This is How You’ll Bail out Municipal Pension Funds

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Check the bills in your mailbox. Happening now in Chicago.

It has gotten so bad that the phrase “Pension Crisis” made it into Wikipedia. It’s the perplexing reality that municipal, state, federal, and corporate pensions in the US and similar schemes around the world are so badly underfunded that it will be impossible to fulfill the promises by a wide margin. By many trillions of dollars.

With state and municipal pension funds in the US, the situation is particularly tricky because the beneficiaries are voters and employees of the government, and politicians of all stripes bought their votes with promises of low contributions and rising benefits. They got away with it for decades because no one cares about “underfunded pensions.” Even the term makes people’s eyes glaze over.

But someone is going to pay. And it’s not going to be the politicians.

This is how they will pay for it in Chicago – the city whose credit rating Moody’s cut by two notches to junk in April last year, and whose interest payments, despite historically low interest rates, have continued to skyrocket as it borrows more and skids deeper into the sinkhole of its own making.

On Wednesday, the City Council approved Mayor Rahm Emanuel’s scheme to bail out its largest and worst-off pension fund, the Municipal Employees’ Annuity and Benefit fund, which would otherwise be insolvent within ten years – and a lot quicker if markets have a hissy fit.

Despite seven years of rampant asset price inflation, and asset bubbles nearly everywhere, the fund’s obligations are only 20% funded. It forms part of Chicago’s $34 billion in retirement debt, accumulated over the decades by politicians making promises to buy votes and support from special interest groups. But neither the beneficiaries nor taxpayers via the city contributed enough to pay for those promises.

To save this one pension fund out of its four pension funds from insolvency, the city is jacking up water and sewer levies by 33%, phased in over a few years. Property owners in Chicago will pay, one way or the other, $3 billion into the fund by 2022, up from $1 billion under the prior scheme. Despite these billions of dollars involved, the fund covers only 77,000 workers and retirees.

Beyond 2022, additional revenues must be extracted from the hapless people to keep bailing out the fund for decades to come.

In theory, the scheme will be 90% funded in 40 years – “in theory,” because in practice, long-term projections like this never work out. There are recessions and market crashes that draw a red line through optimistic assumptions.

Even this won’t be a cure but it would “head off a financial disaster,’’ explained finance committee chairman Edward Burke before the vote.

The other three pension funds of the city will also be bailed out. For residents and property owners, it will be like, to coin a new phrase, “Chicago water torture”: one drop at a time, whereby the drops are getting more frequent and bigger.

Property owners have already been whacked by a record property tax increase passed last October. It came on top of a reassessment of property values. So the property tax bills this year have jumped on average by 13%.

Phone users get to prop up the Laborers’ Retirement fund, expected to become insolvent “by 2029.” It covers about 5,000 current and retired laborers. So proceeds from the 911-surcharge increase from $2.50 a line to $3.90, imposed in 2014, or about $40 million a year, will be redirected to the fund. The city will also shuffle an extra $30 million a year from city funds covering the operation of O’Hare and Midway airports, water and sewer construction, and the like into the fund.

In turn, the Laborers’ Union has agreed that workers hired after January 1, 2017, will have to contribute more (11.5%) and work longer (until 65). The fund is 50% underfunded. The goal is to have it 90% funded by 2057!

2057! This is why citizens aren’t paying attention to the pension fiasco: it plays out over decades. It’s like watching paint dry. And cities like Detroit, known to be heading toward bankruptcy for years, take their time to make the trip. But attention spans are short. So it doesn’t register until the bills for water, sewer, property tax, phone, and the like are suddenly ballooning.

And this is now happening in Chicago.

It might still not keep Chicago out of bankruptcy. But Detroit has shown how municipalities can continue to borrow money and go on for years even as the worst doom-and-gloom projections have already been surpassed. This can go on as long as yield-desperate investors are willing for fork over new money to bail out the old money. It’s only when these investors walk away that the game is over. And then it can be over suddenly. But that’s not happening with Chicago just yet.

Finally, some good data for middle-class Americans, it seemed: the Census Bureau reported that median household income rose 5.2%. But lost to the profuse media gushing, the report got, let’s say, complicated. Read… That 5.2% Jump in Household Income? Nope, People Aren’t Suddenly Getting Big-Fat Paychecks

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  83 comments for “This is How You’ll Bail out Municipal Pension Funds

  1. Felix_47
    September 15, 2016 at 9:07 pm

    I closed my business in California letting quite a few go. I am certain that any Chicago business owner in his right mind will be heading out of town if they already have not. I think moving production to India makes a lot of sense. By moving production to India am I really screwing anyone other than the government workers and their unions? Private sector workers are already toast. I did my best to get my people into government jobs.

    • Intosh
      September 15, 2016 at 11:44 pm

      By moving production to India, you are screwing your country, fellow citizens and yourself.

      • JerryBear
        September 16, 2016 at 3:36 pm

        And just wait until you have to deal with the incredible and horrendously corrupt government bureaucracy of India! Be sure to bring along headache pills…. lots of them! ^,..,^ What you save in labor costs will be more than made up for in bribes.

    • MC
      September 16, 2016 at 2:07 am

      I really suggest when you think you’ve given a second look to India, you give her another one.
      Plainly put not all that glitters is gold: personally I’ve found that other Asian countries give the same advantages as India but with a whole lot less headaches, something anybody can do without.

    • Sound of the Suburbs
      September 16, 2016 at 3:10 am

      “The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction”

      What’s new?

      Capitalists never realise who their consumers are and are unable to see the big picture where:

      All employees = all consumers (approx.)

      By paying lower and lower wages they destroy demand for their products and services.

      Problems with global aggregate demand.


      • William Charles
        September 16, 2016 at 9:09 am

        One thing is for sure, the eventual outcome of ‘Marxism’ in their effort to control markets and the business cycle is their own annihilation as histories past testify.

        • Sound of the Suburbs
          September 17, 2016 at 5:15 am

          The best thing about Communism was that it made Capitalism work better.

          When Capitalism had competition it was important to demonstrate that it worked better for the average citizen.

          The competition went and those at the top took all.

          The real problem with Capitalism is that it naturally descends into crony capitalism.

          The political, business and financial elite all come from the same small Ivy League University pool (US), other countries have their own small elitist pools.

      • WorldBLee
        September 16, 2016 at 3:13 pm

        Yep, the destruction of the consumer class occurs in tandem with the ‘labor cost savings’ that brings smiles to everyone in the boardroom.

    • West
      September 16, 2016 at 12:22 pm

      Here’s my solution to this mess. Require anyone receiving a government pension to live in the jurisdiction where the pension is drawn from in order to receive it’s benefits. Thus, State of Illinois pension must live in IL, city of Chicago, inside Chicago city limits, Cook county, anywhere inside the county, etc.

      Of course, one is free to move, say to Mississippi, but will not receive their pension.

      This will put an end to leaving others holding the bag, because when taxes rise to pay these pension expenses, the recipients will also feel the burden of “paying for their own pensions”.

      (Of course, private employers and pensions would be left to do their own rules).

      • chris Hauser
        September 16, 2016 at 4:57 pm

        i like that idea.

        now how to….ah, never mind.

      • night-train
        September 17, 2016 at 3:20 am

        West: I think what you suggest is both illegal and un-American. That said, many pension systems like the one from which my wife receives benefits, do have a penalty for moving out of state. And then, there are state and private inducements, like discounts, to encourage retirees to continue residence in the state.

        Another point that is often overlooked by people unfamiliar with government agencies is that many positions are specialized professional ones. Many of these can only be filled by bringing in talented, qualified, often experienced, people from other jurisdictions. Limiting their retirement options would hamper agencies in attracting qualified candidates. My wife was required to contribute to her retirement fund by law, as she did for 30 years. Telling her where she can live afterwards is unacceptable.

    • Humpty Dumpty
      September 16, 2016 at 8:26 pm

      Try Thailand, few headaches, good productivity. India, ugh. Or, better, try Idaho, Utah – good work ethic.

  2. September 15, 2016 at 9:42 pm

    “The city will also shuffle an extra $30 million a year from city funds covering the operation of O’Hare and Midway airports, water and sewer construction, and the like into the fund.”

    So the city infrastructure and airports will suffer so these pensioners can live the life of Riley.

    You wait until we read of a jet that ran off the runway and killed several passengers due to poor runway maintenance due to underfunding.

    We already have history in Chicago with EL-Trains derailing due to lack of maintenance and the woman with the cracked skull from falling pieces of Union Station.

    • Scrooge McDuck
      September 16, 2016 at 11:10 am

      This type of comment and idealogy is precisely the reason why we are in such a terrible state as a country. We have been led to believe, primarily by neoliberal conservatives, that pension funds are enabling lazy retirees who have a good thing going compared to the rest of us bastards. And rather than demanding that our government and politicians work for us to provide us with the same benefits that these retirees enjoy, we turn against ourselves and demand that these retirees get stripped of their benefits and live crappy lives like the rest of us. I am not a retiree, I have many years to go before I get there, nor do I work for a government agency, but I do not think it fair that these folks were promised a good pension when they joined their jobs and then after they retire are told that they are on their own. Additionally, why don’t we see the same level of outrage amount folks like this commentor when we read stories about PE mangers defrauding pension funds? Or when we read about Wells Fargo executives overseeing the fraud against their customers and shareholders and receiving million in golden parachutes for their efforts? Where is the outrage there? It has taken me a while to realize that our system is broken, our moral compass is broken, and many of our private institutions are run by thieves and/or sociopaths.

      • kitten lopez
        September 16, 2016 at 6:15 pm

        TESTIFY, Scrooge McDuck! i love it when people defiantly dare to fight for the well-being of others and us all and don’t fall for the “screw you”/ “divide and conquer” shtick where we’re tearing apart each other’s limbs for the change on the ground while the sociopathic execs run off with ALL the cheese.


      • night-train
        September 17, 2016 at 3:26 am

        Very well said. I have wondered for years why so many people say why you, instead of why not all of us. The .05% not only have reduced us to fighting for table scraps, they have also recruited many among us to carry water for them.

    • JerryBear
      September 16, 2016 at 3:40 pm

      Why do I get the feeling that Chicago has set foot on the same path to ruin that Detroit is on?

      • chris Hauser
        September 16, 2016 at 5:01 pm

        an upscale version, bigger better more variety.

        we need these cities to be downsized and reforested. it can be done, a new CCC. but it’s not economic. there’s the problem.

  3. Ptb
    September 15, 2016 at 9:52 pm

    Coming to state near you.

    • Southwesterner
      September 16, 2016 at 5:43 pm

      @Ptb, right on!

      The pensions probably can’t be paid since the markets are destroyed. So there won’t be much pension paid anywhere (unless the Chinese prop up the US system, which it might serve them to do- our people won’t help us. Rahm sucked the final $ out of Chicago). I’ve become very empathetic for businesses leaving the US. My small business pays out a lot of tax….far too much for me to live well. Heck, I’d leave if I could.

  4. michael
    September 15, 2016 at 9:55 pm

    Another reason to remain a renter. It appears there will be a barrage of tax and bond initiatives on the November ballot. I am sure the sheep in my city will vote for more taxes and bonds. I vote no on all of these because the last thing government needs is more money. Unfortunately most of the voters were likely educated in California. California politicians love ignorant voters.

    • Marty
      September 15, 2016 at 10:42 pm

      Who do you think pays the taxes on rentals??? Why do you think rents have gone up so much over the past five years?

      • Vichy Chicago
        September 16, 2016 at 7:50 am

        Marty, you beat me to it.

        “Property owners in Chicago will pay, one way or the other” should instead read:
        “Anyone living in Chicago will pay, one way or the other.”

        • Southwesterner
          September 16, 2016 at 5:44 pm

          Move out. Vote with your feet.

        September 16, 2016 at 10:41 am

        It is the Stupid Public that wants all these taxes on Businesses, yet, they, being so Stupid don’t realize the Businesses don’t pay taxes.

        The Stupid Public pays all of it.

        • JerryBear
          September 16, 2016 at 3:43 pm

          To quote H. L. Mencken, “Nobody ever went broke underestimating the intelligence of the American public.” That stupidity may yet be the doom of our nation.

        • Sound of the Suburbs
          September 17, 2016 at 2:59 am

          It’s not just the public that are stupid.

          The West embraced globalisation but its elites never really got to grips with its requirements.

          To compete on a global economy the minimum wage must be the same in East and West.

          The minimum wage must cover the basic cost of living.

          The West allowed house prices to soar, which meant the basic cost of living soars with it in expensive mortgage payments and rents.

          The costs to labour of housing must be covered by wages and this ensures a minimum wage level that makes Western Labour uncompetitive with Eastern labour.

          Western elites worry about productivity, but its labour force have already been priced out of the global labour market by housing costs.

          Western elites thought about step 2, missing out step 1, known to Classical Economists in the 18th and 19th Centuries.

          The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

          These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

          Neo-liberals now discover that the purpose of free and subsidised stuff to those at the bottom was to make the nation internationally competitive and able to compete in the global economy.

          Removing free and subsidised stuff means wages now have to cover these costs.

    • Intosh
      September 16, 2016 at 12:05 am

      “the last thing government needs is more money.”

      Yeah, it’s better to keep the profits in the private sector so that it can re-invested in the community… huh I mean in the Bahamas.

      Low redistribution of wealth->Worst off middle class -> debt-fueled economy -> speculation -> crisis -> bail out of billionaire banks -> low rates -> low bond yields -> underwater pension funds -> assets bubble -> worst off ordinary people. Rinse, repeat.

      But yeah, pick your poison. The government is corrupt anyway. The most brilliant scheme of free-market neoliberal capitalism is that it naturally corrupts the authority that seeks to regulate and tame it. Thus, making the masse turn against that authority and asking for less intervention. Just brilliant. But then, the irony is that when pharmaceutical companies like Valeant and Mylan exercise that market freedom in the form of outrageous price increases, people go cry to the government. Or, when the IBMs, HPs and Dells cuts tens of thousands of jobs in the US *AND* at the same time, request thousands of H1-Bs, people cry to the government once more.

    • Montana Esq
      September 26, 2016 at 6:21 am

      Michael read above about the elite and the rest of us. Things dont get fixed without money. Our do nothing Republican led Congress cannot even come out with an infrastructure plan to fix roads and bridges. Good luck denying money and get to work fixing things yourself. Will you now self insure and give back your Social Security for the rest of us to use.

      Take a look in the mirror. You are part of the problem LOL

  5. PIGL
    September 15, 2016 at 11:03 pm

    The usual gang of brave Galters ready to lame the unions and government workers. How about blaming the government, the tax system, and the billionaires into whose pockets 30 years of pension contributions have been funnelled.

    Where do people think the funds involved in the recent vast upwards transfer of wealth came from? They were stolen, and the pensions, both public and private, were some of the main piggy banks to be pilfered.

    But no, so much easier to blame the workers whose pensions you have stolen.

    • CrazyCooter
      September 15, 2016 at 11:21 pm

      Does it matter who is guilty when the point of the article is “it’s gone”? No one goes to jail for this crap anymore, nor have they for a very long time (which makes it worse IMHO). The point that I got is “a lot of promises were made – they won’t be kept because they can’t”. And we got numbers and dates to reinforce that observation.

      Here is an anecdote – my old man was a bit of a hard ass. When I used to fight with my siblings, he would settle stuff as he saw fit and inevitably when someone complained he used to say “life is not fair” and that was that.

      So, once in the sixth grade, we got a new teacher (first year) who brought us treats one day (we did well on an test the day before – something like that). Of course, we all went nuts on sugar and freedom – and eventually he had to yell, force everyone to their desks, and then he lectured us about taking advantage of people who are nice. He concluded this little episode with “… and that is not fair.”

      Well, boy howdy, let me tell you this little six grader knew the answer and up went my hand. He called on me and asked me what I wanted. I told him what I had heard pretty much my whole life.

      “Life is not fair Mr. Lilly”.

      To reinforce the point, off to the principals office I went. I got beat with a board. At a much older age, my old man finally told me his version of the story (all parents got called when they did corporal punishment). He went down to the office – and the break room next to the principals office was full of old women school teachers – and they were HOWLING at the story (they kept getting a new one in the break room off and on often enough to keep the fun going for several hours). My dad was solemn as the principal went over the ordeal, but he could hear them the whole time he was there.



    • September 16, 2016 at 12:20 am

      Did you read the article?

    • Petunia
      September 16, 2016 at 8:50 am

      Yep, even when and if the pension funds are fully funded, they are subject to raids by the parasites.

      When Jeb left the governorship of FL, he went to Lehman Bros. and promptly set about to selling the state pension fund some of Lehman’s junk. This is why Jeb could not win his own state, the peasants were pissed. Even now they are dealing with the effects of the hole he blew in the pension fund. Last I heard they were increasing worker contributions and thinking about a two tier system.

      The politicians need to be stopped from raiding these funds and even from being anywhere near them. There needs to be a lot of transparency and oversight.

      • September 16, 2016 at 9:03 am

        Pension fund raiding by Wall Street has evolved into an art form. Pension funds are the number one target for hedge funds and PE firms. Everyone wants to get their foot in the door – because that’s where the money is. Some of these investments are good for pension funds, others are catastrophic. But the fees (mostly undisclosed) always eat into the funds.

        Occasionally, there a huge scandals cropping up publicly, but mostly it’s done without public notice, and years later, when the fund needs to be bailed out, the causes are rarely laid out, and the responsible parties (pension fund managers, politicians in pay to play schemes, and the like) are rarely held to account (if ever).

        • golden handcuffed
          September 16, 2016 at 11:19 am

          When Ed Lee floated the local property investing idea for the SF pension fund (I believe also tied to affordable housing), I nearly had a coronary. Of course, for all I know that thing is invested in local tech and housing already. At scale, even with “local knowledge”, the pay to play, moral hazard, and all the eggs in one basket issues make such a thing ridiculous.

        • chris Hauser
          September 16, 2016 at 5:21 pm

          willie sutton was asked why he robbed banks. we all know the answer.

          i’m starting to feel like we have a two-tier economy. the robbed and the to be robbed.

          i’m exaggerating for effect.

    • JerryBear
      September 16, 2016 at 3:47 pm

      Like I said, “The problem with Capitalism is you eventually run out of other peoples’ money to steal.”

  6. Gian
    September 15, 2016 at 11:46 pm

    San Bernardino and Stockton, CA filed bankruptcy due mostly to pension obligations. Although the federal bankruptcy court ruled that PERS could be included in the proceedings and contracts renegotiated, city “leaders” elected to screw bond holders and make PERS whole. Those city leaders and local judges will never allow renegotiation of these benefit contracts because they too are pigs eating from the same public trough. Until and unless there is some sort of tax revolt, taxpayers will continue to be expected to deliver these retirees to the lap of luxury.

    • David G. L A
      September 16, 2016 at 12:43 am

      LA does it with parking tickets and DWP bills. They go up and up and up.

      I think people will start to wise up and just move out of certain cities.

      • CrazyCooter
        September 16, 2016 at 9:30 am


        I am not sure I will ever own property again at this point – for this reason alone. I don’t see how RE has any upside over the remaining 20 or 30 years of my professional life – and being able to pack up and go where the jobs are may make the difference between cat food or cold beer when I get to retire*.



        * I don’t believe in the idea of retirement anymore – it won’t apply to my demographic except owners of capital – but I can be 100% out of debt, have some cash in the bank, keep my living expenses to a minimum, live in a very low cost setting, work part time or equivalent, and so forth.

        • Graham
          September 16, 2016 at 11:57 am

          “but I can be 100% out of debt, have some cash in the bank, keep my living expenses to a minimum, live in a very low cost setting, work part time or equivalent, and so forth.”

          This is the way forward, there’s not point in earning decent money anymore as it just gets taxed, and via corporate welfare schemes (like subsidising their staff because they are underpaid) it ends up in the Cayman Isles etc.

          It’s better to keep the numbers small and get off the tax radar.

  7. John Doyle
    September 16, 2016 at 1:45 am

    The Fed has to take over paying pensions. The economy is just too up and down to make assumptions the money will be there in umpteen years time. Private funding for pensions is OK if you do your own, but a nightmare for corporations whose business models change from relevant to outdated before collect day comes. Now the boom days – when a lot of these funds were organised – are gone forever. Just look through Wolf’s posts, 90% are bad news, if not all of them! The news is bad and the bad news will be locked in. We are going down hill at ever greater speed.

    The money to pay pensions is only available long term to those who actually create the stuff, like commercial banks and the Federal government. Everyone else is a user and has to budget. Punters today, even the middle class ones cannot budget enough spare money to put aside and if it’s savings, forget it, what with negative rates there’s little of that. Thank the Fed for that bright idea!

    The Fed/ Treasury can do it courtesy the Constitution having given it the inalienable right to create currency and not as a double entry event. Free money may frighten some people, but the alternative is 100 times worse.
    Pitchforks for all, coming soon!

    By paying pensions – and all welfare etc- spending power in the economy is not drained so the economy gets a boost. It will pay for itself in short order. There really is no alternative this side of chaos.

    • Graham
      September 16, 2016 at 12:02 pm

      “The Fed/ Treasury can do it courtesy the Constitution having given it the inalienable right to create currency and not as a double entry event.”

      No, the constitution specifically, clearly and deliberately says only the treasury can issue currency for Very Good Reasons blindingly apparent today.

      The Fed is un-constitutional and the 1913 FED act was sneaked though against the rules – and the world has been paying the cost of that ever since, to the bankster leeches who collect our wealth through their usury scheme of currency rental.

      • John Doyle
        September 16, 2016 at 7:37 pm

        The Fed writes the cheques on behalf of Treasury. They are joined at the hip. The Fed has no money. It’s all in treasury [as the name implies] but the Fed does the banking and never touches a cent in Treasury’s accounts.

        • Robert
          September 28, 2016 at 11:27 pm

          The expansion of the national debt from zero before FDR to $20 trillion today can be laid at the foot of the creation of a central bank (the very term was, after what had happened in Europe with John Law, practically a dirty word and never mentioned in the press until a humiliated Richard Nixon, who had not himself created LBJ’s Great-Society-Plus-Vietman debt, was forced to take the dollar off the gold standard while abjectly bleating “We’re all Keynesians now” whereupon central bankers, who were now the King of the Hill (meaning Capitol Hill) were free to dance about and congratulate each other. Congress is fully complicit, of course, as whatever debt is not funded by the public’s buying bonds is done by the friendly Fed, which tightens its boa grip on the economy, (such as now, by being granted the right to “regulate” the banks, which happen to own it) each time it momentarily relaxes its grip. With the debt so enormous, it has achieved Nirvanah: keep the rates the banks which own it pay for money near zero, which also enables them to pay savers near zero, and it looks like they would hold these rates near zero forever, for if they were to go up a fraction- or even look like they might, the whole economy would implode. And it took them just 100 years to pull it off.

        • John Doyle
          September 29, 2016 at 12:41 am

          We are in a fiat money system. What applied before WW2 is irrelevant, although the idea that all money came from the Central bank goes back to the original constitution. This gave the government complete control over its currency. The Federal Reserve was founded by private bankers to influence the process but it has morphed into a significant arm of government. It derives its authority from and is backed by Congress

          Please don’t think that “Government debt” is owed to the nation except as an accounting identity. Remember your savings account? It is also a bank liability. Government debt is private assets, i.e, wealth. Governments do not need or use this debt money, It is never revenue constrained as it is the monopoly issuer of the currency. It does not have to issue debt to cover spending.

  8. night-train
    September 16, 2016 at 1:51 am

    People tend to paint government pension systems with a broad brush. There are, however, many differences in the different pension schemes when one compares them. We have Federal, state, and municipal. Municipal may include cities and a different one for county. Then there are those for education workers and non-education workers. Some places have a separate system for the judiciary, for example. Some workers are members of unions, while others are prohibited from union membership.
    This is just off the top of my head.

    The point is some are better managed than others. Some are practically criminal enterprises, while others perform pretty well. Each has to be looked at individually and not just lumped in together. Many of these systems now have a two tier system. One for those hired before an established date and one for those hired after said date. For those against government pensions, after the older workers and retirees are gone, a government pension will be as lousy as any other. Chalk up another win for the Koch Brothers and John Arnold.

    • David G L A
      September 16, 2016 at 8:28 am

      Night – train –
      It’s not even about who’s skimming off the top. It’s about votes for cash. The corruption is built into the local and state governments. retire at 50 or 55 and get 90 percent of your full salary for life, plus full medical? What planet are these people living on?

      • Paulo
        September 16, 2016 at 1:24 pm

        Those are the myths tossed out about public pensions. In actual fact public pensions are set out by formula and usually achieved by forgoing wage increases in the present for a decent retirement in the future. The rates and formulas are public record.

        For example, I spent 17 years teaching public school in BC. I have two certified trades, a 6 year degree (grad Royal Roads), and 25 years work experience in the private sector. The private sector offered no pension plans, whatsoever, beyond CPP which would max out at $1200/month if I worked to 65 at max contribution levels. The teacher pension was mandatory to join and required an approx $1,000/month contribution, matched by my employer. When I switched into teaching my new salary was 1/2 what I made working construction and flying. This is just to provide background why I now have a pension to live on.

        The pension plan is 102% funded and well situated with safe investments (relatively speaking). The pesnion rate received is 2% per year based on your/my best 5 years salary, which maxes out at 70%….period. You could teach 50 years and you will still max out at 70% salary. I make about 30% best 5 years due to a penalty for retiring early…(I had cancer and decided life was short and pulled the work plug) (cancer free, now, thankfully).

        Anyway, due to current investment yields, despite being sound and healthy 102% fully funded, the Pension Plan actuarial committee just voted to change the formula for future retirees. Starting in 2018 the formula will begin to be based on 1.85% as opposed to 2%, and the penalty date and amount is raised to 4.5% of total pension at age 61. There will be no cap on your pension if you work longer than 35 years, but retirees will only escape a clawback penalty if they have worked longer than 35 years.

        Seems fair to me.

        Our Provincial Govt. used to raid our public pension plans kitty by borrowing at low rates for mega-projects, (especially for election goodies). This ability was taken away by law in the 90s. That is why our Pension Plan is now fully funded and healthy; (the Govt. had their hands slapped out of the cookie jar). While the citizens of Chicago might now resent having to pay off what is presently owed to retirees, they probably enjoyed the benefits of lower taxes or Govt. projects paid for by the various pension plans along the way. You can’t have it both ways.

        However, even though I now enjoy having a pension, if it was cut in half tomorrow we would be okay. Why? Because as responsible individuals my wife and I chose to live a lifestyle that reflected our means and eliminated debt from our vocabulary.

  9. John Doyle
    September 16, 2016 at 2:18 am

    To add weight to what I say, this brief video of Ben Bernanke and Alan Greenspan should silence doubters;

    • September 16, 2016 at 8:49 am

      My two favorite goons, Bernanke and Greenspan! The men who destroyed the mechanism by which the US economy used to operate and cleanse itself and whom I hold responsible (particularly Bernanke) for the quagmire we’re in now, after they engineered the greatest wealth transfer in history (from labor to capital, from the many in the future to the few now).

      • Petunia
        September 16, 2016 at 8:54 am

        I laugh every time I see Greenspan trying to redeem himself, really? At least Bernanke takes pride in enriching the tribe.

        • polecat
          September 16, 2016 at 12:15 pm

          Well you know …. he DOES have Andrea to console him ….after doing her nightly stint, for the Ministry of Propaganda !

      • Southwesternerh
        September 16, 2016 at 5:54 pm

        Yep- those 2 criminals wrecked the US system. I can’t imagine even half of the pensions being paid as they should have been…they stole the wealth.
        On purpose.

        • Sound of the Suburbs
          September 17, 2016 at 2:52 am

          Unfortunately, US ideas have been rolled out globally and the whole world is in the same mess.

      • John Doyle
        September 16, 2016 at 7:26 pm

        Yes, not good examples. Just the same even crooks sometimes speak the truth. And here they do.

      • Humpty Dumpty
        September 16, 2016 at 8:38 pm

        Ugh. I was enjoying the comments until these two names came up like crocodiles on a florida golf course…when the pitchforks come out, it will be interesting to see how much courage Bernanke has – the very embodiment of elitism: arrogant, smug, self-involved and predatory.

        • John Doyle
          September 16, 2016 at 10:15 pm

          Actually there’s no reason to particularly signal out these two. They are central bankers who do what central bankers do. You should be reserving your wrath for the politicians, who are supposed to be representing us, but who give in to these people. I would be reserving my scorn for Clinton who betrayed his Democratic party, not to mention everyone else, by repealing Glass- Steagall and allowing this rot to infect the economy. You can’t blame your cat for being predatory, you can blame the politicians for giving in and the utter betrayal they inflict!

      • nick kelly
        September 30, 2016 at 6:38 pm

        Wolf have to disagree with about the duo- it was Greenspan that created the bubble, and got to float along on a wave of adulation for having tamed the economic cycle- i.e. lowering rates every time the market hiccuped.
        How long was Bernanke in office before the crash? I wish I’d looked it up before but I think he had a pretty short honeymoon.
        There’s lots of blame to go around in the 40 year credit bubble but for me Greenspan takes the prize over Bernanke.

        • September 30, 2016 at 6:48 pm

          I can go along with that – that Greenspan kicked it off … that Bernanke took it to the next level … and that, at the next recession/crisis/whatever, Yellen will take it to the next level still.

  10. Sound of the Suburbs
    September 16, 2016 at 3:13 am

    Wall Street has also been helping themselves to the nations pension funds.

    HFT profits are skimmed from big institutional investors like pension funds.

    Pension funds also thought it would be a good idea to get Wall street experts in to run their funds, they charged huge fees with lousy returns.

    Wall Street is richer and pension funds are poorer.

    • Jerry Bear
      September 16, 2016 at 4:36 pm

      I am a big believer in free enterprise. But Neoliberal Market Fundamentalist Capitalism is actually antithetical to genuine free enterprise. It is just an excuse for the big players at the top to suppress capitalist competition and take everything for themselves.

    • Southwesterner
      September 16, 2016 at 5:55 pm

      Part of the plan……why is everyone so surprised?

  11. Dan Romig
    September 16, 2016 at 6:46 am

    I had 25% of my portfolio in Closed-End muni bond ETFs for a few years, and they did well; plus they paid nice dividends. Two months ago, I sold them, and am sitting tight on the cash. Yeah, I lost out on about .8% in dividend payments, but I don’t trust even well run and diversified muni ETFs right now.

    Much of the trouble stems from Central Bank policies of NIRP & ZIRP. How the hell can a pension fund manager return 8% annually in this environment? I reckon there’s a lot more bloodshed to follow, and not just in public pension funds, but in the private sector as well.

    For what it’s worth, the ETFs:

  12. michael
    September 16, 2016 at 7:26 am

    I agree with David’s sentiment. The answer is to remain mobile. Vote with your feet.

  13. trader
    September 16, 2016 at 8:00 am

    Welcome to Amerika!

  14. September 16, 2016 at 8:08 am

    Well, If you rent, it’s expenses + Profit that you are paying. If you own it’s expenses + equity your paying, and the equity you may be able to get back if you need to. The profit in renting is to the building owner. I am always amazed to see that there are people who think they are not paying taxes when they rent….. In the above, expenses are all those costs included in owning a building….. Taxes too.

    Part of the problem is that for every person tired of paying the NEW High in all of the housing expenses there are new home owners that are starting out at this new high, only it’s the bottom for them, and they “can” afford it – it’s great because its their first new home and life is great ! They will not be willing to have a tax revolt until they have had their house for 20 years and read 20 years worth of corruption, and see 20 years worth of their purchasing power decline.

    Sorry I know there is most likely not 20 years worth of this stuff left, but you know, some people are just happy with the situation as it is…. They are gov. workers getting it as they like it and fat, dumb and happy as the saying goes…


      September 16, 2016 at 11:31 am

      Don’t worry.

      This is our last Election.

    • Southwesterner
      September 16, 2016 at 5:59 pm

      I don’t think the tax $ will be there to pay them.
      The demographics don’t support the infrastructure. As Boomers quit working and buying, the market continues to collapse. The Millenials are debt laden. Immigrants send much of their pay home….so where’s the beef? Gone.

  15. Petunia
    September 16, 2016 at 8:34 am

    To those of you who comment that renters pay the taxes, you are correct. However, the benefit of being a renter is the mobility. As the taxes go up on a property, the landlord can increase the rent, but the renter has the ability to leave. It gets harder to rent, sell or to keep a property as the taxes increase. High taxes are usually an undesirable characteristic of an area. The landlord eventually pays the tax of a lower property value.

    • RD Blakeslee
      September 16, 2016 at 9:50 am

      Petunia, I am one to whom mobility as a defense against government malfeasance is anathema.

      But one must critical about his/her locale for settling:

    • Saylor
      September 18, 2016 at 12:53 pm

      You wrote a rather profound statement a couple of months back that I have since quoted to friends. They in turned became reflective as they nodded their heads….
      you wrote “mobility is our only asset now”.
      I have thought often on that.
      It is now my main point of argument for convincing my wife we should live on a sail boat.
      Said with humor but not joking.

  16. William Charles
    September 16, 2016 at 9:04 am

    Like New York, look for the people that have earned their wealth to mass exodus!

  17. Chicken
    September 16, 2016 at 10:25 am

    More than likely, higher property taxes would hold land values down due to those who can’t or don’t want to pay the tax are forced out.

    California is always an exception to conventional logic though.

    And that Zuckerberg idiot must think laws don’t apply equally, someone please advise him Palo Alto doesn’t allow for all 4 walls to be torn down. What kind of monstrosity to his magnificence was he planning, anyway?

    • nhz
      September 16, 2016 at 12:38 pm

      in the Netherlands property taxes are extremely low (like 500 euros a year) but land values are extremely high (like 100K for an average home). You pay for the land when buying a home (and indirectly when renting …), for the median 275K or so home the land value is often more than the (inflated) construction cost.

      Effectively land value is just another form of property tax, you pay up front for the right to live there (in Netherlands almost all land where building homes is allowed is owned by the government, although the rights are sometimes transferred to big developers). The BIG benefit to the government is: with high land value and low property taxes they can cash almost the full amount right away, instead of over 30 years. Bread and circuses!!

      And of course nowadays a home buyer doesn’t really have to pay for the land, you just loan the money (at less than 1% rate) and assume the property will be even more valuable in 30 or 40 years when you have to pay back the loan. So effectively no property taxes at all for home owners, as long as the Ponzi system keeps working (as it has been doing here for over 30 years now).

  18. Ptb
    September 16, 2016 at 10:48 am

    Taxes, insurance, maintenance….all property ownership costs that never go away. These costs are usually the highest in areas of greatest affluence. It’s hard to get blood from a turnip. I’ve dealt with local govt in areas of poverty where the property tax has nt been paid in years. Nothing happens as the tax collectors know the owners can’t pay and the property is almost possible to sell. Kind of a zombie situation.

  19. Frederick
    September 16, 2016 at 11:04 am

    I increase the rent on my apartment in Warsaw by 3 percent a year and the tenant complains that the country is in deflation but he eventually agrees My maintenance and tax payments havent risen a zloty in 10 years thankfully My house in Turkey has zero property taxes and I paid cash for it This summer I rented it to Brits by the week and lived on my boat enjoying the beautiful spots along the Turkish coast So glad I sold my Sag Harbor tax liability and got off the hampster wheel Seven dollars for a loaf of bread decided it for me oh and I was paying a hundred dollars a month for hot water with propane and now I get free solar hot water ten months a year

  20. Aussie
    September 16, 2016 at 6:40 pm

    And of course, there are NO guarantees this money collected will go to the pension fund! And more than likely it won’t, such are the rodents we have engaged, as government! Get rid of the Fed, and burn the fu*king banks to the ground!

  21. Bookdoc
    September 16, 2016 at 8:55 pm

    I have a feeling that the politicians involved often have a job waiting for them after they are out of office. One with a big salary and great benefits. The fees that are made on ripping off the funds are, I am sure, quite substantial.

  22. WTFrogg
    September 17, 2016 at 7:09 am

    I heard from my great Grandfather that the practice of “tar and feathering ” was big back in the 1800s…….. Would be nice to see it make a comeback for some of the white collar thieves out there.

    Why rob a bank when you get less jail time( if any) for white collar crime?

  23. c smith
    September 19, 2016 at 1:11 pm

    “Property owners have already been whacked by a record property tax increase passed last October. ” Hope you’re sitting down for this one: My son owns a house in the Wicker Park neighborhood of Chicago. He has a big problem with giant rats living in a vacant house next door. Thankfully, the city of Chicago has offered to RENT HIM A FERAL CAT to take care of the problem. I can’t make this $hit up.

  24. Oneyedjack
    September 19, 2016 at 4:04 pm

    Pension mess still boils down to one thing -CORRUPTION .Who’s going to clean up and put politicians, bankers behind bars cleaning toilets with a tooth brush were they belong?

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