Green Room

Surprise: Illinois vastly underestimated pension funding shortfall

posted at 3:11 pm on June 28, 2013 by

Congratulations, Illinois taxpayers:

Moody’s Investors Service reported that Illinois’ true unfunded pension liability in fiscal year 2011 was nearly 65% higher than the state’s official estimate. In its report titled “Adjusted Pension Liability Medians for U.S. States,” Moody’s calculated the unfunded liabilities for Illinois’ three largest state-run pension plans at $133 billion, compared to the state’s official calculation of $81.3 billion. Illinois’ pension funds use overly optimistic assumptions in calculating their unfunded liability, including an expected 8% yearly average investment return. The new Moody’s methodology uses more realistic market rates based on high-quality corporate bonds. The rate Moody’s used for fiscal year 2011 was 5.67%, resulting in a $52 billion increase in the state’s unfunded liability. Moody’s has yet to publish their report on fiscal year 2012 liabilities. However, the market rates they’ll use to calculate the unfunded liability have already been determined. As of June 30, 2012, that rate was equal to 4.13%. That means Illinois’ official $97 billion underfunding is set to approach $200 billion under the new Moody’s methodology.

Friendly reminder: Illinois voters sent veto-proof Democratic majorities to both houses of the legislature last fall — not that vetoes are much of a concern in Springfield these days.  Illinoisans elected a Democratic governor in 2010, well after the state’s fiscal crisis was readily apparent, and in the immediate wake of the Blagojevich spectacle.  But hey, at least they kept that dog-hating Republican meanie from winning.  Phew.  Before Gov. Quinn narrowly won his race, the state’s public sector unions were busy publishing propaganda “debunking” public pension “myths.”   A few months later, they were picketing outside the state capitol in favor of raising taxes.  Illinois has the worst credit score of any state in the union, having earned rating downgrades from two separate agencies in recent months.  Second on that list is California — which, coincidentally, also boasts Democratic supermajorities and a Democrat governor.  Weird!

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Liberals + Unions = Decay.

Mimzey on June 28, 2013 at 3:39 PM

The next question is who will beg for a massive federal bailout first – California or Illinois?

gwelf on June 28, 2013 at 3:52 PM

That means Illinois’ official $97 billion underfunding is set to approach $200 billion under the new Moody’s methodology.

Too big to fail, obviously.

Hello, China? We’re gonna need some more cash.

BobMbx on June 28, 2013 at 4:41 PM

Math is hard… but the solution is easy. Just raise taxes. Duh.

Hill60 on June 28, 2013 at 4:55 PM

Let it burn – along with all the politicians responsible.

Zomcon JEM on June 28, 2013 at 5:09 PM

Illinois’ pension funds use overly optimistic assumptions in calculating their unfunded liability, including an expected 8% yearly average investment return.

“Well, what’s the problem with that? If private investors and investment companies don’t want to guarantee and give us at least 8%, we’ll simply seize their assets/capital! We’ll screw the private bondholders, leaving them with nothing!
“And the best part is… every year we can just keep going back to that well, again and again!”

- Dem/Lib state legislatures and municipalities

Marcola on June 28, 2013 at 5:19 PM

The next question is who will beg for a massive federal bailout first – California or Illinois?

gwelf on June 28, 2013 at 3:52 PM

It’s a trick question. They will both get bailed out by the Federal government through Executive Order, since the GOP will refuse to use the money from the citizens of 48 states to bail out these two bankrupt DNC protectorates.

Jaibones on June 28, 2013 at 5:39 PM

Math is hard… but the solution is easy. Just raise taxes. Duh.

Hill60 on June 28, 2013 at 4:55 PM

Turnip, blood; some squeezing required.

Steve Eggleston on June 28, 2013 at 5:40 PM

Math is hard… but the solution is easy. Just raise taxes. Duh.

Hill60 on June 28, 2013 at 4:55 PM

Sad part is, that’s exactly how Illinois Democrats think.

1) Notice budget shortfall.
2) Raise taxes on everyone, but mostly on businesses.
3) Accuse other states of “poaching” as businesses leave Illinois.
4) Watch tax base shrink.
5) Watch revenue shrink.
6) Go back to step 1.

JimLennon on June 28, 2013 at 6:30 PM

It’s ok. Obama will figure out a way to make the red states pay for it.

xrayiiis on June 28, 2013 at 6:57 PM

The FUNNIEST story of the week was Jerry Brown proclaiming at an annual budget signing, then cutting himself off in the middle of a sentence, that ‘this is the first time ….’ He then paused, and said ‘I was signing a nicely balanced budget’.

No mention of the admitted 12 billion 2013 shortfall for the pension system was included in ANY reporting this week.

Freddy on June 28, 2013 at 10:44 PM

Too big to fail, obviously.

Hello, China? We’re gonna need some more cash.

BobMbx on June 28, 2013 at 4:41 PM

Have you read the fictional book 2030 by Albert Brooks? It is eerily coming true. It has a leftist slant, of course, but, nevertheless, it acknowledges many truths which most liberals never, ever wish to acknowledge. Among them are the debt crisis and the continuing indebtedness to China. Also, the current amnesty giveaway is addressed.

Theophile on June 29, 2013 at 1:50 AM

Changing your accounting rules to allow underreporting of liability results in underreporting of liability? Will wonders never cease?

boone on June 29, 2013 at 10:05 AM

Let’s do some math here:

Dem. Gov. + Dem. State House + Dem. State Senate = economic ruin

Rep. Gov. + Rep. State House + Rep. State Senate = economic prosperity

Hey you democrat governors why don’t you just print money like Obama does. Oh, what’s that you can’t.

mike3121 on June 29, 2013 at 12:11 PM

Gee … Democrats lying about budget / fund shortfalls …. whoda thunk it?

BD57 on June 29, 2013 at 5:49 PM

This is Houston writ large. In 2003 our liberal mayor Lee.P.Brown jiggered the public pensions. 10 years later this city alone is toting almost $6 billion in debt. I bet Dallas, Austin and San Antonio are the same.

Our current liberal gay mayor has the cover of our local Hearst rag the Houston Comical. She is never confronted on the debt and I mean never. They hide facts for her and praise her diversity.

Her predecessor liberal Bill White valiantly lowered the 12% guarantees to 8.5% and Annise has gutted it all the way down to 8% and claimed victory. But she doesn’t fund it. All these gay couple’s kids are already in debt beyond their ability to pay.

btw, Houston is toutesd as booming. Wrong. Our population growth is averaging about 1% over the last 10 years. The surrounding area is booming outside of the city limits. Be warned.

DanMan on June 29, 2013 at 8:28 PM

Cognitive dissidence
One of the hallmarks of progressive “thought” is the ability to hold two diametrically-opposed and directly contradictory positions simultaneously, and insist that they are not only not contradictory, but that both of them are absolutely true, as well as being morally superior to anyone else’s opinions on either subject.
It is often encountered when progressives are busy trying to abolish an object or business they loathe (automobiles, tobacco, guns), while still trying to figure out some way to keep making money (tax revenue) off it. This is a classic example.
In the real world, someone with this “split” worldview would be defined (clinically) as suffering from a schizoid disorder. In progressive circles, it is defined as a higher plane of “enlightenment”.
What that means in concrete terms I leave as an exercise for the reader.

Not mine but the author is spot on.

jukin3 on June 30, 2013 at 1:08 PM

If it were only easy to let these bozo’s run thier state into oblivion…. I am certain that somewhere the Feds will bail them out. I dont know if public pensions are covered by the Federal Pension insurance but there are going to be a lot of unhappy retirees when there is nothing th state can do to pay for the pensions. But hey, 200B is a drop in the bucket….

triumphus04 on June 30, 2013 at 11:34 PM

I really can’t figure out what is weird about a Democrat governor and legislature blowing through budgets and projections. Seems like a forgone conclusion to me…

nitram on July 1, 2013 at 8:03 AM

There is obviously something racist about the problems in CA and IL. I’m just not able to draw the proper liberal conclusion to waht it is.

acyl72 on July 1, 2013 at 8:31 AM