In Illinois, at least.
Just when you thought the state of Illinois’ fiscal trajectory couldn’t get worse, Springfield has done it again. The major Illinois pension funds are selling off core assets to pay benefits. The biggest fund, Teachers’ Retirement System, may have to cut $3 billion from its investment portfolio in the coming year, nearly 10 percent of its total.
Two more on that same story: State pension funds project asset sales; Illinois Teachers’ Retirement System Enters The Death Spiral: AIG Wannabe’s Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations.
Illinois public employees who think the state constitution guarantees that they’ll get all their pension benefits may have another think coming.
Politicians’ and public labor unions’ assurances aside, there’s another, not-well-publicized school of thought that says if the pension funds go bust, the state has no obligation to step in to pay the benefits
U.S. state pensions such as Illinois, Kansas and New Jersey are in a “death spiral,” with assets at many insufficient to cover benefits, payouts consuming a growing portion of resources and costs rising twice as fast as investment gains.
People who say things like “The City of Chicago is too big to fail,”, no matter how smart they are elsewhere, are whistling past the graveyard. (To be fair, Prof. Rauh is well-versed on this subject and a Greece-like disaster is one of the possibilities he forsees – but he has a different political calculation than I do.)
No, Chicago can fail. There’s a reason Daley is jumping that ship, and it’s not because Chicago’s best bud trio Rahm, David, & Barack are in DC.
New York learned the hard way, 40 years ago. Some very special interests are going to find out “there ain’t no money of” as my youngest sister used to say.
If Chicago is like other places, some key groups of workers, and definitely the retirees, live someplace else. Their political pull, in terms of votes, is negligible.
Various groups might come together to try to solve the problem, but said problem was forged decades ago, and the bill is coming due now.
And when there’s nothing but fellow liberal Democrats to flay (a la Chicago)? A Republican primary in Delaware ain’t got nothing on that bloodbath-to-be.