(Public) pensions have been mentioned in these pages alot (clicking on the 'pension' tag above gives some links). Today's Suntimes, Terry avage relates that we are actually borrowing from them now to pay for the state's operations. And she quotes a report that says Illinois gov't has been doing this for the last 30 yrs. It cites a source called, www.IllinoisIsBroke.com . Pretty clearly named, eh?
http://www.suntimes.com/business/savage/2048376,CST-NWS-savage15.savagearticle
Emperor has no clothes: Pensions are short cash
February 15, 2010
BY TERRY SAVAGE savage@suntimes.comIllinois politicians are at it again. They're borrowing from the future to make state pension contributions today. Illinois has one of the most underfunded public pension plans in the nation.
When boomers start retiring, there won't be enough money to pay those pension promises. Both political parties are still trying to hide the magnitude of the problem.
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Under Gov. Rod Blagojevich, Illinois borrowed $10 billion for pensions in 2003, with some of the borrowings to be invested in the stock market to beat the 5 percent cost of interest.
(AP File)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.
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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.
The report lays out the problem clearly:
"Not wanting to implement dramatic cuts in spending on essential services, the legislature and various governors elected to instead divert revenue from making the required employer pension contribution to maintaining services like education, health care, public safety and caring for disadvantaged populations. Effectively, the state used the pension systems as a credit card to fund ongoing service operations."
Several pension reform proposals have been presented to the Illinois Legislature. Even the most gentle reforms would require the state to make additional annual pension contributions of more than $12 billion every year. Simply cutting benefits for current or future retirees comes nowhere near to solving the problem. And the prospect of a longer-lasting recession wreaks havoc on the state budget, aside from pension contributions.
Illinois now has public debt of more than $130 BILLION. Unlike the federal government, our state cannot simply create new money to pay its bills. At some point -- and that point is very near -- investors will no longer be willing to lend money that cannot be repaid.
If you would like to see more facts and figures, check out the Web site www.IllinoisIsBroke.com, created by the nonpartisan Civic Committee of the Commercial Club of Chicago. A visit to the site shows a few pictures that are worth a thousand words -- and billions of dollars.
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