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Blue Model's Nerve Center Feeling the Pinch


Springfield, Illinois, is the HQ of America’s pension mess, presiding over the worst state-level debt and pension crisis in the country and now home to its own municipal pension woes. The WSJ reports on what happens to the most basic city services when a public employee pension fund gets buried under increasing benefits each year while failing to meet the returns needed to cover its liabilities:

The price of the problem can be seen around the Illinois state capital. Library branches that closed in the wake of the recession have never reopened. The Springfield Municipal Band, which was established through a 1936 referendum, has shrunk. In older neighborhoods such as Harvard Park, heavy rains overwhelm storm sewers and roads. Vacuum trucks fan out and suck up water because the city hasn’t been able to afford needed road repairs.

“I have seen kids 8 and 10 years old wading waist-deep into it,” said Polly Poskin, president of the Harvard Park Neighborhood Association. “The city has settled for a temporary fix, and we live with a permanent problem.”

The process of Springfield’s rot is all too familiar. Annual payments to public employee pensions tripled in the last decade to nearly $20 million, between a fifth and a quarter of the city’s entire budget, more than double the national average. The current labor agreement gives city employees a five percent pay bump every year; because pensions are based on the most recent salary level, retirees can use the increase to boost their retirement packages by tens of thousands of dollars. The funds’ investments are not performing well, meeting their own forecasts just once in the past ten years. A decade ago, the city had 75 percent of the assets needed to pay its promised benefits. Now it has about half. The number of Springfield’s retirees is, of course, increasing.

The biggest move lawmakers have made to confront this problem has been to reduce benefits for newly hired workers—a measure that does nothing to stem the current tide. As far as we can tell, that means libraries will continue to close and roads will continue to deteriorate. Unfortunately, this isn’t rock bottom; the blue model has a knack for pushing funding shortfalls indefinitely into the future. There’s a lot of potential for things in Springfield to get worse.

[State Capitol of Illinois image courtesy of Shutterstock]

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  • Jacksonian_Libertarian

    While kicking the can down the road isn’t an exclusively leftist tactic, the right has a record of anticipating and solving these problems before they become damaging (Springfield) or insurmountable (Detroit). For example look at Wisconsin and TEA Party backed Gov. Scott Walker’s winning battles with the labor gangs. This was a case where kicking the can down the road was rejected, in favor of a brutal and expensive political fight, and Wisconsin’s financial condition is now much improved.

  • Kavanna

    Few want to take the losses and the pain up front. But it works. Kicking cans doesn’t, although it might become an Olympic sport before long.

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