Tales from the Illinois Exodus Part 5: Chicagoans finally awakening to pension bomb

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Tales from the Illinois Exodus Part 5: Chicagoans finally awakening to pension bomb

Illi­nois bicen­ten­nial flag on bottom

By John Ruberry

While I was on vaca­tion near Da Tech Guy’s base – New Eng­land – my Face­book feed was dom­i­nated by sto­ries on the sticker shock Chicagoans, par­tic­u­larly better-​off North Siders, received when they opened up their 2019 prop­erty tax bills.

One North Side woman, Liz Gold, when speak­ing of her gar­gan­tuan bill, told CBS Chicago, “This is out of control.”

More from CBS Chicago:

She and her fam­ily have lived in their 1890s rehabbed home in Ravenswood since 2001. They had hoped to stay until they were hit with their recent Cook County prop­erty tax bill that may force them out.

Over­all for the year it increased by 60%,” she said. “We are now pay­ing almost $21,000 — $20,200.”

She said they had been pay­ing $12,000.

Gold said the extra $800 a month they need to find to pay their new yearly bill erased any col­lege money they had hoped to save for their youngest son.

Most Chicagoans are receiv­ing a more mod­est tax hike, but here is a fam­ily that has to come up with $10,000 to con­tinue to live in their home.

Now Gold wants to move from Chicago, which, by the way, has funded its pen­sions only at 23 percent.

She won’t be alone if she joins the Illi­nois Exo­dus. Chicago has been los­ing pop­u­la­tion for sev­eral years and the Land of Leavin’ has been suf­fer­ing from declin­ing pop­u­la­tion for five straight years. Ris­ing taxes to pay for often lav­ish under­funded pen­sions for gov­ern­ment retirees, most of them mem­bers of public-​sector unions, are the heart of the prob­lem. Not just for Chicago, but across the state.

Public-​sector unions are sim­ply the gov­ern­ment employee wing of the Demo­c­ra­tic Party. And Chicagoans reflex­ively vote Demo­c­ra­tic. As they old Irish say­ing goes, “You made your bed, now sleep in it.”

Chicagoans mov­ing to sub­ur­ban Cook County – Chicago is the county seat – will be bur­dened by the county’s own woe­fully under­funded pen­sion pro­grams. And if Gold chooses the wrong sub­urb, they’ll have to belly up. Niles, for instance, the town just west of where I live, has far more retirees col­lect­ing pen­sions than active employ­ees. Chicago, although not as much as Niles, has more retirees than cur­rent work­ers. Math is a stub­born thing.

Illi­nois’ pen­sion plans are the worst funded among the states. Cur­rently 26 per­cent of the bud­get is ded­i­cated to pen­sions – more than the state spends on edu­ca­tion. Vot­ers in Illi­nois will be asked to approve an amend­ment to change the state from a flat-​tax income tax state to one with grad­u­ated rates. Mean­while the num­ber of Illi­nois retirees col­lect­ing six-​figure pen­sions increased by 74 per­cent since 2015. And after sit­ting on the bench for a lit­tle more than a decade, the aver­age retired judge in Illi­nois has col­lected $1.2 mil­lion in pen­sion income.

The Chicago edi­tion of the Illi­nois exo­dus is hav­ing a neg­a­tive effect on hous­ing prices. If prop­erty taxes go up by $10,000, you can expect home val­ues to decrease by that much. Or more – as not even Illi­nois politi­cians are dumb enough to claim that the lat­est rash of state and local tax hikes will be the final ones to fix the pen­sion bomb.

Out­side of Chicago, there are more pen­sion bombs. Rockford’s mayor says that pen­sion pay­ments might con­sume 60 per­cent of its bud­get by 2025. Pen­sion oblig­a­tions forced Peo­ria last year to lay­off 27 munic­i­pal employees.

Chicago’s new mayor, Lori Light­foot, has sug­gested that the state – I hope she knows that it has its own pen­sion prob­lems–assume the pen­sion oblig­a­tions of her city and other local gov­ern­ments. Illi­nois’ new gov­er­nor, JB Pritzker, is under­stand­ably cool to the idea.

That’s like hav­ing Puerto Rico trans­fer­ring its finan­cial prob­lems to Venezuela.

There is one way out of this mess, as I’ve said before. The Illi­nois con­sti­tu­tion needs to be amended to elim­i­nate the pen­sion guar­an­tee clause. Years ago a Repub­li­can gov­er­nor signed into a law pen­sion cost-​of-​living increases at three per­cent com­pounded inter­est. Those increases need to go.

John Ruberry reg­u­larly blogs at Marathon Pun­dit.

Illinois bicentennial flag on bottom

By John Ruberry

While I was on vacation near Da Tech Guy’s base–New England–my Facebook feed was dominated by stories on the sticker shock Chicagoans, particularly better-off North Siders, received when they opened up their 2019 property tax bills.

One North Side woman, Liz Gold, when speaking of her gargantuan bill, told CBS Chicago, “This is out of control.”

More from CBS Chicago:

She and her family have lived in their 1890s rehabbed home in Ravenswood since 2001. They had hoped to stay until they were hit with their recent Cook County property tax bill that may force them out.

“Overall for the year it increased by 60%,” she said. “We are now paying almost $21,000 — $20,200.”

She said they had been paying $12,000.

Gold said the extra $800 a month they need to find to pay their new yearly bill erased any college money they had hoped to save for their youngest son.

Most Chicagoans are receiving a more modest tax hike, but here is a family that has to come up with $10,000 to continue to live in their home.

Now Gold wants to move from Chicago, which, by the way, has funded its pensions only at 23 percent.

She won’t be alone if she joins the Illinois Exodus. Chicago has been losing population for several years and the Land of Leavin’ has been suffering from declining population for five straight years. Rising taxes to pay for often lavish underfunded pensions for government retirees, most of them members of public-sector unions, are the heart of the problem. Not just for Chicago, but across the state.

Public-sector unions are simply the government employee wing of the Democratic Party. And Chicagoans reflexively vote Democratic. As they old Irish saying goes, “You made your bed, now sleep in it.”

Chicagoans moving to suburban Cook County–Chicago is the county seat–will be burdened by the county’s own woefully underfunded pension programs. And if Gold chooses the wrong suburb, they’ll have to belly up. Niles, for instance, the town just west of where I live, has far more retirees collecting pensions than active employees. Chicago, although not as much as Niles, has more retirees than current workers. Math is a stubborn thing.

Illinois’ pension plans are the worst funded among the states. Currently 26 percent of the budget is dedicated to pensions–more than the state spends on education. Voters in Illinois will be asked to approve an amendment to change the state from a flat-tax income tax state to one with graduated rates. Meanwhile the number of Illinois retirees collecting six-figure pensions increased by 74 percent since 2015. And after sitting on the bench for a little more than a decade, the average retired judge in Illinois has collected $1.2 million in pension income.

The Chicago edition of the Illinois exodus is having a negative effect on housing prices. If property taxes go up by $10,000, you can expect home values to decrease by that much. Or more–as not even Illinois politicians are dumb enough to claim that the latest rash of state and local tax hikes will be the final ones to fix the pension bomb.

Outside of Chicago, there are more pension bombs. Rockford’s mayor says that pension payments might consume 60 percent of its budget by 2025. Pension obligations forced Peoria last year to layoff 27 municipal employees.

Chicago’s new mayor, Lori Lightfoot, has suggested that the state–I hope she knows that it has its own pension problems–assume the pension obligations of her city and other local governments. Illinois’ new governor, JB Pritzker, is understandably cool to the idea.

That’s like having Puerto Rico transferring its financial problems to Venezuela.

There is one way out of this mess, as I’ve said before. The Illinois constitution needs to be amended to eliminate the pension guarantee clause. Years ago a Republican governor signed into a law pension cost-of-living increases at three percent compounded interest. Those increases need to go.

John Ruberry regularly blogs at Marathon Pundit.