Courtesy of Mish.
I had the pleasure of being interviewed one again by Gordon Long as part of his financial repression series. The topic of this interview was “America’s Pension Problem“.
Interview
Synopsis – By Gordon Long – Edited by Me
Mish Shedlock talks about the magnitude of the mounting Pension Problem in America and uses his home state of Illinois as a prime example. According to a State Budget Solutions, last year’s state unfunded pensions reached an all-time high of $4.7 trillion. This funding gap state public pension plans are underfunded by $4.7 trillion, up from $4.1 trillion in 2013. Overall, the combined plans’ funded status has dipped three percentage points to 36%. Split among all Americans, the unfunded liability is over $15,000 per person.
Pending Pension Crisis
“Illinois Pension’s in general are 39% funded. This is after this massive rally we have had since 2009 in financial assets. Some of the worst ones are only about 20% funded.”
“Various cities in Illinois have problems, Chicago being one of them. The City of Chicago has a huge pension crisis right now. We have things in Illinois like “Home Rule Taxes” where cities can levy their own taxes in addition to the state. That is why we have varying sales tax that range anywhere from 6.25% to 10%, depending on locality.”
“I have been working with the Illinois Policy Institute on pension and bankruptcy issues. There are a number of cities in Illinois that are ready to file bankruptcy. The problem is they can’t file bankruptcy because the state doesn’t allow it.”
“The fundamental problem is they have made more promises than they can possibly keep”
Gaming the System
The problem is “you have police and fire workers who can retire after 20 years and collect up to 70% of their earnings based on the 5 highest years salaries. We see a lot of pension spiking in the last few years where for example police work overtime (which counts towards their best five years) so these workers stand to collect far more in retirement (total years in retirement) than they actually ever made while working (total years worked)….
