So what is the solution:Public pensions vs. taxpayersThis is a nasty story I've followed for years. I wrote about the "accounting legerdemain" in 2003, when under Gov. Blagojevich the state borrowed $10 billion to make required pension contributions, with some of the borrowings to be invested in the stock market. The belief was that stock market investment returns would beat the 5 percent cost of interest on the bonds, helping to fill the gap between promises and reality. Unfortunately, the stock market didn't cooperate.
Then in January 2009, this column highlighted the growing budget deficits and late payments to state providers, such as nursing homes, pharmacies, day care centers and other providers. We called it the "Coming Pension Wars" -- as the state and municipalities are forced to raise taxes or cut services to pay the promised pensions, along with current bills. In just the last year, the situation has become even more dire.
In November 2009, the state's Pension Modernization Task Force sent its recommendations to Gov. Quinn. The Task Force concluded that Illinois' unfunded pension liability exceeds $61 BILLION! And that number is growing exponentially.
The report points out the "deadly combination of nearly 30 years of systematic state underfunding of its employer contributions to the pension systems" as the main cause of the gap between promises and reality. It's also exacerbated by longer life expectancies and payout periods, not to mention the second-worst decade ever for investment returns.
In early January, while everyone was busy watching the nasty campaign commercials, the State of Illinois pulled an end-run on the budget process. On Jan. 7 the state sold $3.5 billion of "pension obligation notes." In simple English, the state borrowed money to finance the state's contribution to its five retirement systems.This is a flailing government sector with no financial underpinnings.
1 comment:
Smart post admin
I hope to visit my blog and subscribe to me :)
Economic and Social Contributions of Small Business and how to become a small business owner
Post a Comment