Friday, September 21, 2012

Paying Public Sector Pensions ... Taxpayers Beware of Upcoming Bailouts and "Guarantees"

We've been writing periodically about the enormous problem with unfunded public sector pension liabilities in Chicago and Illinois as a whole. Teachers have been the point of emphasis.

However, the public sector pension funding problems aren't strictly a city of Chicago, state of Illinois or just a public school system teachers issue. The problems cut across many cities, states and public sector employees throughout America as a whole.

Accordingly, there is no easy or even obvious solution to the long running financial debacle. That said, it now appears that there is a behind the scenes quiet movement to reward the ones who shouldn't be rewarded by punishing the ones who shouldn't be punished. Put simply, it seems like the plan is to have the bad bailed out by the good, the irresponsibles to be bailed out by the responsibles and that unfairness is to prevail under the false label of fairness.

What's apparently developing is a situation where all U.S. taxpayers are going to be required to "bailout" or guarantee the pensions of public sector employees in specific cities and states that have long neglected to act repsonsibly.

An Illinois Pension Bailout? is subtitled 'Governor Quinn wants you to guarantee his state's pensions.'  Hold on tight to your wallets after the November elections, fellow citizens, especially if you don't live in a state like Illinois or California and don't work in the public sector. Here's what may be coming:

"Now that Chicago's children have returned to not learning in school, we can all move on to the next crisis in Illinois public finance: unfunded public pensions. Readers who live in the other 49 states will be pleased to learn that Governor Pat Quinn's 2012 budget proposal already floated the idea of a federal guarantee of its pension debt. . . .

 Sooner or later, we knew it would come to this since the Democrats who are running Illinois into the ground can't bring themselves to oppose union demands. Illinois now has some $8 billion in current debts outstanding and taxpayers are on the hook for more than $200 billion in unfunded retirement costs for government workers. By some estimates, the system could be the first in the nation to go broke, as early as 2018.

Liabilities are also spiralling nationwide, with some $2.5 trillion in unfunded state pension costs. According to a paper released Thursday by the Illinois Policy Institute, the crisis will end up pitting states against each other as taxpayers in places like Tennessee, Texas, Virginia and Utah will be asked to subsidize the undisciplined likes of Illinois and California. . . .

It's no surprise that many of the states deepest in the red are public union strongholds. For decades, Democrats have bought union support in elections by using surplus revenue during good times to pad pension and retiree health-care benefits.

Look no further than the recent Chicago teachers strike. The city is already facing upwards of a $1 billion deficit next year with hundreds of millions of dollars in annual pension costs for retired teachers coming due. But despite the fiscal imperatives, the negotiation didn't even discuss pensions. 

The final deal gave unions a more than 17% raise over four years, while they keep benefits and pensions that workers in the wealth-creating private economy can only imagine.

As a political matter, public unions are pursuing a version of the GM strategy: Never make a concession at the state level, figuring that if things get really bad the federal government will have no political choice but to bail out the pensions if not the entire state. Mr. Quinn made that official by pointing out in his budget proposal that "significant long-term improvements" in the state pension debt will come from "seeking a federal guarantee of the debt."

Look for Democrats in Washington to take up that call, and for such an effort to get some traction if Democrats control one or both houses of Congress next year. Jim DeMint, the South Carolina Republican, has seen this future and is already warning against it. He and Illinois Senator Mark Kirk have proposed a resolution opposing a federal bailout of state pensions, and we hope more sign on. States need to clean up their own fiscal messes."

Summing Up

I can't help but be amazed that a Democratic Mayor, a Democratic Governnor and a Democratic President are apparently and somewhat openly planning for taxpayers to guarantee the wasteful spending and irresponsible actions of a single city and state, or for that matter, several cities and states.

It's also somewhat curious to note that in the case of Chicago's teachers and their pensions, the Democratic Mayor was formerly the White House chief of staff for the President and the current Secretary of Education in President Obama's administration used to be the head of schools for the city of Chicago.

It's also highly doubtful that the Governor would ever have dared to propose a federal guarantee of the city's and state's public pension debt in his budget had there not been good reason for expecting that this rather novel idea would be well received in the White House.

But none of this will be brought forward for public discussion until after the November elections, of course.

And finally, I can't help but think that the public sector union allies of the Obama administration are in on this obvious "non-plan," too.

Call me a cynic if you will, but that's the way it all looks and smells, at least to me.

There's a certain stench in the air. That's for sure.

Hold on to your wallets, fellow taxpayers. A bailout is being planned by the Dems and their union allies, and you'll undoubtedly be given an opportunity to pay your "fair share" if, as and when the time comes.

Thanks. Bob.

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