Local elected officials reacted with criticism and others with potential solutions when Moody’s downgraded Illinois’ debt to A2 from A1 Friday, making an investment in the state’s bonds potentially the riskiest of all 50 states’ securities.
Illinois had been tied with California at the bottom of the list, according to the Bloomberg News Service, until Friday’s action put it alone at the bottom.
, who is retiring at the end of her term in a year, called for the entire Illinois General Assembly to work together to do something about getting the rating higher again.
“This is somber news and a very great challenge for Illinois,’ Garrett said. “We’ve come to a crossroads and must find a solution in a bipartisan and fair way for our taxpayers.”
The effect on Illinois taxpayers was foremost on the mind of U.S. recognizing citizens must pay higher interest on money Gov. Patrick Quinn plans to borrow later this month.
"Moody's decision to downgrade Illinois debt echoes the judgment of my Sovereign Debt Advisory Board report last year,” Kirk said in a prepared statement. “We are reaping the results of years of irresponsible spending and debt."
and recognize years of neglect to the state’s pension liabilities are a major part of the problem demanding immediate attention.
“It’s unfortunate,” Nekritz said of the downgrade. “We can and will take steps to correct it. At the top of the list is our pension debt. It’s unfortunate all of our new revenue will be tied up in the next year’s pension liability and it will be up to us to make cuts necessary to accommodate the issue.”
Biss considers Medicaid liability as well as pension responsibility areas requiring immediate attention. “This strengthens our resolve to put in place workable and sustainable budgets that take into account all liabilities including our pension and Medicaid liabilities,” he said.
While the state’s debt has been downgraded, a number of suburban communities like Deerfield, Lake Forest, Highland Park, , Wilmette, Winnetka and Glenview have AAA bond ratings, the highest possible.
Just like the reduction of the federal government’s bond status by Standard & Poor’s over the summer, the action by Moody’s Friday should not affect the local ratings. Highland Park Corporation Counsel Steve Elrod made that clear in August in the face of the federal action.
401K style retirement plans and some sort of Health Savings Account are the real solution. We better start moving in that direction while there are still people to tax in Illinois.
Our best and brightest are already leaving for "greener pastures". Unfortunately for the farmers, they can't leave.
In order to make retirement systems work, we need to increase the retirement age above the average life expectancy once again. It was my understanding that a pension was provided to gov't employees in exchange for lower salaries. Instead what we've got now is fat gov't salaries and that generates fat pensions. Perhaps the solution is to cut the salaries of gov't workers and raise the age of eligibility for a pension. Raising the minimum age for collecting a pension to 100 would solve the gov't employee pension problem. It should be noted that Chile has a retirement system that seems to work-the system provides an annual return of 8 percent, rather than the measly 2 percent return that SSI provides. Note that President Bush proposed such a system in 2007, but quickly retreated after the opposition party attacked him for trying to make the improve the system.
Here is a partial list of the 130TRS pension enhancements passed by a compliant legislature and governor at the time at the expense of every Illinois taxpayer: • 1971 – Pension maximum raised to 75% from 60%. Ogilvie • 1971- Annual COLA raised to 2% from 1.5% Ogilvie • 1971- No pension reduction if younger than 60 with 35 years service. Ogilvie • 1972 – 85 sick days (1/2 year service) allowed for early retirement. Ogilvie • 1973 – Survivor benefits paid at age 50 instead of 55. Ogilvie • 1978 – Annual COLA raised to 3% from 2% (not compounded) Thompson • 1979 – ERO (Early Retirement Option) allowed. Thompson
• 1980 – Retiree health insurance program established. Thompson • 1982 – Employer pick-up of employee contributions allowed. Thompson • 1983 – Unmarried children over 18 eligible for health insurance coverage. Thompson • 1984 – Sick leave credit upped to 170 days from 85 days. Thompson • 1990 – 3% COLA compounded. Thompson • 1990 – Survivors get COLA. Thompson • 1990 – Disability and pensions added for part-time and substitute teachers. Thompson • 1991 – Retiree health care premiums 75% subsidy. Thompson • 1998 – Waive Early Retirement cost – 34 work-years becomes 35 years for pension. Edgar Every one of the above items added to taxpayer cost- $100′s of billions over the decades. Just the COLA going from 1.5% not compounded to 3% compounded increases the pension payout by 30% over a 30 year retirement life expectancy. Based upon this 130 item, 40 year rap-sheet, teachers should be paying at least 15%.
There is a small city in Alabama who solved their pension system problem-the city is located just outside of Mobile. They had a choice between writing checks for pension benefits or keeping the lights on. They chose to keep the lights on and stopped sending the pension checks. Simply because you're promised something 30 years in the future doesn't mean that you will actually get it. Sorry, so sad, too bad. When my father's company went bankrupt in 1970, he got 4 cents on a dollar-not that big a deal, he died before he collected a dime of it, so you could say that he didn't lose anything on the deal. No doubt losing 96 percent of his pension helped cause his early demise, along with a pack of unfiltered cigarettes a day. The way to deal with the pension problem is for local and state gov't to declare bankruptcy and then negotiate pension benefits with all current and former employees. 25 cents on the dollar is what is guaranteed by the Federal Government, so a good point to the start the negotiations would be a 75 percent haircut. Christmas is for kids and only comes once a year. Gov't employees think that every day is Christmas. Never ever vote for a politician who promises you something after he is out of office. Mayor Daley destroyed the City of Chicago with all of his promises and got the hell out of the Mayor's Office before the house of cards started falling.
"DB plans can work if they are managed properly..." The people of Illinois (and the people of Greece) want to hear how to properly manage defined benefit programs. In particular, how can you honor promises made when the economy slows down, revenues drop, and taxpayers begin running away from the increasing burden... causing a downward spiral leading to increasing taxes on those left paying for everything? You have the floor.