POWIP Piece of Work In Progress – Former Abode of Dan Collins

When the money runs out

I've been wondering.

Why the hell does anybody want to be mayor of Chicago after Daley?

Daley is sucking out as much money from Chicago as he can before he leaves. Indeed, I am of the mind that Daley knows that the money is going to run out not too far in the future, and the city is not going to get bailed out - not by bondholders, not by the Fed.

From the guys that brought us the news of a $1 trillion gap in public pension funding, we've got a new study showing when the money runs out for various municipal pensions (see their paper for the details on their projections). This is not looking at funding percentages - which, while scary, don't indicate when the cash runs dry.

Chicago is #2 on the list, with Rauh and Novy-Marx projecting the money to run out in 2019. (Philadelphia is #1, with money running out in 2015.... but compare the size of their unfunded liabilities - a =lot= more people are represented in the $45B shortfall of Chicago compared to the $9B shortfall of Philly). Take a look at the per capita share of that debt -- that is not supportable by Chicago's population.

There will be pensions that will not be paid. There will be muni bonds that will default.

And unlike other Ponzi schemes, where the early exiters win, the workers of Chicago can't win by retiring earlier. They need to keep getting payments til they die. Considering expected age at death is in the mid-80s now.... well, I recommend to these people to save up money. Or get used to living on the small amount Social Security gives (they are covered by SocSec, right? That's not true of all government workers).

So I think Rahm had better rethink about fighting the charges that he's not eligible to run. Because that would give him an easy out to avoid this disaster.

OH AND: Don't get too used to those retiree health benefits

I'VE BEEN TOLD: that the Chicago workers are SOL re: Social Security. Unless they had worked in a non-governmental job for long enough to be eligible. But their years of work for Chicago won't be covered. So perhaps that would be the "bailout" -- getting these guys on SocSec. But they're really not going to like that - 12.4% of their salaries out for very small benefit later.

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

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