By Mark Wachtler
August 6, 2014. Blue Island. (ONN) The state of Illinois is in such dire shape over the missing $100 billion from its own government employees pension fund that nobody, including Wall Street experts and our elected officials, has any clue just how much money is really missing. That point was make clear by a Better Government Association report yesterday revealing that the suburbs and towns of Cook County, excluding Chicago, had billions missing from their municipal government employee pensions too.
The Better Government Assoc discovered billions in missing suburban Cook County pension funds. Image courtesy of ChicagoReader.com.
Pension crisis or pension heist?
If you’re a resident of Cook County, Illinois, you’re about to get hit with a quadruple pension punch. Not only do you have to repay the $100 billion missing from state employees’ pensions, but you also most likely will have to cover Chicago’s government employee pensions because state Democratic Party officials, all from Chicago, have already determined that Chicago’s burden is probably too big to be paid off by Chicago residents alone.
Now, add to those the pensions of all Cook County government employees, whose pension funds are also mysteriously missing money. And as of yesterday, suburban Cook County residents have learned that their own small town governments have been playing fast and loose with their own municipal government employee pension funds.
It’s gotten so bad, towns in Illinois are eliminating their Police and Fire Departments. Instead, they’re thinking creatively by hiring part timers, volunteers, private companies and even merging their systems with the systems in neighboring towns. Things are quickly looking like Detroit, where the city abandoned most of its jurisdiction, leaving city residents to fend for themselves or wait for emergency responders to arrive from two towns over.
Wall Street noticed
It’s worth noting that Illinois’ pension debacle is costing residents more money every single day, literally. The same day the BGA released its findings about new missing pension money in Chicago’s suburbs, the state’s borrowing costs shot up, costing the state more to borrow.
Bloomberg Business released a report yesterday titled, ‘Illinois Yields approach Junk.’ The average yield on a BBB rated municipal bond, the near-junk rating Illinois’ bonds have, is 3.43%. Illinois taxpayers however must pay investors 3.94% now for the same grade of bonds, just because they’re from Illinois and the market is rapidly losing faith in the state’s promise to pay its debts.
Analysts Bloomberg spoke to said they weren’t jumping into the higher yield just yet. They anticipate Illinois’ credit rating to crash even further due to the state’s inability to address its insurmountable debt. Many global investors are betting that President Obama will never let his home state go bankrupt like Detroit recently did. A federal bailout of Wall Street bond investors is the consensus on the street. Just like the Bush-Obama Wall Street bailouts of 2008 to the present, wealthy speculators collect the profits, but taxpayers reimburse them for any losses.
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Cook County towns in trouble
If you live in one of the below towns and suburbs, get ready for either a major hike in your taxes, a drastic reduction of services, or both. According to the Better Government Association, 58 different towns and suburbs in Cook County have a government employee pension fund with less than 50% of the money in it. A funding rate of 80% is considered healthy and a 2010 Illinois law requires the funds to be at least 90% funded by 2040.
BGA investigators looked at each Cook County town with at least $1 million in assets. Chicago, with its estimated $20 billion pension shortfall, is excluded.
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Other highlights from the BGA report include the revelation that, ‘The fire pension funds in Blue Island, Cicero and Melrose Park have just 32 cents for every dollar owed.’ For police pensions, it was even worse in, ‘Blue Island, Burnham, Summit and Willow Springs, each with less than 30 cents for every dollar owed.’
The investigators also uncovered cases of possible corruption in towns like Alsip and Blue Island. They detail the cases of two Alsip police officers who were each given $20,000 raises only days before their retirement. Since pension amounts are based on the final pay rate, not the average rate over 20 years, the report explains, ‘Over their lifetimes those pay bumps could result in total additional pension payments of $1.8 million.’ And it’s all compliments of the future taxpayers of tiny Alsip for 2 government employees.
The worst offender of all may be Harvey, Illinois. According to the BGA investigation, ‘From 2010 to 2013, the total annual required contributions for Harvey's police and fire funds was $10.1 million. State records show the south suburb, however, paid just $140 during that four-year span.’ That’s not a typo, that’s $140, or about $10.1 million short.
View the full report from the Better Government Association at BetterGov.org.
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