POWIP Piece of Work In Progress

Potential Chicago Mayors…. Run Away!

The Chicago pensions situation is going to get ugly, and fast.

First, from John Bury, some number-crunching on city pension plans. He explains his number-crunching therein, but looking at his spreadsheet - the Chicago pensions are not too hot. He does mention the over-100%-fundedness may be illusory here as his number-crunching doesn't allow for differential assumptions [firemen and police tend to have much lower retirement ages, but not really higher mortality in retirement]. Even so, the Chicago Firemen and Policemen's funds look awful.

So what's the word from the Illinois statehouse? A shiny present for the next mayor of Chicago:

After decades of making retirement promises they weren't fully paying for, Chicago and many suburbs could be forced to set aside more money under sweeping changes to police and firefighter pensions headed to Gov. Pat Quinn's desk.

The legislation, approved Thursday on a 46-4 Senate vote, prompted an immediate rebuke from Chicago leaders who said it was draconian and would force financial pain on city taxpayers.

"This goes to the economic vitality of the city of Chicago and the county of Cook, the economic engine of the state," Mayor Richard Daley said.
....
Few sides were left completely satisfied. Reform advocates said it doesn't go far enough. Police and fire unions took a hit with benefits cuts for new hires.

Chicago was the most vocal opponent, unleashing an unsuccessful full-scale lobbying blitz to kill the bill because it said it would require a major property tax increase.

Supporters countered that the bill merely forces the city to start paying for its promises.
.....
Chicago leaders also complained of a key provision that changes how the city calculates the amount it sets aside for pensions starting in 2015, from multipliers of payrolls to more commonly accepted actuarial methods.

The change may seem mundane, but a recent Tribune investigation found the current formula allowed the city to claim it adequately set aside enough money for pensions at the same time it cut deals to boost benefits that helped spike the debt. The city police and fire funds now have less than 40 percent of the money needed to cover the eventual pension benefits already earned by past and current workers.

"This is the first time that anybody has acknowledged that the multiplier used to fund Chicago's pensions doesn't meet its obligations," said Mike Shields, a trustee for the police officers' pension. "They've been lying to themselves for the past 20 or 30 years."

Remember how I keep saying Daley is running away because of the money situation, and that Rahm had better hope he's thrown out on a technicality?

The above is part of that. Illinois is unable to bail out Chicago [being broke itself], and for Chicago to be bailed out by the Feds requires the cooperation of the House Republicans. I don't see that happening.

MORE: Why is Daley making warnings now? When it's way too late?

My theory: he doesn't want to move. If it gets too ugly, he will have to leave Illinois at the least, the country at the worst. I'd be buying some land in Costra Rica if I were you, Daley.

EVEN MORE: From John Bury -- Chicago Police and Fire Pensions Still Dying

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.