Illinois Passes on Pension Debt Interest Payments

A report earlier this week revealed that Illinois isn’t paying the $9.1 billion annual interest payment on its pension debt.

You read that right: They’re not going to pay.

And it’s no wonder: As it stands, the Illinois state pension fund is underfunded by $130 billion. And likely to worsen if fund managers fall short of the 7% annual return that’s already baked into the cake.

Larry’s told you about the pension crisis in the past. And I knew it was bad in Illinois.

But not this bad.

Well then again, they haven’t had an annual budget for 19 months and they have accumulated $11 billion in unpaid bills.

What’s worse is that Illinois has the highest property taxes in the nation and the worst credit rating. As a result, residents are leaving at an alarming rate. And that’s crushing the tax base and pushing it toward decade lows.

Many government workers earned their pensions by doing hard and dirty jobs. Now they may lose their benefits.

Result: The debt spiral will get worse.

What are state legislators going to do?

The latest sign of desperation comes as lawmakers consider monkeying with the state constitution to allow for “restructuring.” But that looks like a stopgap measure at best, no ifs, ands, or buts about it.

And it’s not just Illinois facing crippling pension liabilities: It’s also happening in California and New York.

The latest bad new comes from California Public Employees’ Retirement System – CalPERS – which has the arduous task of balancing financial obligations with reduced benefits.

CalPERS has $311 billion in assets and a funding ratio of 68%. Worse yet is the estimated 0.6% annual return in 2016 that missed the 7% target by a country mile.

Moving to the East Coast and the latest casualty: The New York Teamsters Road Carriers Local 707 Pension Fund ran out of money.

Result: A drastic reduction in benefits for its members.

Consider …

One member who paid into the fund for 30 years began retirement with a $3,500 check. After the fund blew up, that monthly stipend plunged to $1,170.

No doubt about it, this is bad.

Also, on the precipice is the Central States Pension Fund, with an estimated 400,000 members across the U.S.

And the pension debacle across the United States will bring more benefit reductions and higher taxes when state and municipal plans go down.

In fact, some estimates indicate that 200 plans are on the fast track to insolvency, representing a mind-boggling 1.5 million to 2 million people.

Larry’s wave model shows that the pension crisis will accelerate this year and threaten your life’s hard work and wealth in its wake.

Best wishes,

Mike

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Comments 43

  1. Douglas March 10, 2017

    We will truly miss Larry, his wisdom, and his guidance.

    Reply

  2. Secundino Rodriguez March 10, 2017

    Mr. Burnick,
    If Larry knew and you know, having learned the situation is “much worse than foreseen”, what was Larry’s (and now, your) next move? Do you have an AI model on this to know what we should buy low and / or sell high?

    Reply

  3. Richard S McKenzie March 10, 2017

    If States are allowed to reduce retirement pensions then retirees ought to be able to reduce their monthly bills by the same percentage. That’s my plan. ?

    Reply

  4. Johnie Dutch March 10, 2017

    Is it any wonder when all 3 areas mentioned have been Democratic bastions for years. People fleeing Illinois like rats of a sinking ship.

    Reply

    • f151 March 11, 2017

      Bingo!

      Reply

    • Ted March 11, 2017

      3 failed states Cali, Illinois and New York helped elect and keep Obama in office and now they will fail as they should

      Reply

      • Chemiker March 13, 2017

        Think of the 50 worst ghettos in this country. Every one is run by liberal Democrats.

        BTW, where do they get an 80% yield?

        Reply

  5. acqcon March 10, 2017

    More liberal mismanagement. They should file BK.

    Reply

  6. Angry Max March 10, 2017

    All of this was done by people who think they are smarter than everyone else and that they should be in charge of everything and everybody in a global government. The ones who create the problems, are then the same who propose the ‘solution’ which compounds the problem.

    Reply

  7. Mike March 10, 2017

    The biggest enemy of pensions, savers and most retirees is the Federal Reserve. The Fed has subsidized Wall Street gamblers and debtors with below market interest rates for 8 years. Fiscal conservatism has been crucified on a cross of quantitative easing.

    Reply

  8. Jim March 10, 2017

    What a joke! Should have converted all these pension funds to a 401K years ago! States and the participants would all be 10 times better off. You can thank the democrats for this mess!

    Reply

    • grover5995 March 11, 2017

      ILhas had Republican governors for most of the time during past 30 years.

      Reply

      • Chemiker March 13, 2017

        Until the latest one (with whom the Democrats refuse to work) the Reps were just a crooked as the Dems. How many went to prison? IL makes LA seem honest.

        Reply

  9. Vito Puopolo March 10, 2017

    I’m still in shock! I always looked forward to Larry’s latest comments. It’s a terrible loss.

    Reply

  10. ROBERT REISSNER March 10, 2017

    The economists do not understand that wealth which should still be in pension funds, and other locations, still exists in the possession of the super wealthy 01% that owns 40% of our nation’s wealth because our govt. refuses to tax those sacred cows at a high enough rate to funnel the wealth to where it should ethically and morally travel to. This has been occurring for decades.
    Wealth just doesn’t evaporate……it still exists and too much of it has been going to those who don’t need it. That is the horror of unregulated Capitalism where excessive wealth travels faster and faster to those sacred cows who don’t spend it but instead, lend it out to those people who badly need it and who then naturally become the perpetual slaves of the inadequately taxed sacred cows.That action destroys the economy.

    Reply

  11. Lee March 10, 2017

    Illinois always seems to pop up on the (corruption and/or government incompetence) radar. Very sad. I guess it’s hoping for a Fed bailout.

    Reply

  12. Robert Foster March 10, 2017

    It is correct to discuss both public and private sector pensions in the article, as both types are part of the coming disaster. However, it would have been more informative if it had been made clear that two of the funds you cited, New York and Central States, are for the Teamsters Union, not public sector plans like Illinois and California.

    Reply

  13. nick March 10, 2017

    Larry you the best!missed you so much!your spirit your soul your smile will never be forget!love you forever!?

    Reply

  14. Dot March 10, 2017

    I always eagerly read every word Larry sent. I initially began his Service to learn more about gold but quickly discovered that his knowledge was much broader. It was amazing to read his analysis and watch his “observations and expectations” become reality. I appreciate his willingness to patiently share his research and analysis. He will truly be missed.

    Reply

  15. Seb van den Oever March 10, 2017

    Compulsory pension funds are a Ponzi scheme run by the government. The last one is left holding the bag.

    Reply

  16. Pierre March 10, 2017

    The offshut of this debacle is very very much reduced payments to pensioners
    On the other hand the retirees should be allowed to see the amount they actually paid into their pension account and be allowed to withdraw that amount plus a reasonable interest rate (say return being paid on 5 year gov’t bonds).
    Those retirees who are presently receiving monies should be told their payments will be reduced drastically as they probably were overpaid to begin with.
    Then all monies withheld from employee pay checks shall be invested in US Gov’ t bonds
    Sh.. has hit the fan and the smell is atrocious
    Guarantees are no longer in vogue. It’s everyone for themselves!

    Reply

  17. tim March 10, 2017

    Douglas…..I agree. He is aleady missed.

    Reply

  18. Bob March 10, 2017

    Has anyone noticed these all sound like blue states. tax and spend until there is nothing left worth taxing.
    I live in southern Illinois and most of our taxes go to support Chicago, The Welfare State. We would be better off if everything south of Interstate 80 became a separate state.

    Reply

    • f151 March 11, 2017

      Secede!

      Reply

  19. paul ellenbogen March 10, 2017

    So sorry to learn of Larry’s passing my sincerest condolences to his family and friends he will be missed may he Rest In Peace.

    Reply

  20. Jamshed March 10, 2017

    Cash is King and surely not debt. I shudder at the thought of Trump asking Congress to increase debt. The case of Illinois is mind haunting and makes a working man shudder that at the end of his 30 year working life he will be denied a pension which he rightfully contributed to.
    Let us seriously try to reduce debt and borrowings as much as possible so we can live well, enjoy normal standard of living and save for ourselves.

    Reply

  21. joe March 10, 2017

    unbelievable story. so you are saying that the whole state pension has stopped being paid by the government. that should headline nation news. this is a criminal act and politicians should be held accountable and go to jail.

    Reply

    • Paula March 11, 2017

      don’t hold your breath

      Reply

  22. Stephen Ettinger March 11, 2017

    This is for Mike Burnick:
    My wife has a Pension Plan set up in the State of New York as a Nassau County Educator. She has been contributing into her pension plan for 32 years. We are in our late 50’s and with 1 kid in College and the other going in- in 4 years, – OUR GOAL IS TO WORK 8 more years full time, pay for 4 years of education for 2 children, and then retire. IF my wifes’ pension plan is in jeopardy like so many as your article indicates, how are we (her and I) supposed to control this? It is always good to be aware of what is going on in our country financially. But my question to you is………if pensions are collapsing all around the USA, HOW DOES TELLING US BENEFIT US, MAKE US FEEL BETTER, AND PROVIDE A SOLUTIN TO THIS PROBLEM. I have been reading Weiss Research Reports now for almost 5 years. You, Larry, and some of the other writers that share intel. what troubles me is I am working like a dog to pay for others who have nothing to get a lot of free bees. But none of you share solutions that truly benefit anyone. I read Mr. Weisses rants and about his wonderful trips. I listen to hours of vides. Larry was the only one who told us – Get into this! or get out of that until I tell you it’s time to back up the truck. HE is dead, and the one guy who had clear direction regarding the commodities markets, markels, energy patches etc, is gone. I am sick of reading about the problems in Pensions. YOU TELL US IF WE AHVE A PENSION DUE DOWN THE ROAD,………… how do we collet if the pension is in trouble? Do you have a solution?
    SS ETTINGER. Telling us about every states pension problems does not provide a solution. DO YOU HAVE ONE? ——- or are you going to continue to tell us about every states problem? PROVIDING A SOLUTION……..
    CAN YOU DO IT????????????????????? That would help people. Truly help people protect their right to live in comfort and not hav eto work like a dog till 70-75……….

    Reply

    • Ken March 12, 2017

      The solution is………you’re screwed. When your wife started her pension 32 years ago people (money managers, government officials) were more scrupulous. Many deals were closed with a hand shake. Times change. Integrity converts to dishonesty. The Michael Milken’s and Bernie Sanders and their ilk came along, enriched themselves and left the rest of us poorer. They will one day have to explain their actions. In the meantime I as well as Larry would say greed and temptation became too large for these folks and your pension got raided. (along with being poorly managed)
      I believe the best place to store your wealth that can’t be raided by these scoundrels is in precious metals and real estate.

      Reply

  23. Dave March 11, 2017

    They will meet their pension obligations when a loaf of bread costs $75.

    Reply

  24. Robert Kimble March 11, 2017

    If I was part of the Illinois state employees. I’d organize to sabotage everything that can go wrong and put state and local governments out of business.

    Reply

  25. Randy March 12, 2017

    What DID happen to the $870 Billion that Obama said was for “shovel ready” infrastructure projects but was actually given to the unions?

    Reply

    • Mike March 13, 2017

      You could ask the over 100 Republican Representatives who voted against the projects and then went back to their districts to pose for the cameras at the constructions sites and take credit for the jobs.

      Reply

  26. dan March 12, 2017

    I was shocked and sad to hear of Larry’s passing. I have read and listened to him for many years. Always enjoyed his thoughts and he turned out to be right on almost all the time. More importantly, he seemed to be a gentle, humble, guy. I am sure many will miss him and his insights.

    Reply

  27. Jon March 12, 2017

    I think that a big part of the problem here is in the partial story being told. Pensions like Insurance companies that have sold whole Life policies and annuities, had a 100 plus year data base of interest rates and reasonable investment expectations. When the Federal Reserve changed the game to shift monies to Wall street banks and other member banks it was at the expense of most other programs that had been run fairly soundly. The funds in trouble are in the situation because of paying benefits based on expected returns over a long term. The only way to salvage these programs is to go back and recalculate the rates of return and reduce payouts and even claw back or suspend certain accts. until the overage is back in balance. The real villain here is the Federal Reserve policy of Zero interest (for their friends) CC and many other debt instruments still have default rates of 30%…..Shameful!! At the end of the day one of 2 results will take place. Either ‘all shall share in the pain’ of readjustment or first in and out (by mere age) will reap the lions share of gains and the last ones in who continue to contribute will suffer the greatest burden in the distribution. My advise to you younger readers is to create your own portfolios of assets (ie rental houses, small businesses, ladders of treasuries and or CD’s) and along the way live at or below your means, spend wisely and save so that you can purchase things with cash and not suffer the costs of debt. It has worked for me, but my family will tell you that it has been a long road with very long hours and save first spend later life style. All the Best to the many readers of this comment. M3jonny

    Reply

    • Jim Shannon March 13, 2017

      I have read that NY State, unlike other states like NJ, California and CT have rules on the books stipulating that Civil Service Union pensions must be financed at some level. It is not at 100% but something like 70% if my memory serves me correctly. Hence, the problem is not nearly as dire in NY State as in these other states who have shirked their responsibilities. It shows the importance of a law on the books mandating a prudent financing program for pensions. However, it is also important that the pensions are sane and not at crazy levels that could straitjacket the rest of the population.

      Reply

  28. Valerie March 13, 2017

    Thankfully you and Larry have made us well aware of these two problems:
    End of the Euro and E Union.
    Illinois defaulting on its pension.
    However, what I would like to hear is what your computer programs or experience tells you will be the result of each of those two things happening. What will happen to the rest of the world, if the E Union begins to desolve; if Illinois defaults on its debt?

    Reply

  29. al March 13, 2017

    What is in common with CA, NY and IL? CATHOLIC… There is not one successful CATHOLIC nation on earth. Why would these be any different?

    Reply

  30. Frances March 13, 2017

    In addition to the state pension plans you related are having difficulties and apparently are going to continue to have difficulties I would not be surprised to see difficulties arising in other state and even city pension plans throughout the nation. How precarious are the United States Government Employees pension plans and plans like Social Security. What does it portend for the entire nation?

    Reply

  31. Tonia Mahnken March 13, 2017

    The state of Oregon is also mired in debt for pensions.. This problem is because of Govt. employee unions. These employees were promised a 7 percent increase
    Per year and the State is only generating 2 percent. Oregon has tried to lower the return but it has been declared illegal to do so. It doesn’t take a genius to figure the outcome. Our liberal Governor is trying everything she can to raise taxes including excluding mortgage interest and taxes from being a deduction on State taxes. She tried raising taxes on large businesses but the people voted that down. Any way you look at it, it will wind up hurting those that thought they had a secure retirement and it proves the point you can’t give away that which you don’t have. A very liberal policy.

    Reply

  32. Kenneth Henderson March 15, 2017

    AS FOR THE PENSION CHRISES IN ILLINOIS, I WOULD BET MY LIFE, THAT POLITICIANS IN THE ILLINOIS
    SENATE DID NOT REDUCE THEIR PENSION. ALSO, I AM CERTAIN THEY ARE GETTING THEIR FULL SALARY EVERY MONTH. WHEN ARE THE PEOPLE IN ILLINOIS GOING TO DOING SOMETHING ABOUT THE POLITICIANS IN ILLINOIS THAT ARE PLAYING WITH THE WELL FARE OF OF THE CITIZENS ILLINOIS? THE STATE SENATE IN ILLINOIS SHOULD BE CLEANED OUT AND FRESH, HONEST PEOPLE SHOULD TAKE OVER!

    Reply

  33. Ricky March 15, 2017

    these people with their pensions are making more in retirement than I will ever make working!!!

    Reply