08 February 2023

Reality Has a Way Happening Whether or Not You Want Something

Unless something changes drastically, Chicago is headed for bankruptcy. STUMP - Death and Taxes brings us Chicago Mayoral Race: Good Luck Dealing With the Pensions. That is a 22 minute audio clip. I listened while doing some mindless chores.

What happens when you make gold-plated promises, and then you don't save money to honor those promises? The answer is the Chicago Municipal Pension funds.

The title of this post is a quote from the podcast. Chicago politicians have wanted to promise lavish pensions, and at the same time have wanted to avoid paying for them. Reality dictates that you really can't both "have your cake and eat too." They made the promises, now they can't afford to honor them.

Meep is an actuary. Occasionally she turns her attention to various municipal pension funds. Monday, she looked at Chicago pensions. Her position is that whoever wins the current mayoral race (which is currently going on for an election in March) will actually lose. There is probably no way to deal with the pensions without going through bankruptcy.

They don't have the money to pay for the promises they've already made. They don't have the money to cover the benefits already accrued.

Chicago over the past 20 years - or longer - has been setting aside less than half of what they should have been saving for pensions. Less. Than. Half. They haven't made payments of 100% of what the SHOULD have paid since 2001 and 2002. In 2003, they paid less. And then less.

They kept paying the same percent of payroll, while the amount they should have been paying was climbing precipitously. Because every time you underpay that means it accrues more the next year.

I should note that the opening of the podcast is...

Partly a memorial to Laurence Msall, recently deceased, who had been the President of the Civic Federation of Chicago

Only a few minutes.

1 comment:

  1. Pension boards will tell cities they need to contribute $xx dollars as they expect the fund to achieve returns of xx%. When they don't earn that percentage they then back bill for the shortfall and make new predictions of returns that fail and the bill increases again. Biggest problem is allowing other pay outs to increase the amount of the retirement, like accruing massive unpaid sick-time, unpaid vacation and working massive hours of overtime in the last year. Pensions should only be based upon base salary.


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