Wirepoints to Enormity of Taxpayer Pension Burden

If you haven’t thought about moving before, you might change your mind after reading this analysis by Wirepoints.

Illinoisans are overwhelmed by ‘shadow mortgage’ of pension debts – Wirepoints

By Ted Dabrowski and John Klingner

Illinois’ combined state and local pensioner debts have reached absurd levels. When divvied up between Illinois’ households, the “shadow mortgage” each one is on the hook for now totals hundreds of thousands of dollars per household, if not more, depending on who politicians target to repay those debts.

As Gov. J.B. Pritzker and other lawmakers try to extract that kind of money from Illinoisans, they’ll fail, for the simple reason that the amounts have become overwhelming.

Too many households don’t have the means, while others won’t stick around to pay for it.

They’ll just leave.

Leaving Cary.

And as Illinoisans leave, the shadow mortgage on those who remain will jump. The crisis will only deepen. 

The shadow mortgage

A simple calculation based on Moody’s state and local retirement debts puts the shadow mortgage each Illinois household is on the hook for at $90,000.

That’s what you get when you divide Illinois’ $424 billion in retirement debts (see appendix) by the state’s 4.8 million households. 

But $90,000 is not a real number.

Too many families in Illinois don’t have the means to take on that kind of debt. So the real burden on households with the means to pay is much higher.

Maybe the more “realistic” shadow mortgage amount is $215,000 per household, which is what you get when you impose the $424 billion only on those households with incomes of $75,000 or more.

Does Pritzker really think those households could pay down an additional mortgage of $215,000, even if they were willing to?

So what then?

Go after only those households with incomes of $200,000 or more, like Pritzker does in his proposed progressive tax plan?

Then the shadow mortgage on those 330,000 households jumps to $1.3 million each.

The amounts get crazy.

And pensioner debts already consume more of the Illinois budget than anywhere else in the country.

State government projections show that these debts will consume at least a quarter of the budget for the next 25 years – and that’s under their rosy scenario.

The evidence is overwhelming that there’s more pensioner debt than can ever be taxed. If Pritzker continues to reject the need for a pension amendment – and the need for a reduction in pension debts – then he’s simply ignoring the evidence.

Which means that if he doesn’t want to fix pensions, he’s going to have to go hog-wild with tax increases to get the money needed to pay down all that debt. 

Expect the exodus to increase as Illinoisans finally figure that out.

For more on Illinois’ growing “shadow mortgage,” see:


Wirepoints to Enormity of Taxpayer Pension Burden — 35 Comments

  1. Note: the folks at Wirepoints don’t actually put forward any solutions.

    Because, well, there are no constitutional solutions that solve the problem.

    The problem isn’t going to get fixed overnight, its going to take a long time for the problem to get under control.

    But the primary way to do that is to put more money towards it.

  2. **Would you add cutting pension benefits for future employees?**

    They already have.

    Tier 2 is a far worse plan.

    And removing pensions all together will do little to address the real problem.

    The actual problem is the cost of pensions for current and future employees.

    The primary problem is that underpayment into the pension funds for years.

    There is a reason why IMRF isn’t in any trouble at all.

    It isn’t because of lower benefits.

    Its because there is a mechanism that forces local government to pay the full pension payments.

  3. @Alabama Funny how the only remedy you see is to put more money to the problem?!

    You might as well just take out thousands of dollars and just burn them in your front lawn.

    Didn’t know it was Wirepoints job to fix Illinois Legislature problems.

    There have been many suggestions throughout the past 30-40 years and they have all been ignored which is why this state is in the problem that it is!

    Here is a suggestion that has been stated for a half a century, NO MORE GOVERNMENT PENSIONS! Please just do that!

  4. Again – please suggest some possible constitutional solutions please.

    I’ll be waiting.

    And getting rid of pensions doesn’t at all solve the problem.

    So try something else.

  5. Could start with deporting all the ILLEGALS who are ravenously consuming
    the taxpayers money doled out in benefits, but that would be a bridge too
    far for the likes of Alabama and Larry Lightfoot and their fellow Leftist/Socialist travelers.

  6. IMFR contribution legislation went into effect when I was McHenry County Treasurer…sometime between 1966-1970.

    The letter I received said after 40 years that pension fund would be in good shape.

    So, the General Assembly forced local government to be responsible, but did not adhere to the same solution.

    As I have pointed out previously, the same year Jim Edgar agreed to improve state employee pensions in return for no salary increase for a year, Missouri took action.

    It went from 100% defined benefit to a 50-50 plan, with half henceforth being defined contributions.

    When I pointed it out in an Appropriations Committee Chairmen/Spokesmen briefing, I was told it was too late to do that in Illinois, because the deal had been cut.

    What would happen if Illinois went to 100% defined contribution plan–like a 401(k)in the private sector?

    Future debt would be eliminated, but even more money would have to be found because those future employees would not be paying into the defined benefit pension fund.

  7. How about cutting benefits to current irrelevant, irresponsible, sunshine blogger beneficiaries? This is just a question…tic, tock, tic, tock, tic, tock, 259 days, tic, tock, tic, tock, meeeeeeoooooooowwwwwwwwwwwwww…

  8. **Future debt would be eliminated, but even more money would have to be found because those future employees would not be paying into the defined benefit pension fund.**


    Plus the State would have to start paying into social security as well.

  9. I believe tire 2 now allows the spouses to collect the pensions after the pensioner’s death.

    That expands the payout of the benefit which will cause it to get even further out of control than it already is.

    Just curious, could Cal please let us know how much of his money did he contribute towards his pension and how much has he drawn out so far.

    I bet the numbers are staggering??

    This is not meant to demean you Cal, but would put into perspective as to the cause and effect.

  10. Termenator, I don’t think a State can file bankruptcy.

    Cities and Counties YES, but a state, no.

  11. After reading some of the comments, it seems the only answer for the regular working family
    (not on any Illinois pension scheme) is quite simple.

    Move out of Illinois and never look back.

  12. The top two high fliers(Kelly and Bernotas) are those under paid teachers and Superintendents. LOL Tic Tock Tic Tock

    Doesn’t show how much Cal put in, but it shows how much he pulled.

    I knew teachers didn’t pay in much if any but wasn’t sure about Legislators.

  13. Shadow mortgage of $215,000 per household is outrageous. Who besides a muliti-millionaire living in a posh suburb could afford to pay out $215,000 even if spread out over 10 or more years?

    Bankruptcy. If some law says can’t be done, change the law. Also, haircuts to cap pension payouts to $100K per year. Also, eliminate COLAs. Private sector retirees, to extent they even have a pension, rarely if ever get a COLA. Not many private sector retirees, even with their SS benefits, get more than $100,000 per year.

    Somehow, some way a combination of bankruptcy and severe haircuts must be done. All ordinary non-public government retirees along with ordinary non-public workers in Illinois should demand bankruptcy, haircuts and elimination of COLA’S.

  14. @Alabama all increase of pensions would be directly tied to SS increases up to 3%.

    You have some silly notion that government workers actually put in the fair share toward the pension in their paycheck.

    We the taxpayers are the ones that put into hourly earners on the government dole.

    Case in point look at teachers and what they actually put into the TRS system.

    It’s as little as 2% and who makes up the difference the taxpayers which can be up to 10% per paycheck!

    IMRF employees are required to put I believe 4.5% of their paycheck.

    So to make the funds plausible the taxpayers have to make up the difference and during the OBAMA years taxpayers were putting into the IMRF fund up to 13% or more per paycheck per employee!

    The taxpayers are already funding the pension system at ridiculous rates as it is!

    Now you have funds that are only 50,60 or 70% funded which is underfunded.

    If you cut the pension system and decreased what they yearly increases are at during pension years is a good start.

    Nobody can collect pensions til they are 66 unless they are police/fd and they need to up their pension collection age some as well.

  15. I ran some numbers.

    Somebody do me a favor and check my math.

    Let’s assume that the $424 billion doesn’t go up every year.

    It will, but just for the sake of developing a starting point, let’s assume that this is a firm number.

    Treat that like a mortgage and pay it off over 30 years.

    At 5%, the annual payment would be $27.6 billion.

    There are 4.8 million households in Illinois.

    Around 35% make $75,000 per year or more:

    * The top 5% average about $400,000;
    * the next 15% average about $150,000;
    * the next 15% average about $90,000.

    In order to collect enough money to amortize the pension obligation over 30 years would require the following MARGINAL tax rates (marginal, not average, i.e., the amount by which the income tax would have to GO UP)

    * Top 5%, 14.0% = $13.5 billion

    * Next 15%, 9.0% = $9.8 billion

    * Next 15%, 6.5% = $4.2 billion

    Of course, this is static analysis.

    That is, it assumes people don’t change their behavior if tax rates go up.

    In reality, if income tax rates go up enough to fund the pensions, then large numbers of upper income people will move, taking a lot of lower income jobs with them.

    And, in reality, eventually the pensions WILL have to be funded.

    It will take several more years, but eventually under-funding means annual outflows will begin to exceed annual inflows and when assets fail, taxes will have to rise.

    Pensions are legal obligations and states CANNOT go bankrupt under Chapter 9, so there’s no getting around it.

    Even if we passed a constitutional amendment tomorrow and eliminated all pensions going forward, the state’s taxpayers would be legally responsible for obligations already incurred.

  16. I really don’t think the pensions ever will be funded, unless the unions can sell the state on that ridiculous $100+ billion pension bond scheme they were floating.

    If Pritzker gets his progressive income tax, he’s going to use the money to fund his wish list of new government programs.

    I think the pension problem will continue to get worse until the Feds eventually have to step in, and they’ll have to decide whether to bail out states like Illinois or change the bankruptcy laws so that they can get relief from their pension obligations.

    If the Feds were to change the bankruptcy laws, the pension guarantee in the Illinois Constitution would become moot.

    I expect the people with smaller pensions wouldn’t see much change, and those with larger pensions would see significant haircuts.

  17. Look at Crystal Lake’s Police and Fire Pension liabilities and debt owed by the taxpayers.

    Then take a look at the jackalope’s who’ve been’ running ‘ the town for decades.

    In my humble opinion a bunch of loafer shuffling turds.

  18. States aren’t permitted to go bankrupt for two reasons.

    The first is constitutional.

    States are autonomous entities under the Constitution.

    The second is that bankruptcy is for debtors that lack sufficient income to pay their debts.

    States have the legal authority to raise unlimited amounts of revenue.

    In doing so, they may damage their citizens and their economy, but that doesn’t change either their power or their obligations to pay.

    Going to court and saying, “Hey, judge, I COULD raise more revenue, but I don’t want to” won’t get you very far.

    Those municipalities that defaulted were limited by state statute with regard to how much they could raise in taxes.

    And the few that have gone bankrupt haven’t touched their pension obligations.

  19. Steve to your point, there is no reason to stay in IL.

    Literally the only way around this is to pack up, sell house (for a loss) and move.

    I’ve been running the numbers and I’m close to breaking even in TN, even with a $50k loss on my house here in IL.

    No income tax, and low property take will just about net out the loss of the house.

    Easily by year 2 I will be in the black.

    I’ve already warned the family and my young kids, that the progressive income tax will be the end of our stay in IL.

    I will not stay around to watch that disaster unfold.

    I know, I know, I should have the house on the market now… but maybe my $50k loss on the house turns to $75k loss and my ROI pushes to 2-3 years…

    still not bad.

  20. +1 H.Abe, then try busting useless unions that will save the pension issue start at the bottom first, then take the top off of fat costs.

  21. Mchenry Guy here, I actually have a real estate agent coming over this Friday.

    I’m jumping ship to a state with no income tax and no gas tax(Texas).

    Imagine the next 30 years of my life until retirement, keeping an extra 4.95% of my income for investing and saving, versus handing over to the state of Illinois.

    We are talking real money.

  22. The bigger question is why are they so dead-set on depopulating this state? They are killing their golden goose on purpose – but why?

  23. There is a Judge from this county who spent 21 years working in the public sector, he retired in 2005 and has collected almost 3 million dollars in pension benefits.

    He is about 65 right now and even if he passed away tomorrow, his wife will get his annual 181k, for the rest of her life.

    He never earned 3 million in his 21 years of service but has received that much in retirement, plus SS when of age.

    Even if he put in 10% of his pay and the County matched it, they contributed at most 500k and already collected almost 3mm, no insurance company can survive those benefits let alone a public pension system.

    But the heavy hitters are the teachers and their hierarchy, they contributed next to nothing and never have stopped at GO.

    Some City/County/State servants have 2 and even 3 of these pensions in different shapes and sizes.

    Don’t think you can escape too far, most other states are in the same predicament and have their own issues.

  24. Can anyone calculate Pam Althoffs pension from being mayor of McHenry, pension from being in the state legislature, salary and benefits from McHenry County Board, salary from lobbying and salary from her position on newly created marijuana Commission?

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