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Pension Meltdown
Chicago: Greece on the Great Lakes

Is there a cure for what ails Chicago? The city’s protracted meltdown—declared the “next Detroit” by the NYT nearly two years ago and dropped to “junk” by Moody’s this May—has been well-documented. In a critical look at the city’s “Great Financial Fire,” Aaron Renn lays out the dire facts and presents a cautiously optimistic best case scenario:

While some sort of refinancing may be required, the proposed debt issue contains maneuvers similar to those that helped get Chicago into trouble in the first place—including more scoop-and-toss deferrals, $75 million for police back pay, $62 million to pay a judgment related to the city’s lakefront parking-garage lease and $35 million to pay debt on the acquisition of the now-vacant site of the former Michael Reese Hospital.

Most dubiously, the city actually is borrowing the money to pay the first two years of interest payments on these bonds. In true Chicago style, the proposal passed the City Council on a 45-3 vote. Hey, at least the city is getting out of the swaps business.

And now the hopeful part:

Emanuel should not let this crisis go to waste but use the opportunity to accelerate, not defer, painful choices. This means declaring a hard stop on gimmicks like borrowing for current expenses and scoop-and-toss after the current bond issue and structurally balancing the budget now. Yes, aggressively defend the pension reform deals—but just as aggressively put the city on track to full funding even at the expense of current pain.

And a few more things: Join with Gov. Bruce Rauner to fight for legal changes at the state level to require all future local employees to receive 401(k)-style pensions only, and to prohibit any enhancements to existing legacy pensions, in order to prevent a repeat of the current problems.

Easy? No. Painless? No. Which is why a strong leader like Emanuel should be taking them on.

While Rahm has, at times, looked keen to wish away, rather than face, Chicago’s deep pension crisis, options are beginning to run scarce. The way things are going, some of the proudest cities in America are going to be looking for bailouts: there won’t be much appetite in cities and states who have done the hard work to manage their finances well to bail out the bad actors. For Chicago and its peer cities nationwide, reform is on the way.

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  • rheddles

    For Chicago and its peer cities nationwide, reform is on the way.

    Reform would be realizing you can’t continue to do business as you have in the past. I see that no where in the electorate. Rahm, like all democrat hacks, will force the creditors, including retirees, to take a haircut. And as soon as he can he will go back to tax and borrow and spend as much as he can to solve everyone’s problems or at least secure their votes in the next election. Until the people, in large numbers, start to understand that government’s purpose is not to solve their personal problems, we are in trouble. Death to Julia!

    • JR

      Did you see the new sales tax in Chicago? 10.25%!!!!!!!!! Once again, it is the poorest and most vulnerable that will pay the price for the lies the politicians sold to them.

      • Josephbleau

        You can still pay the tax with your SNAP card.

        • JR

          Indeed you can. Unfortunately, people who make statements like that not in jest are either scumbag politicians trying to fool idiots into voting for them or the above mentioned idiots.

  • Andrew Allison

    Reform is on the way just not in a way that the general populace will like (c.f. Greece). Nothing is going to change until local, state and federal governments acknowledge that the already-promised benefits cannot be paid, and stop making new, unsustainable, promises. The only way that’s going to happen is when they run out of credit.

  • Dale Fayda

    Is there any way to embarrass a liberal? Or at least to give them pause? I submit to you that there is not!

    Social Democracy is collapsing before our very eyes – locally (Detroit, Chicago), regionally (Puerto Rico), nationally (Greece). None of this seems to faze the progressives in the slightest.

    Truly, liberalism is a mental disorder.

    • f1b0nacc1

      Being a Lefty means never having to say you’re sorry

  • זאב ברנזון

    in Israel when a city or a regional council goes bankrupt
    the central gov repossess the city cancels elections and nullify all budget extras
    it is a great anti corruption and anti mismanagement model
    and it together with police investigations make municipal govrnance in israel baerable

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