Governor JB Pritzker’s administration has now made clear it will seriously consider the latest idea to address Illinois’ pension crisis – transferring public assets directly to state pensions. It recently announced the formation of a task force on the subject.
At its core, the concept is exceptionally simple. In practice, however, it’s exceptionally subject to smoke and mirrors and would further obscure a pension system that’s already far too opaque. More importantly, asset transfers do nothing to improve the state’s overall fiscal health.
Just convey ownership of some public assets to the pension, for free, in addition to the cash contributions taxpayers make now. That’s all this is about. Maybe the Illinois Lottery or Illinois Tollway for state pensions. Maybe Midway Airport or its water system for Chicago pensions. Those are examples of assets that have been mentioned that might be handed over.
Illinois state pensions are officially reported to have assets about $130 billion less than what they need to have on hand to pay for pension benefits already earned. Turn over ownership of the tollway and some other assets and, voila, the thinking goes, that shortfall would shrink by whatever the transferred asset is worth.
The first problem should be obvious – the state, as a whole, would be no better off. Whatever assets the state owns – which are your assets as taxpayers – would simply be moved over to the pension funds for the sole purpose of covering benefit obligations. But the pensions are really just a unit of government because Illinois courts have made clear that the sponsoring unit of government is liable directly to pensioners if pension assets ever fall short. So, pensions might be made more secure by an asset transfer, but the government’s overall balance sheet remains the same.
Not true, I’ve heard some proponents of asset transfers say. They claim there are certain public assets where the value of the asset can only be fully unlocked through a transfer to a pension. Just selling or leasing the asset to some third party, they say, wouldn’t work. I’ll believe that when I see an example.
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6 comments:
sure thing, then the asset could be sold by said pension plan to the highest bidder to provide $$ to beneficiaries. And you now pay some conglomerate whatever they say you need to pay for the services provided by said asset now owned by the conglomerate!
easy peasy!
How long are you people going to let elected leaders steal your money
The state of Connecticut, whose underfunded pension obligation is so large that it can’t even raise taxes enough to meet current payments, is looking at the same asset transfer plan as Illinois. Supposedly, this plan is already being implemented by some European governments. Several other states are watching Connecticut as a model to solve their own pension issues. Meanwhile, wealthy CT residents are relocating out of the state, as they see the handwriting on the wall. It should be interesting to see how this all plays out.
Maryland will have to do something like this also for the 1 billion plus shortfall.
The problem with socialism is that you eventually run out of other peoples' money
Margaret Thatcher
IIRC, something of this sort has already occurred with one of their toll roads, except it didn't go on the books as an asset before sale.
Seem to recall same thing for toll road by Dulles Airport, too?
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