How not to fill a pension hole.

PENSION WANDERING

I’m fixing a hole where the rain gets in
And stops my mind from wandering
Where it will go

I’m filling the cracks that ran through the door
And kept my mind from wandering
Where it will go

And it really doesn’t matter if I’m wrong, I’m right
Where I belong, I’m right
Where I belong
See the people standing there who disagree and never win
And wonder why they don’t get in my door

I’m painting the room in a colorful way
And when my mind is wandering
There I will go

And it really doesn’t matter if I’m wrong, I’m right
Where I belong, I’m right
Where I belong

– Fixing a Hole, The Beatles

 

On Monday, Crain’s Greg Hinz reported that Democratic Governor JB Pritzker has set up two task forces to address two pension issues.

One task force will look at the issue of public pension consolidation of mostly small downstate municipal pension funds that belong to police and fire fighters.

Let’s look at the idea of consolidation another time.

The other task force will try to address the more than $130 billion unfunded state pension liability.

Hinz says that Pritzker is bringing in “a trio of Chicago business leaders and a top Republican to help him.”

That’s a red flag to me.

I’m not convinced that Chicago business leaders and top Republicans are the ones I want futzing with my retirement savings.

The idea Pritzker is floating to address the unfunded pension liability is to “repurpose state assets” to pay off at least part of the unfunded liability.

The flag just got a whole lot more red.

Like there are sharks in the water.

So far, the details are few.

By repurposing does Pritzker mean selling off state assets like Daley sold the parking meters and Rahm sold the skyway?

Or does Pritzker mean handing off a state asset that produces a continuous flow of revenue to fund the pension system?

The first concept seems politically untenable given the results of the parking meter and skyway sales.

The second idea is both dangerous and problematic.

First of all, there simply are not that many revenue producing state assets available. The tollways are taken. Toll revenue must be spent on maintaining the tollway and servicing the debt.

Chicago owns O’Hare, not the state.

Further, wouldn’t whatever the estimated value of the asset be deducted from the unfunded liability, requiring the state to pay less into the pension funds?

But a state asset is like my house. It is what my retirement financial advisor calls an unrealized asset.

My house has value but I can’t spend that money unless I sell it.

Hypothetically the value deducted from the unfunded liability would only be realized if the state asset was sold to a private owner.

JB Pritzker needs to go back to the plan proposed by those like Ralph Martire of the Center for Tax and Budget Accountability.  JB and the state of Illinois can reamortize the debt, pay it back over a longer time and raise the necessary revenue by carrying out his promise to create a fair income tax system to replace the current flat tax.

No repurposing state assets. No selling them off to private ownership. No gimmicks.

I’m fixing a hole where the rain gets in
And stops my mind from wandering
Where it will go.

 

 

 

3 thoughts on “How not to fill a pension hole.

  1. Yeah, I too thought that Ralph Martire’s arguments were solid and facts based and I might add that his committee was bi-partisan too.

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