cred­i­ble solu­tions. Noth­ing. They’re as delu­sional as Ger­ald O’Hara metic­u­lously count­ing out his Con­fed­er­ate bonds in Gone With The Wind–“All we have left” – after Gen­eral Robert E. Lee surrendered.

There’s a way out – chang­ing state law so munic­i­pal­i­ties and gov­ern­ment agen­cies can declare bank­ruptcy, which is some­thing Bruce Rauner, Illi­nois’ reform gov­er­nor, favors. But the Democ­rats and the public-​sector unions will never agree to that.

John Ruberry, who moved from Chicago to the sub­urbs in 1999, reg­u­larly blogs at Marathon Pun­dit.

Chicago’s South Side

By John Ruberry

I’ve been saying that Chicago will be the next Detroit for years, and on Thursday, syndicated talk radio show host–and former Tea Party congressman–Joe Walsh, was making the same prediction on his program.

Walsh was discussing a just-released pension study which the Chicago Sun-Times reported on.

Standard & Poor’s surveyed pension obligations in New York, Los Angeles, Chicago, Philadelphia, San Francisco, San Diego, San Jose, San Antonio, Phoenix, Jacksonville, Dallas, Houston, Columbus, Indianapolis and Austin.

Chicago performed the worst across the board — registering the highest annual debt, pension post-employment benefits costs as a percentage of governmental expenditures and the highest debt and pension liability per capita.

And there is more:

The report noted that the “median weighted pension funded ratio of 70 percent” for the 15 cities “underlies a wide range of positions with Chicago only 23 percent funded across all plans and Indianapolis the most well-funded at 98 percent.”

Chicago’s pension burden is $12,400 per person–more than double that of New York City and it has the lowest bond rating of those 15 surveyed cities. The S&P report says that in 2015 Chicago “only made 52 percent of its annual legally required pension contribution.”

If you are looking for more bad news you came to the right place. More than five times as many people live in New York and Los Angeles combined–but there were more murders in Chicago last year than the total in both of those cities. As for Chicago’s population, it’s at a 100-year-low. Leading the exodus are middle class blacks.

CPS school on the West Side that closed in 2013

Chicago’s jobs program for people with education degrees, better known as Chicago Public Schools, has been cited by other middle class ex-Chicagoans, including your humble blogger, for decades as the main reason they abandoned the city. CPS bonds are rated as junk. Lack of money may lead to the last thirteen days of the school year being cancelled–and the CTU may add a fourteenth with a one-day strike in May to protest that early shutdown. Yep, I don’t get it either.

CPS officials have been battling the union for years to force teachers to pay more into their own pension funds. Yeah, they can afford it–of teachers in the largest school districts, CPS teachers rank in the top three in pay. But hey, the union members probably are thinking, “Why should we pay more when we have so many taxpayers who can foot the bill?”

But that’s the mindset that got Chicago into its mess. Oh that, and public-sector unions contributing heavily into the campaign funds of Democratic politicians.

Critics of my Chicago-is-the-next-Detroit hypothesis point out that large corporations have been moving their corporate headquarters into Chicago of late, the most prominent examples are ConAgra relocating its HQ from Omaha to Chicago and McDonald’s, which will move back to the city after four decades in suburbia. But no one can say how many of these corporate big shots will live in Chicago.

Two years ago Chicagoans were slugged with the largest property tax increase in the city’s history to pay for, yes, unfunded pension liabilities. Last year Chicago water and sewer taxes were hiked. Remember what what I wrote earlier, Chicago’s pensions are only 23-percent funded. Does anyone think that there aren’t additional massive tax increases in Chicago’s future? And when the producing segment of Chicago is even more depleted–chased out, that is–how will Chicago pay for street repair, schools, and snow removal–as well as adequate police and fire protection?

The Illinois Supreme Court recently ruled that public-worker pensions cannot be reduced.

Blogger in downtown Chicago

Here’s what I base my Chicago dystopia projection on. Defenders of the status quo place blind faith into their hope that Chicago can somehow hang on until enough pensioners die, which probably won’t be until the middle of the century. They offer no credible solutions. Nothing. They’re as delusional as Gerald O’Hara meticulously counting out his Confederate bonds in Gone With The Wind–“All we have left”–after General Robert E. Lee surrendered.

There’s a way out–changing state law so municipalities and government agencies can declare bankruptcy, which is something Bruce Rauner, Illinois’ reform governor, favors. But the Democrats and the public-sector unions will never agree to that.

John Ruberry, who moved from Chicago to the suburbs in 1999, regularly blogs at Marathon Pundit.