Category: Public Finance

Retirees plead for extra pension funding in new state budget

Mary Pat Campbell

Link: https://newschannel20.com/news/local/retirees-plead-for-extra-pension-funding-in-new-state-budget

Excerpt:

Retired public service workers gathered Monday to urge lawmakers to put more money into state pension funds.

The pension situation in Illinois is often referred to as a crisis because as of June 2021, the unfunded pension liabilities were almost $140 billion, according to a Commission on Government Forecasting and Accountability report.

That is money the state has promised to retirees who say they need it to live.

There’s a proposal in this year’s budget to put half a billion dollars toward pension debt on top of the required payments from the state.

Author(s): Jordan Elder

Publication Date: 7 Mar 2022

Publication Site: News Channel 20

CHICAGO PENSION DEBT DROVE CITY PROPERTY TAXES UP 164% BEFORE COVID-19

Mary Pat Campbell

Link: https://www.illinoispolicy.org/chicago-pension-debt-drove-city-property-taxes-up-164-before-covid-19/

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Excerpt:

Chicago residential property tax collections across all units of government in the city were up 164% from 2000 to 2019.

Property taxes paid by homeowners within the city grew nearly 30% faster than property taxes in suburban Cook County during those 20 years. Suburban residential property taxes grew 116% while total residential property tax collections county-wide grew 133%.

While some of Chicago’s increase was driven by new property or growth in existing property tax values, the average homeowner still saw an 85% increase in their bill from 2000 to 2019. Since the record-setting 2015 property tax hike to pay for pension debt, the average Chicago bill has risen 27%. Prior to that hike, property taxes were on a lower trend from 2011 to 2014.

Author(s): Adam Schuster

Publication Date: 28 Feb 2022

Publication Site: Illinois Policy

Hit hard by high inflation? This N.J. income tax move could bring relief, lawmakers say.

Mary Pat Campbell

Link: https://www.nj.com/politics/2022/03/hit-hard-by-high-inflation-this-nj-income-tax-move-could-bring-relief-lawmakers-say.html

Excerpt:

A six-year old income tax reform bill accomplished something remarkable in Trenton on Monday: It got Democratic and Republican lawmakers to agree on changing your tax policy.

The state Senate Budget and Appropriations Committee approved a Republican-backed measure, S676, that’s supposed to provide relief to New Jersey workers struggling to make ends meet amid the highest inflation levels in 40 years.

The concept is simple: If inflation goes up, so would New Jersey’s income tax brackets. For many, it would mean not having to pay higher taxes if salaries go up the rate of inflation.

…..

New Jersey uses a graduated income tax, which means residents shell out a larger percentage of earnings to the state as their incomes rise into higher tax brackets. When inflation pushes wages higher, it can often result in a net loss to workers that are pushed into higher brackets.

Author(s): Derek Hall

Publication Date: 2 Mar 2022

Publication Site: nj.com

Study: Seattle’s Soda Tax Has Been Great for…Beer Sales?

Mary Pat Campbell

Link: https://reason.com/2022/02/12/study-seattles-soda-tax-has-been-great-forbeer-sales/

Excerpt:

A new study is pouring cold beer on Seattle’s soda tax. The study, published in the peer-reviewed journal PLoS ONE, reveals that since the city I call home adopted a soda tax in 2018, residents have swapped out soda and replaced that soda with beer. Pointedly, the study says Seattle’s soda tax “induced” consumers to buy more beer.

“The good people of Seattle responded to a tax on sugary drinks by buying more beer,” Christopher Snowdon, director of Lifestyle Economics at the Institute of Economic Affairs and a leading critic of the nanny state, tweeted after the study’s release.

The PLoS study, by University of Illinois-Chicago researchers Lisa M. Powell and Julien Lader, compared sales of beer in Seattle both before and since adoption of the soda tax with comparable sales in nearby Portland, Oregon, which has no soda tax.

Author(s): Baylen Linnekin

Publication Date: 12 Feb 2022

Publication Site: Reason

How AI and federal funding can revolutionize city budgets

Mary Pat Campbell

Link: https://lizfarmer.substack.com/p/ai-federal-funding-city-budgets

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Excerpt:

The big takeaway from the GFOA’s Rethinking Revenue project is that the modern economy is shifting the tax burden toward those who can least afford it. Now, the association and its partners are launching pilot programs to test some of the ideas the project has explored.

One will target the inequities built into relying on fees and fines and the GFOA is inviting governments to apply for a pilot project testing segmented pricing as a potential solution. Instead of a one-size-fits-all fine, segmented pricing is designed around a user’s ability or willingness to pay. For example, a $100 speeding ticket for someone who earns just $500 a week is a much larger financial burden than it is for someone who earns $2,000 a week. So for the lower-income transgressor, the fine is lowered to $50. It still stings, but it’s much more likely to get paid.

Shane Kavanagh, GFOA’s senior manager of research, said they’re looking for around five places to test this idea and that the tested revenue source would have to be large enough (such as traffic fines) and also be one that the government has had difficulty collecting.

Author(s): Liz Farmer

Publication Date: 24 Feb 2022

Publication Site: Long Story Short

City Of Chicago Shunning Fossil Fuel Investments. Who Benefits? Russia. – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/chicago-shunning-fossil-fuel-investments-as-nation-struggles-with-higher-energy-costs-wirepoints/

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Excerpt:

The timing on Wednesday was impeccable. I was looking at the price of oil, which was up four percent that day and about to pass $100/barrel. Energy stocks were up over one percent despite a horrible day for the rest of the market.

That’s when an email popped up with a story in Crain’s headlined “Chicago moving to divest from fossil fuels.”

….

So, with inflation raging, gasoline moving towards $4.00/gallon and Russia murdering Ukrainians with the help of American oil purchases, Chicagoans can take comfort knowing that the city will refuse to invest in oil and other fossil fuel production and thereby “will be sending a message that Chicago is permanently leaving dirty energy in the past and welcoming a clean energy future for generations to come.”

That’s from Chicago Treasurer Melissa Conyears-Ervin. She and members of the City Council, with Mayor Lori Lightfoot’s support, are pushing for an ordinance to mandate that the city divest its funds from fossil fuel companies, as Crain’s reported.

In fact Conyears-Ervin had already made oil and gas divestment office policy. The new ordinance would make the change permanent going forward. Her office has already removed $70 million in fossil fuel-associated bonds from the city’s portfolio, she says.

How wise has it been lately to be shunning fossil fuel investments? Here’s a chart comparing performance year-to-date of the S&P 500 to XLE, an ETF basket of mostly oil and gas companies. While the market in general is down some 10% the oil and gas stocks are up over 21%.

Author(s): Mark Glennon

Publication Date: 25 Feb 2022

Publication Site: Wirepoints

‘We Don’t Have Actuarial Numbers Relative To This Amendment’: Illinois’ Tier 2 Pension In Their Own Words

Mary Pat Campbell

Link: https://www.forbes.com/sites/ebauer/2022/02/20/we-dont-have-actuarial-numbers-relative-to-this-amendment-illinois-tier-2-pension-in-their-own-words/

Excerpt:

In Illinois, this resulted in a Blue Ribbon Pension Commission under Gov. Rod Blagojevich, which issued a report in 2005 with some recommendations which were adopted and others which, well, never saw the light of day. As might be guessed, the changes actually implemented were small scale, but included an anti-spiking measure, a reduction in the guaranteed interest rate used to calculate a minimum pension benefit, and a reduction in the categories of state employees eligible for the more generous alternative formula. This legislation, Public Act 94-0004, also required that any new benefit increase henceforth must be paired with a corresponding funding increase, and must sunset after five years (though recall that this didn’t stop the legislature from increasing benefits for Chicago Firefighters or non-Chicago Police and Fire pensions, both of which involve the state dictating benefits and localities funding them).

In recognition of the small nature of these changes and the very large debts still remaining, the bill also created yet another commission, with no effect, and in subsequent years, still more commissions met. In 2009, the Illinois Pension Modernization Task Force held a series of public meetings, but produced no majority-approved report, only a work product with findings and minority reports.

It is in that context that the Illinois Tier 2 pension system came into being — which avid readers will recall is a new set of benefits for public-sector employees in Illinois hired after January 1, 2011, a set of benefits with changes made that “looked good” to legislators at the time but had no actuarial review, and as a result will sooner or later fail the “safe harbor” test, in which state and local public pensions must provide better benefits than Social Security in order to opt out of the Social Security system. And why didn’t the law have an actuarial review? Because it was created behind closed doors — which makes it all the more worthwhile to repeat the exercise of reading the legislative transcripts of the day it was brought to the floor of the Illinois State House and Senate for a vote.

Author(s): Elizabeth Bauer

Publication Date: 20 Feb 2022

Publication Site: Forbes

State Individual Income Tax Rates and Brackets for 2022

Mary Pat Campbell

Link:https://taxfoundation.org/state-income-tax-rates-2022

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Excerpt:

Individual income taxes are a major source of state government revenue, accounting for 36 percent of state tax collections in fiscal year 2020, the latest year for which data are available.

Forty-two states levy individual income taxes. Forty-one tax wage and salary income, while one state—New Hampshire—exclusively taxes dividend and interest income. Eight states levy no individual income tax at all.

Of those states taxing wages, nine have single-rate tax structures, with one rate applying to all taxable income. Conversely, 32 states and the District of Columbia levy graduated-rate income taxes, with the number of brackets varying widely by state. Hawaii has 12 brackets, the most in the country.

States’ approaches to income taxes vary in other details as well. Some states double their single-bracket widths for married filers to avoid a “marriage penalty.” Some states index tax brackets, exemptions, and deductions for inflation; many others do not. Some states tie their standard deductions and personal exemptions to the federal tax code, while others set their own or offer none at all.

Author(s): Timothy Vermeer, Katherine Loughead

Publication Date: 15 Feb 2022

Publication Site: Tax Foundation

Comptroller asks for upgrade to Illinois’ worst-in-nation credit

Mary Pat Campbell

Link:https://www.thecentersquare.com/illinois/comptroller-asks-for-upgrade-to-illinois-worst-in-nation-credit/article_464a70c6-8862-11ec-b879-afe32c50f8c6.html utm_term=0_3386e99c24-8d6a8659cc-71461060

Excerpt:

Illinois Comptroller Susana Mendoza is asking the credit ratings agencies to upgrade Illinois’ worst-in-the-nation status.

S&P Global has Illinois at BBB. Moody’s has the state at Baa2. That’s after upgrades from the agencies last year. Fitch has Illinois at BBB-.

“My office is doing everything possible to manage the current backlog of bills and address Illinois’ finances head-on,” Mendoza said in a letter to the agencies that her office announced Monday. “The Illinois Office of Comptroller urges you to consider these positive factors and progress made in strengthening Illinois’ financial position when evaluating Illinois’ creditworthiness.”

Mendoza said in the letter she has paid back recent borrowing from a federal program. Illinois was the only state to borrow from the Federal Reserve’s Municipal Liquidity Fund for a total of $2.6 billion.

Author(s): Greg Bishop

Publication Date: 8 Feb 2022

Publication Site: The Center Square

Providence Pension Working Group

Mary Pat Campbell

Link:https://www.providenceri.gov/wp-content/uploads/2022/01/PVDPensionWorkingGroup_Jan312022.pdf

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Excerpt:

Decisions made more than 30 years ago drive challenges. The seeds of the City’s
pension problems were sown more than three decades ago when the City promised
unsustainable benefit increases to members of the retirement system without
funding the associated annual Actuarily Determined Contribution (ADC).2


The severity of the situation makes Providence an outlier. The City of Providence’s
Employee Retirement System (ERS) is among the lowest funded pension plans in
the nation. Since 1991, the City’s unfunded pension liability increased by more than
$1 billion. In addition to the pension liabilities, and over and above the pension
shortfall, the City’s retiree health benefits are underfunded by approximately $1.1
billion.3
The unfunded liability of the ERS drives costs to City that outpace revenue
growth, limiting investments in other priorities. As of June 30, 2020, the ERS was
only 22.2 percent funded.4 Total pension liabilities equated to $8,518 per resident –
of which $6,629 is not funded.5 In the last twenty years, the City’s unfunded liability
per capita increased by $4,000 per resident.

Publication Date: January 2022

Publication Site: Providence RI

Providence needs $500M bond to fix pension shortfall, report states

Mary Pat Campbell

Link:https://www.bizjournals.com/rhodeisland/news/2022/02/01/providence-needs-500m-bond-to-fix-pension-shortfa.html

Excerpt:

A coalition of civic leaders is recommending that Providence issue a $500 million bond to address the city’s massive unfunded pension obligation.

“Doing nothing is simply not an option,” the Pension Working Group wrote in a 27-page report issued Monday. The group of public officials, working with business and nonprofit leaders, released its recommendations after six months spent studying the city’s staggering pension liability problem.

Providence’s pension plan is funded at 22%, making it one of the weakest employee retirement systems in the nation. Since 1991, the city’s unfunded liability has grown by more than $1 billion, and that doesn’t include a $1.1 billion shortfall in retiree health benefits.

“Current and future retiree liabilities are unsustainable,” the report states.

Author(s): Mary Serreze

Publication Date: 1 Feb 2021

Publication Site: Providence Business First

Opinion: A Slow But Accelerating Crisis—Preserving Affordable Housing for Up to 1.4 Million NYers

Mary Pat Campbell

Link:https://citylimits.org/2022/02/08/opinion-a-slow-but-accelerating-crisis-preserving-affordable-housing-for-up-to-1-4-million-nyers/

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Excerpt:

The recent op-ed in Crain’s New York Business by former City Comptrollers Jay Goldin and Elizabeth Holtzman (“Affordable housing initiative worked in the past and can work again today”) recalled a city pension fund program, initiated in 1983, that was specifically designed to finance the renovation of deteriorated rental apartment buildings in lower income neighborhoods. Supported by New York State mortgage insurance, the pension investments financed the restoration of a wide range of apartment buildings and worked uniquely well for small buildings with owners of limited resources. Two percent of the pension funds’ assets were committed for long-term, fixed-rate mortgages, with an interest rate priced at the market, with a two-year rate lock while the capital improvements were made.

Recognizing that these buildings would need some public subsidy—and that many owners lacked the experience to deal with complex government processing—a system evolved whereby these investments were coupled with streamlined city subsidy programs. The program’s goal: to restore a building’s physical and economic health while keeping its apartments affordable. 

The pension funds filled a critical gap as most conventional long-term lenders viewed this market as too complicated and too unprofitable. For many years after its inception, the Community Preservation Corporation was the primary user of the program, using its “one-stop-shop” to originate construction loans for predominantly small properties. Upon construction completion, the long-term mortgage was provided by the pension funds. Over time, other banks were approved to originate loans for the funds, with their focus mainly on financing the renovation of larger buildings. 

….

Fourth, the pension funds should recommit to investing up to 2 percent of their assets (now $5 billion) for long-term financing at a market rate, insured by the State Mortgage Insurance Fund. In the long history of the program, the funds have experienced no losses, the state insurance fund covering the few losses that had occurred. 

Efficient implementation can minimize the use of public funds and provide a large pool of fixed-rate, long-term financing for these properties. Doing so is within the purview of the city’s comptroller and the pension fund trustees.

Author(s):Michael D. Lappin

Publication Date: 8 Feb 2022

Publication Site: City Limits