I received a lot of response from my article: “Financial Fraud – You Decide”. The news has been full of stories this year about pension funding. I wish I could tell you that the state of Illinois is the only poor manager of its pension obligations. Unfortunately, I can’t.
On February 10th, the Chicago Civic Federation released a report concerning the financial status of a number of city and county pension funds. The news was grim, to say the least. Unfunded pension liability grew SIX-FOLD between 2000 and 2009. The pension funding shortfall in just those ten public funds grew to almost $23 billion!!
The report painted a much more graphic and disturbing picture of what this means when it estimated what would happen if the total cost of unfunded public pension liability for Chicago, as well as Chicago’s share of the state’s unfunded liability, was divided among every man, woman and child in Chicago. How much would you guess that total is?
My hunch is that your guess doesn’t even come close.
Ten years ago, that liability was $2,442. Now, that per capita liability for each Chicagoan totals over $11,934! And remember, this is just for unfunded pension liability!!
Despite how you might have interpreted the supposed “good news” earlier this year from Gov. Quinn and the Illinois House and Senate regarding “pension reform”, the sad truth is that the bill did not put any dent in “current” liability funding. All it did was lower benefits for newly hired folks, which does prevent the liability from growing even faster, but doesn’t reduce current liability.
The Civic Federation pointed out that Illinois’ pension code allows state and local governments to avoid paying the actuarially required contributions for employees’ retirements. This fundamental flaw in state and local policy needs to be corrected immediately, so the pension debt owed by each one of us will not get any more out of hand.
It will not be easy. It will require hard decisions and steep cuts. But there is no other workable solution.