Public workers' pension funds are eating Illinois alive

We keep hearing about how the state has "borrowed" cash from money set aside in the Illinois public pension funds to help balance the state budget, in effect, spending their pensions to pay for such things as state aid to schools. 
But the Kankakee Daily Journal, in an excellent editorial, points out that it's a double-edged sword. Not only is the state borrowing billions of dollars to make its required massive contributions to the pension funds, but the state also is selling its assets to help pay the pensions.

The systems are now consuming assets to make payments. The Teachers Retirement System, the largest, has cannibalized $1.1 billion of assets since JULY to keep pensions coming.

The editorial nicely explains some of the problems of the proposed $3.7 billion borrowing now being considered by the state legislature. For example:


Now, if the state borrows $3.7 billion, there will be a cost. Let's say the bonds are sold at roughly 5 percent. The end cost to the taxpayers would then be approximately an extra $200 million a year, which would buy exactly nothing. It's not money for programs. It's not money for salaries. It's money to make up for irresponsibility.


Filed under: History

Tags: budget, finances, Illinois, politics

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  • The CTA example shows the real cost. The legislature authorized borrowing to make up what it wasn't contributing to the plan. The problem now, according to the budget, is while they could short the plan, they can't default on the bonds, so essentially all the tax money goes to the pension bonds, which must be paid, even though the real estate transfer tax supposedly backing them has gone into the tank.

    Given though that at least the "earned" pensions are untouchable contract obligations, I don't see any way of not paying for the irresponsibility.

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