Adjusted for inflation, state and local government revenues have more than doubled since the 1970s. But state and local politicians haven’t collected nearly enough taxes to pay for the retirement promises they’ve made to their friends in government employees unions. So government pension fund managers are now rolling the dice. Heather Gillers writes today in the Journal:
U.S. public pension funds are taking on more real estate, and at times some of the riskiest types of property investments, as they try to close their funding gaps...
Most large retirement systems don’t have enough assets on hand to pay for all future benefits owed to firefighters, police officers, teachers and other public workers. Estimates of governments’ combined unfunded promises to workers nationwide range from $1.6 trillion by the Boston College Center for Retirement Research to $4 trillion by Moody’s Investors Service, and the funding shortfall is straining taxpayers and putting pension promises in jeopardy.
Nowhere are taxpayers in greater jeopardy than in Illinois. Crain’s Chicago Business reported in August:
Illinois Teachers’ Retirement System, the state’s biggest pension fund, is relying heavily on risky, expensive investments as it tries to claw its way out of a quicksand of unfunded pension liabilities.
The pension fund, which has only enough money to cover 40 percent of its future obligations, has steadily increased allocations to private-equity funds and only recently reversed course on investing with hedge funds despite lackluster results for both.
That TRS investment strategy poses a threat to pensioners’ retirement income and stands to exacerbate the burden for taxpayers already on the hook for $138 billion in unfunded liabilities across all Illinois pensions.
The story doesn’t necessarily look better when one examines some of the specific beneficiaries of government pension systems. Steve Cortes writes in RealClearPolitics:
I grew up in Park Forest, Ill., a working-class suburb of Chicago. In my youth, Park Forest was pleasantly middle-class -- a solid community of well-kept lawns, strong churches, and active sports. Unfortunately for my hometown, times have been tough over the years, reflected by a jobless rate about twice the national one and a poverty rate 43 percent higher than the state of Illinois average. As a consequence, Park Forest has lost almost a third of its peak population of 30,000 since the 1970s.
But like many such struggling communities, one class of people has found a way to prosper: public employees. Recently, Fox affiliate Channel 32 and Open the Books detailed the exorbitant pay package for part-time interim school Superintendent Joyce Carmine. She retired in 2017 making $398,000 annually, the highest-paid superintendent in Illinois, in a community where the median household income is $44,000. She will receive, courtesy of taxpayers, a pension of just under $300,000 for the rest of her life. Adding insult to injury, the school district hired this retiree back as a consultant at the rate of $1,200 per day for a total of 100 days, bringing her pay this year to $419,000 total for part-time work. Given the modest $75,000 median home price in Park Forest, her salary equates to 5.5 home purchases…per year.
If you can believe it, the story gets worse. According to Mr. Cortes, most students in the school system don’t meet state academic standards and by the time "those students matriculate to the local Rich East public high school, only 16 percent meet expectations and a truly shocking 0 percent exceed them."
The photo accompanying today’s column shows a 2011 political demonstration in Illinois and a poster created by a government employees union which reads, "Defend the Middle Class." But as in other states, many government workers in the Land of Lincoln have long since left the middle class. Mr. Cortes adds:
All told, over 94,000 total public employees and retirees in Illinois command $100,000 salaries from taxpayers, such as the "power couple" of Lewis and Clark Community College, Dale and Linda Chapman, who made a combined $690,000 last year, or former Chicago Mayor Richard M. Daley, who earned a $140,000 pension for his eight years of service in the Illinois legislature.