It’s the giant debt you didn’t know you had.
And it’s silently eating away at the value of you home, of every home anywhere within the borders of Illinois. Public employee pension debts aren’t just a financial catastrophe for Springfield. Today, they represent an existential crisis for virtually every municipality in the state.
At issue are retirement benefits (cash and “free” health care) quietly -- mostly secretly -- promised to village and park district employees, police officers and firefighters, teachers, and political appointees.
They are, at best, despicably exorbitant . At worst, they represent a raw, if conniving expropriation of wealth from private property owners to one’s political supporters by way of government borrowing.
Illinois House Speaker Michael Madigan doesn’t have to literally take your house to fund his Chicago political machine. He can have the same effect by just borrowing against it.
And for going on 40 years, he has.
Your home’s ‘other’ mortgage
The concept is simple. Your home is an asset. The equity you have in that home is its value minus all liabilities borrowed against it.
That includes your mortgage. It also includes public debt attributable to your home, money borrowed against it by all the taxing districts in which it is located. This debt doesn’t show up on your personal balance sheet -- good for Madigan -- but it has always meant real money to you, both in property taxes paid and appreciation on your home foregone.
Long ago, state and local government debt in Illinois was inconsequential. Then Madigan and his allies figured out how to game the system, how to use Illinois’ full faith and credit to borrow big in the shadows, simultaneously “encouraging” local governments to do the same.
Gullible suburban and downstate mayors and city council members got hooked -- then had to look to Madigan for help to avoid going into hock.
Such is the story of how Illinois found itself in this financial mess.
Phantom pension savings.
The biggest chunk of this Madigan-driven borrowing came in the way of government employee pensions. And there’s a good reason why.
Individual government employees don’t have credit departments.
Borrowing from a bank or a public market requires a government to show it has the assets to pay the money back. Someone with an accounting degree pores over financial statements and challenges their projections.
But when government borrows from a government employee -- from an individual teacher or a police officer -- it faces no scrutiny at all. The employee never verifies whether the promises being made can realistically be kept.
Even better, the money is borrowed without even bothering to tell local taxpayers, who don’t see the debt on their city or village balance sheets and, unless they knew how and where to look, would never know it was there. To be sure, most elected local government officials to this day have no idea how much pension debt their communities face.
Don’t blame them -- they never actually approved it in the first place. The pension debt came by way of state mandates forced on municipal governments. Mandates preserved and fully exploited (of course) by Madigan, who has built an army not on his charm but by doling out government jobs and pensions to political supporters.
To be clear, state and local government “pensions” aren’t “pensions” in the actual definition of the word. The government employees receiving them have barely saved a fraction of what they stand to receive. This isn’t “savings” and benefits aren’t paid out thanks to “investment.” Rather, benefits for yesterday’s retirees are paid for by today’s property taxpayers.
One typical downstate police pension fund exemplifies the rule.
It has 15 retired officers collecting retirement benefits who saved an average of $65,560 ($984,760 collectively) over their combined careers. Yet those officers collected $663,235 in 2014 alone. And they will collect $18.6 million in benefits over their combined retirements -- about $1.24 million each.
That’s on a savings account of $65,560.
Here’s what it means to all of us.
If our property taxes actually reflected the money being spent -- in cash and promises -- today by our state and local governments, they would be three to four times what they are today.
They aren’t, and the money is coming from somewhere.
Enter your home.
How much of your home has been taken by government?
We did the digging to uncover all of your state and local obligations.
Now a little basic math will shed light.
Take what your house is worth today and do the following:
- Subtract $28,137 for living in Illinois. This represents the $194 billion in state debt Madigan and company have managed to borrow on our behalf.
- If you live in
- Moline, subtract $17,989.
- Rock Island, subtract $16,148.
- Galesburg, subtract $13,237
- East Moline, subtract $8,510
- Kewanee, subtract $5,553
- Monmouth, subtract $3,688
- Silvis, subtract $2,984
- Geneseo, subtract $2,707
- Milan, subtract $2,310
- Colona, subtract, $1,936
- Subtract your mortgage total
Look, it could always be worse. If you lived in Chicago, where Madigan has been plying his plunder-by-public borrowing trade for the past 45 years unchecked by oddities like Republicans or independent Democrats, you’d be subtracting $57,213.
Combined with debt from the state, Chicago homeowners owe a grand total of $85,350 each thanks to the profligacy of their leaders.
The median home price in Chicago last month was $226,000, actually $140,650 for good measure.
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