Chicago's Pension Funds Looking More Like A Collapsing Ponzi Scheme



Chicago households are on the hook for more than $145 billion in state and local retirement debts and there are fewer and fewer people left to pay them.

Tue, 04/23/2019 - 16:45
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Submitted by Ted Dabrowski and John Klingner of WirePoints

You canít help but call it a Ponzi scheme. Not if you look at Chicagoís collapsing demographics and consider how theyíre threatening the solvency of the cityís government-run pensions. Chicago households are on the hook for more than $145 billion in state and local retirement debts and there are fewer and fewer people left to pay them.
Consider first Chicagoís falling population. The cityís metropolitan population has fallen four years in a row. Itís the only top-ten city to shrink like that. In all, the Chicago MSA lost 66,000 people between 2014 and 2018.


A falling population means the cityís massive pension debts are falling on a smaller base of taxpayers. Thatís bad news enough. But another key demographic Ė the ratio of active government workers to pensioners Ė is even more concerning. That ratio, which equaled 1.4 actives for every pensioner in 2005, has collapsed to nearly 1.05. And if the trend continues, in just a year or two there will be more pensioners draining money from the pension funds than active workers putting money in.

The problem is compounded by the fact Chicago households canít afford the amount of pension debt thatís been racked up by state and local politicians. Spread out the $145 billion in overlapping government pension and retiree health care debt Ė from the city, the Chicago Public Schools, Cook County governments and the state Ė and each Chicago household is, on average, on the hook for more than $139,000 each. Itís an insane amount and itís tabulated in the following graphic. (Retirement debt calculations are shown based on both official and Moodyís-based estimates.)


Whatís fascinating is that Illinois politicians think Chicagoans will willingly pay off that debt no matter what. Theyíre oblivious to the fact that more residents may just choose to slip right over the border. Itís a rare case where you can simply walk away from a massive debt without being arrested and/or having your assets taken away from you. Illinois politicians are also arrogant enough to think that out-of-staters will continue to move into Chicago and just assume new debts the size of a mortgage, but with nothing to show for it.Chicagoís pension plans are already deeply in debt and functionally bankrupt. Thatís particularly true for the municipal, police and fire pension funds, which are about one-quarter funded.

A recent analysis by Wirepoints found that at the end of 2017, the police fund had only enough assets cover the next four years of payouts. In contrast, the fundís assets in 2000 were enough to cover the following 13 years of payouts.
Chicago is losing the demographics game as its retirement debts get ever-bigger. Itís hard not to call this a Ponzi scheme orchestrated by Illinois politicians. The question is, how fast does it fall apart?

https://www.zerohedge.com/news/2019-...g-ponzi-scheme