Local governments across the country are funding high-dollar pension plans with high interest loans by exploiting a loophole in federal law that allows municipalities to issue taxable bonds without voter approval.
Oakland, Calif. recently paid out $245 million, nearly a quarter of the city’s budget, to cover such bond loans. Municipalities are using the financial ploy, called “pension obligation bond,” to borrow staggering sums of cash to finance bloated government pensions. Ultimately, taxpayers are on the hook for such debt and future pensions of many union members are at risk from mismanagement.
"There are communities that just do not want to make the hard choices, even though it means the choices in the future will be worse," said Robert Doty, a municipal finance consultant in Sacramento, Calif. "They are just going to dig themselves deeper and deeper into a hole," according to a Tampa Tribune article.
Illinois has the worst funded pension system in the United States, according to a 2011 PEW Center report.
If elected leaders in Illinois fail to address that state's pension shortfalls, the majority of the state's budget will have to be used to pay for pensions rather than education or social programs and taxpayers will be tapped time after time to pay for the runaway pension plan. In 2011, The Pew Center reported that Illinois sets aside only 51 cents for every dollar it is obligated to pay out.
In fiscal 2012, Illinois was slated to spend $6.4 billion on pensions, including interest on borrowing from fiscal 2003, 2010 and 2011. By 2045, the pension payment is projected to be $22.1 billion, according to a Sunshine Review report.
In 2011, a Chicago Tribune/WGN-TV investigation found at least eight Chicago labor leaders who are eligible for inflated city pensions also stand to receive union pensions covering the same work period, thanks to a charitable interpretation of state law by officials representing two city pension funds. Despite Illinois Governor Quinn signing a law prohibiting double dipping earlier this year the state pension problems and some double-dipping problems continue.
The investigation revealed "one labor leader stands to reap more than $400,000 a year from three pensions — the city laborers fund, a union district council fund and a national union fund — all covering the same time period. During his expected lifetime, he stands to receive approximately $9 million, according to an analysis based on the funds' actuarial assumptions."
In February, Dave Sivini of Channel 2 Television, Chicago, caught up with Mark Wilcockson, Northeastern Illinois University finance director, and asked him if he was double dipping. Last summer, Wilcockerson retired from the university and started collecting his pension. A couple months later, was re-hired.
Wilcockson was reportedly earning $168,648 when he retired. He returned to the job at a lower salary of $123,000 per year. But after adding $101,312 annual pension pay his income grew to $224,312.16, or a 33% increase in pay.
The unemployment rate remains high in the U.S. and many workers in private industry are taking pay cuts while struggling to save for their retirement. Meanwhile, there is no shortage of double-dipping government workers across the country and too many municipalities are kicking their massive pension debts down the road.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com