This article was published by The McAlvany Intelligence Advisor on Monday, May 30, 2016:
Little happens legislatively in Illinois without the approval or acquiescence of House Speaker Michael Madigan (shaking hands with another corruptocrat, above). A Chicago pol, he has been speaker for 31 out of the last 33 years. When a bill arrives, it is shunted immediately to his Rules Committee, run by his second-in-command, Rep. Barbara Flynn Currie, also from Chicago, also a Democrat who was appointed Majority Leader of the House by Madigan.
If a bill ever sees the light of day (most don’t) it then is assigned to one of 50 committees, each of them chaired by a Madigan selectee.
A present example is SB 777, which was passed by the General Assembly a little over a year ago. It was designed to reduce the onerous pension plan contributions Chicago was scheduled to make in 2016. Those contributions jumped from $478 million last year to over one billion this year, and the state legislators decided that that was just too much to ask, especially since the state had passed a property tax increase as recently as 2011, hoovering $31 billion from taxpayers (most of which went to those underfunded pension plans).
Governor Bruce Rauner saw it for what it was: another exercise in can-kicking, and vetoed it on Friday:
By deferring responsible funding decisions until 2021 and then extending the timeline for reaching responsible funding levels from 2040 to 2055, Chicago is borrowing against its taxpayers to the tune of $18.6 billion.
This practice has got to stop. If we continue, we’ve learned nothing from our past mistakes.
Mayor Rahm Emanuel responded immediately:
With a stroke of his [veto] pen, Bruce Rauner just told every Chicago taxpayer to take a hike. Bruce Rauner ran for office promising to shake up Springfield [Illinois’ capital city], but all he’s doing is shaking down Chicago residents, forcing an unnecessary $300 million property tax increase on them and using them as pawns in his failed political agenda.
Nothing was said about Madigan, of course. That information had to be derived from an investigation done by Austin Berg of the Illinois Policy Institute. Wrote Berg:
Illinoisans may elect who goes to the House of Representatives, but they don’t choose their representation – at least not in any meaningful sense. [That] power belongs to Madigan. And he represents himself.
Madigan has a little help from his family. His son-in-law, Jordan Matyas, is the chief lobbyist for the Regional Transportation Authority, acting as deputy chief overseeing its Government Affairs Department, while his oldest daughter, Lisa, is Illinois’s Attorney General.
The bill that Rauner vetoed was related to the unsurmountable pension plan deficits that the city has accumulated over the years, offering overly-generous benefits to teachers and city workers represented by unions unconcerned about how they might be paid for. One of those plans, the Municipal Employees’ Annuity and Benefit Fund, saw its unfunded liabilities jump by $11.5 billion as the plan’s actuaries were forced to reduce some of its investment assumptions. Those overly generous assumptions have masked its real unfunded liabilities for years, counting on pixie dust in the form of market returns in the stock and bond markets to cover for the funding shortfalls.
A year ago that plan had 42 cents in the bank for every dollar of promises it owes in the future. This year it’s down to 32 cents. It is liquidating between 12 and 15 percent of its present assets just to pay out current benefits.
A year ago Governor Rauner spelled out a plan to deal with the state’s suffocating pension plan shortfalls, consisting of cuts in benefits and increases in funding by the city and the plans’ participants. Not only did the bill never make it out of committee, Rauner never even bothered submitting it, knowing full well that Madigan would bury it.
Under current circumstances Chicago’s pension plans are likely to run out of money inside 10 years. But it could happen sooner. The likelihood of stock and bond market gains to bail them out is diminishing with every passing day. Recession signs are popping up everywhere and the markets have struggled to break through the top in the SPX hit last July. Some are suggesting that there will be no significant capital appreciation in the markets for at least the next 10 years. By that time, Chicago’s pension plans will be history.
The only solution is bankruptcy, but that would require a bill to pass the General Assembly. And that would require approval by Madigan. Bankruptcy would bring together every interested party at the bargaining table to redeem and rescue whatever remains of the plans’ assets, including the unions, the pension administrators, the state’s bondholders and, last but not least, the lowly taxpayer. It would exclude Madigan from the proceedings.
Translation: observers will watch as Chicago, the city, and Illinois, the state, continue their descent into oblivion, thanks to corruption best represented by Michael Madigan. Mish Shedlock, an observer of that descent, is right: “Illinois is terminal. [The] cancer is too deep and has spread too far to save the patient. The state is bankrupt morally, politically, and monetarily.”
Sources:
Austin Berg of the Illinois Policy Institute: All Hail, Michael Madigan, Dictator of Illinois
Pensions and Investments: Illinois governor vetoes bill to reduce Chicago fire, police pension contributions
Mish Shedlock: Rauner Vetoes Bill Reducing Pension Contributions Despite Massive Underfunding, Chicago Mayor Whines
Bloomberg: Chicago’s Pension-Fund Woes Just Became $11.5 Billion Bigger
The New American: Illinois Comptroller: State Is Out of Money, Legislators’ Paychecks Delayed
Illinois governmental structure
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