How to solve the pension debt crisis (Chicago, Washington: income, income tax)

[DoseTheClowns5]

Originally Posted by lepoisson

I suspect that as interest rates continue to increase on the pension debt, Illinois and Chicago will get junk bond status. When no one lends us money, our politicians will be forced to take action. They need to cut all pension payouts by 10-20%, tax retirement income, and eliminate pensions for new employees (get a 401K instead). This will all happen in the next 5 years.

They can't. The Illinois state constitution clearly states pensions can't be diminished or impaired. If you try and cut them the courts will throw it out. So people will get their pensions before you have police or fire services, roads, schools or any other government service.
There isn't a real long term fix aside from leaving the state.

[BRU67]

Originally Posted by jasperhobbs

Legalize recreational marijuana and use the tax revenue to solve pension debt crisis.

To solve our pension debt crisis through legalized cannabis, we would have to smoke so much weed that it would create a fog of pot smoke over the entire state that would make the pollution smog clouds over 1970s Los Angeles look like a gentle mist over a beautiful meadow on a late spring morning. I'm not saying I'm against it but this is a dumb premise. And aside from that, do we really need anything to make our voters any more zonked out than they already are?

[dtcbnd03]

Originally Posted by DoseTheClowns5

They can't. The Illinois state constitution clearly states pensions can't be diminished or impaired. If you try and cut them the courts will throw it out. So people will get their pensions before you have police or fire services, roads, schools or any other government service.
There isn't a real long term fix aside from leaving the state.

True but you can diminish them by taxing them and rolling 100% of proceeds into future pension benefits creating a compounding reduction effect (for outta staters call it an admin fee). I also think when other states start running out of cash the IL Supreme Court will find a softer viewpoint and allow them to be diminished cause it's either that or completely ruining the state. They'll use some "rare and exceptional" type language to justify their change of heart.

[lepoisson]

Originally Posted by DoseTheClowns5

They can't. The Illinois state constitution clearly states pensions can't be diminished or impaired. If you try and cut them the courts will throw it out. So people will get their pensions before you have police or fire services, roads, schools or any other government service.
There isn't a real long term fix aside from leaving the state.

That's why you'd have to amend the constitution and rework the pensions. The unions and pensioners will throw a fit, but if you tell them "the alternative is you will get a check for $0.00 because the state has no money", they will quickly change their tune.

As taxes continue to rise, more people flee the state, and interest rates increase, this pension crisis will be unavoidable in 3-5 years.

[Liledgy]

Dose, bru, lep and dtc, what does your employer contribute to your pension, 401k, etc?

[lepoisson]

Originally Posted by Liledgy

Dose, bru, lep and dtc, what does your employer contribute to your pension, 401k, etc?

They contribute 5% automatically and match anything up to 9%. I contribute 4%, they contribute 5% automatically, then match my 4%

[Vlajos]

High interest rates will actually be good for the pension debt problem. So would high inflation. Those combined would go a long way in solving the problem.

Debtors love high inflation, which is why Trump is trying to increase it.

[dtcbnd03]

Originally Posted by Liledgy

Dose, bru, lep and dtc, what does your employer contribute to your pension, 401k, etc?

My employer matches 100% of my contribution up to 6%. The beauty of 401k is that it's under your name and SSN so no one can steal, borrow, overpromise and underfund. The only downside is that if you don't save properly you can run out of money before you die. The only benefit to a pension is that you receive benefits until you die...but the downsides are plenty. The assets are held by the company, they're chronically underfunded, people steal from them, and people get added to pensions even though they've contributed nothing.

I work as a financial advisor to distressed/bankrupt companies and I can tell you time and time again the number one thing that gets cut is pensions. When a company files for bankruptcy their assets are frozen and divided up amongst the creditors who receive pennies on the dollar. Since the pension funds are held by the company that's included in the asset pool that gets divvied up. And the future payouts are drastically cut as well. We really need to educate the population that 401ks are so much better...so long as we force the working population to put aside X% each year.

[Liledgy]

Lep, so your employer matches 9% of your salary? Plus 6% into social security for a 15% contribution. Dtc, you get a 6% match, plus 6% for SS, a 12% total from your employer.
That is fantastic! Do you realize that teachers contribute 9.4% of there salary and the state (supposed to) kicks in 8.3% with no social security. And you think the state is way to generous?

[chet everett]

Originally Posted by Liledgy

Lep, so your employer matches 9% of your salary? Plus 6% into social security for a 15% contribution. Dtc, you get a 6% match, plus 6% for SS, a 12% total from your employer.
That is fantastic! Do you realize that teachers contribute 9.4% of there salary and the state (supposed to) kicks in 8.3% with no social security. And you think the state is way to generous?

CPS teachers only put in 2% of their actual wages so long as they were hired prior to 2017. For those hired after that date there was an offsetting hike — https://www.ctunet.com/blog/text/Pen...ick-Up-FAQ.pdf