This article first appeared at The McAlvany Intelligence Advisor on Wednesday, March 4, 2015:
Chicago is a microcosm of Illinois: it has a determined unwillingness to face reality. Even Moody’s, in its latest downgrade of Chicago debt, has failed to grasp the enormity of the shortfalls facing the city and the state.
Moody’s tried to be realistic, using unrealistic numbers:
[Our rating] incorporates expected growth in Chicago’s already highly-elevated unfunded pension liabilities and continued growth in costs to service those liabilities, even if recent pension reforms proceed and are not overturned….
The “expected growth” will likely surprise to the downside even the realists at Moody’s, as the real shortfall in the five pension plans the state is funding is vastly greater than even the $100+ billion the state faces. A “special pension briefing” performed back in November by the state’s Commission on Forecasting and Accountability showed the accrued liabilities on those plans to be