Another property tax increase coming soon...

Chicago Board of Education

Remember during the 2015 municipal elections where I expressed support for an elected school board - though my idea was a hybrid with both appointed and elected members? Well we need to get to work on this idea especially if Gov. Bruce Rauner signs legislation that sets up another property tax increase here in Chicago that would be approved not by Chicago Aldermen, but by the appointed Chicago board of education.

Tapped-out Chicago property owners would face yet another tax hit for teacher pensions — but their aldermen would escape another difficult vote — under a historic new statewide school funding deal now headed to Gov. Bruce Rauner’s desk.

That “compromise” bill — approved by Illinois lawmakers this week — authorizes the Chicago Board of Education, comprised of mayoral appointees, to impose a property-tax hike worth $125 million without any involvement whatsoever from the Chicago City Council, whose members are elected.

The Board of Education does indeed plan to approve the increase, enabling the Chicago Public Schools to walk away with a total of $450 million in new state and local money for the 2017-18 school year once Rauner puts his signature on the bill, school officials said.

Rauner plans a bill-signing ceremony on Thursday, his office said.

It’s unclear when the city’s school board will take up the property-tax increase.

This hike would amount to a 2.5 percent increase in the tax bill for an average Chicago homeowner. The owner of a home worth $200,000 would pay an additional $83 in property taxes, records show.

It brings to mind a recent column written by John Ruberry of Marathon Pundit

In Chicago it’s great to be part of the ruling class. But Chicago’s roads are crumbling, barely one out of four of its students in its government schools read at grade level, its bond rating is the lowest among major cities, and businesses lack confidence in Chicago and Illinois as a whole. If you are part of Chicago’s ruling class you might view high taxes as a downpayment on your next paycheck or your retirement, but Chicagoans endure the nation’s highest sales tax rate and they were slugged with the highest property tax increase in the city’s history to fund public-worker pensions.

Yet Chicago’s public pensions are the worst-funded among America’s biggest cities--at a rate of just 25 percent of its obligations. But the cruel joke may be on these well-compensated public-servants. Despite the strong pension protection clause in the Illinois constitution, a pension “haircut” seems unavoidable for retirees. Michigan has similar wording it its constitution, yet Detroit municipal retirees saw their pension checks cut after the Motor City declared bankruptcy.

h/t Newsalert

BTW, what you see in that Newsalert post is a screencap of the Sun-Times front page which is what I share now.

 

Is Chicago becoming Detroit?

IMHO, I think Chicago is a long way from that fate. That doesn't mean however that people out there still don't believe this regardless. Rich Miller of the CapFax does a good round-up today. Lately in the news we've been hearing about pensions, a court case, and a bond rating downgrade.

Rep. Andre Thapedi on CAN-TV Wednesday

Information sent to us from a member of his district staff.

State Representative André Thapedi to appear live on September 18, 2013 at 7:00pm on CAN-TV.

State Representative Thapedi is an attorney and represents the 32nd District.

Tune in to CAN-TV Channel 21 or online at http://www.cantv.org/live/index.html to view live.

Make sure to call in during the show to 312-738-1060 with legal questions or questions about the State of Illinois Pension crisis, Medicaid Reform and Obamacare.

Pension fund for CPS axes 2 managers

Crain's:

The pension fund for Chicago Public Schools teachers terminated two Chicago-based investment managers for underperformance.

Ariel Investments LLC and Chicago Equity Partners LLC were axed by the Public School Teachers’ Pension and Retirement Fund of Chicago at a board meeting Thursday, according to Kevin Huber, the fund’s executive director.

The timing of the decision was a surprise to the firms.

The two managers, which handled nearly $200 million of the fund’s $9 billion in assets, had been put on notice after three-year returns lagged market indexes. They were scheduled to meet with the fund’s trustees in May to argue their case for retention.

CTA pension fiasco

Bloomberg:

The Chicago Transit Authority retirement plan had a $1.5 billion hole in its stash of assets in 2007. At the height of a four-year bull market, it didn’t have enough cash on hand to pay its retirees through 2013, meaning it was underfunded to the tune of 62 percent.

The CTA, which manages the second-largest public transit system in the U.S., had to hope for a huge contribution from the Illinois state legislature. That wasn’t going to happen.

Then the authority found an answer.

“We’ve identified the problem and a solution,” said CTA Chairman Carole Brown on April 16, 2007. The agency decided to raise money from a bond sale.

A year later, it asked Illinois Auditor General William Holland to research its plan. The state hired an actuary, did a study and, on July 17, concluded that the sale of bonds would most likely result in a loss of taxpayers’ money.

Thirteen days after that, the CTA ignored the warning and issued $1.9 billion in bonds. Before the year ended, the pension fund was paying out more to bondholders than it was earning on its new influx of money. Instead of closing its funding gap, the CTA was falling further behind.
...
In the CTA deal, the fund borrowed $1.9 billion by promising to pay bondholders a 6.8 percent return. The proceeds of the bond sale, held in a money market fund, earned 2 percent -- 70 percent less than what the fund was paying for the loan.

The public gets nothing from pension bonds -- other than a chance to at least temporarily avoid paying for higher pension fund contributions. Pension bonds portend the possibility of steep tax increases.

And yet the defeated con-con that would have been held next year would've harmed pensions. They're not doing too well without one, it appears.

Via CapFax!

Battle brewing over Illinois pensions

Sun-Times:

The State of Illinois has the most underfunded public pension plans in the nation, with a funding gap that is now approaching $50 billion. The low balances in the state's pension accounts have been made worse by the stock market crash, which has also hit Chicago's and Cook County's employee pension plans.

Here's a look at the dire situation for the retirement plans of state workers ranging from police to judges to university professors to members of the Illinois General Assembly. All are counting on generous state pensions, but may soon wake up to a brutal reality.

A financial war is brewing -- and it's likely to pit these public employees against Illinois taxpayers who are responsible for paying those generous pension promises. There simply isn't enough money in all these retirement plans (see box) to send out the promised checks. If you think Bernie Madoff had a Ponzi scheme going, wait until the wave of boomer retirement hits the reality of pension underfunding.

The state pension plans have been underfunded for a long time. But the problem is going critical because of the stock market crash. Unless you're willing to bet on a major bull market appearing in the next few years, there are only three solutions: raise taxes, increase employee contributions, or cut pension benefits.

And yet a con-con would threaten these pensions.

Via Instapundit!