Insolvent Illinois Begs Congress For Pension Bailout
April 18, 2020 in News by RBN Staff
source: www.zerohedge.com
Authored by Mike Shedlock via MishTalk,
Illinois pension plans are in serious trouble. So serious, the states seeks a federal bailout. Cities are in trouble too!
The president of the Illinois State Senate seeks $40 billion to help the pension system, fund unemployment insurance and aid hospitals and cities according to the New York Times.
The letter, sent this week by State Senator Don Harmon, also seeks a $15 billion grant to “stabilize the state’s budget,” $9.6 billion in direct aid to Illinois’s cities, $6 billion for the state’s unemployment insurance fund, and hardship money for hospitals and nursing homes, among other things.
Messages left for State Senator Bill Brady, the minority leader, were not immediately returned on Friday evening. Democrats hold 40 of the State Senate’s 59 seats.
Illinois is Insolvent
I was certain this would happen, but the way this happened is a bit unexpected. Some of the state pension plans will run out of money in as little as 2-7 years.
Wirepoints reports Illinois pension plans were running out of cash long before the Coronavirus hit.
Many pension funds across Illinois were running out of cash even before the Coronavirus reared its ugly head. Some funds were even on the brink of becoming pay-as-you-go plans, where pensioners are forced to rely directly on employer operating budgets, and not pension fund assets, to get their retirement checks.
The proof is in the collapsing asset-to-payout ratios of most Illinois pensions. That ratio – which is one of the statistics Moody’s Investors Service uses to measure pension health – compares a fund’s total assets to how much it pays out in benefits each year. In other words, it measures how many years a pension plan can make benefit payouts before it runs out of money, assuming no new contributions or investment income.
Illinois’ worst-off funds only had two to five year’s worth of payouts left in 2018. They were among the most insolvent in the country. The COVID-19 market meltdown will have only shrunk their assets further.
