Synopsis: IL State And Chicago Governments Continue Their Inescapable Plummet to The Bottom of the Financial Ocean. When Are You Moving?
Editor’s comment: While this article isn’t necessarily about workers’ comp, the crushing debt and skyrocketing taxes in this State are driving businesses, jobs and all of us over the borders. That is certain to affect this industry and all industries across this State. If you aren’t sure, keep reading.
About a year ago, Moody’s confirmed IL pension debt was about $250B. This State’s pending fiscal collapse is the culmination of decades of budget gimmicks used to cover over Illinois government’s structural spending problems that will soon crush ordinary taxpayers.
Please Remember Two Numbers When Considering Our Fake IL Gov’t Pensions—85 and 3.
Why are those numbers important? Well, IL State workers retire at 85% of their highest pay. Someone who makes $100K a year, retires at $85K a year. They don’t pay State income tax on that fake pension money. The reason I call it a “fake pension” is that it doesn’t make any difference how much they contributed to the pension—they all get 85% of their highest pay to start.
On top of that, add the ‘3’—all vested IL State workers get a constitutionally guaranteed 3% compounded bump on their fake pension every year, as long as they live. The bump doesn’t follow the Consumer Price Index or anything else—the worker above who starts at $85K a year will be making more on their gov’t pension in five years than they made while working. In just 23 years, the initial payout of $85K will be doubled!! Yes, that worker will be getting $170K a year in a fake and unfunded gov’t pension when their highest pay was only $100K a year. In 23 years after initial retirement, the gov’t pension will quadruple and they will be getting more than $1M every three years not to work. The 3% compounded annual increases continue for the life of the pensioner, again regardless of their contribution.
Many of my readers don’t believe this math—I point out the math is immutable. If you want me to prove it to you, send a reply. I also am advised something like 700,000 thousand former IL State workers are getting this impossible-to-fund benefit stream. Start to plan to move out of this State if you don’t want to have to pay 100% of the spiraling fake pension costs for all these former State workers who are becoming wealthy off our dime.
State politicians have resorted to all sorts of schemes, from pension “ramps” to issuing pension obligation bonds to temporary tax hikes, to help “balance” budgets without reforming the underlying spiraling costs. These ploys have enabled politicians from both parties to preserve the status quo and to spend more on their misplaced priorities, such as high government worker compensation and impossible-to-fund retirement benefits for State and City of Chicago government workers. The gimmicks are running out.
Illinois’ out-of-control spending spurred credit downgrades almost a decade ago
Illinois has suffered 21 credit downgrades from the three major ratings agencies since 2009. The only thing that slows down the credit free-fall are higher and more taxes on you. These credit downgrades began when Illinois gov’t started borrowing to conceal its growing gov’t pension crisis. As Governor, Quinn borrowed a total of more than $7 billion in two years to make the state’s pension contributions. That sort of borrowing hasn’t slowed and there is a plan to borrow $107B to cut the gov’t pension gap.
By 2010, Moody’s had already downgraded Illinois’ credit to the worst rating in the nation. The next five downgrades happened in the midst of the State’s record tax hike. The tax hikes that brought in $32 billion in new revenues failed to quell rating agencies’ concerns about Illinois gov’t finances. And since then, in the absence of major economic reforms, eight more downgrades have followed. The only thing that slows credit downgrades are higher taxes.
Why Does IL State Government Over-staff, Over-Pay and Over-Retire Its Workers?
The answer is simple—all those workers are voters. They vote in a bipartisan bloc to keep their pay, benefits and unfunded pensions in place. Even at record taxing levels, State gov’t still has to borrow to make ends meet. The seams on this huge debt are starting to swell and the bolts are popping out.
The common theme in Illinois’ budget and ratings history is that the state has refused to pass real spending and economic reforms. They are ready, willing and able to pass a constitutional amendment to pass a graduated income tax—they aren’t willing to cut fake and impossible-to-fund gov’t pensions.
Aren’t We In the Middle of a State-Wide Election? What Are the Candidates for Governor Saying About This Crisis?
As I indicate above, this is another 800lb. pink gorilla that no one is mentioning. Neither billionaire IL Governor candidate, JB Pritzker or Bruce Rauner, are saying anything about it. Why? They don’t want to alienate the voting bloc of thousands of current and past IL government workers who won’t be happy to hear things have to change to their impossible-to-fund compensation, benefits and gov’t pension.
So What Happened This Week?
Crain’s Chicago Business reported Illinois homeowners, who already pay some of the nation's highest property taxes, should pay 43 percent more for the next three decades to wipe out the state's crippling pension debt, according to a trio of economists from the Federal Reserve Bank of Chicago. The economists argue paying off the State's $129.1 billion in unfunded pension obligations cannot be done with revenue from new taxes.
"In our view, Illinois' best option is to impose a statewide residential property tax," they wrote, in part because it would be somehow “fair.” They claimed "Illinois residents who have benefited most from the past services of governmental employees are more likely to be homeowners, so it seems reasonable that they should pay a larger share of the costs."
The economists are proposing a statewide tax of 1 percent of a home or building's value. Under their plan, the RE tax bill on a $500,000 house would go from about $11,600 to $16,600, an increase of $5,000, paid each year for 30 years. Please note the RE tax payout at $16,600 over 30 years would equal the current value of the home! These economists—Thomas Haasl, Rick Mattoon and Thomas Walstrum—calculated a property tax equal to 1 percent of a home's value could possibly plug the State's pension gap in a mere 30 years.
Right now, Illinois homeowners pay an average of 2.32 percent of their home’s value in property tax every year, which according to WalletHub is second only to New Jersey's 2.40 percent. Please note the economists proposal would raise IL property taxes by 43 percent making the RE tax 3.32 percent of the home value—this would put this State way into the lead on having the highest property taxes in this country. Please note this staggering tax increase might kill your neighborhood dry cleaner or convenience store who would be hard-pressed to raise their prices to cover the new RE tax. Please also note the 4.95% IL State income tax is expected to possibly double or more if JB Pritzker is elected and the Governor’s mansion, IL Senate and House are all controlled by the free-spending Democrat party leaders.
From Gene Keefe—How Do These Skyrocketing Taxes “Cure” The Underlying Gov’t Problems? In Short, They Don’t.
To all my readers, please note the systemic failure of our current government to cut State staff, cut gov’t worker compensation and truly reform these hilarious fake gov’t pensions isn’t going to be changed by this proposed RE tax. The IL WC Commission is the agency I am most familiar with. I am sure this agency could be combined with other agencies to dramatically cut costs while preserving services. Their $30M annual budget could be cut to $25M or even $20M. Yes, it might take longer to get some things done but I bet we can and would adjust.
Numerous other IL State agencies and positions could be cut without any impact on gov’t services. Please note there is no reason for
· The State of Illinois to have a do-nothing Lieutenant Governor;
· The State of Illinois to have two mirror agencies--a Treasury Dep’t and Comptroller that fulfill precisely the same job;
· At least seven State agencies have their own “police departments” that I assure you are cushy, no-work jobs;
· Several State agencies, including the IWCC, have “remote offices” that are do-nothing, no-work jobs.
· The State of IL has “tow-trucks-that-don’t-tow-trucks”—the Minutemen tow trucks aren’t allowed to tow your car in a wreck. Why bother buying expensive equipment that isn’t used for its intended purpose?
If we don’t have the money and we aren’t going to be able to borrow to make up the gap forever, folks are going to continue to quietly start leaving. For this State to remain viable, things are going to have to change.
Wanna Get Away?
I can’t help you avoid property taxes, specifically the new and huge tax increase proposed by these federal economists. I can legally help you avoid skyrocketing IL income and estate taxes if you are interested in moving to a different state while maintaining a part-time IL residence. I can send you the lead ruling from the IL Supreme Court on how to do so. Just send a reply.
I appreciate your thoughts and comments. Please post them on our award-winning blog.
Synopsis: E-Notice Announcement from the IL WC Commission.
Editor’s comment: IWCC Chairman Joann Fratianni is pleased to announce another step forward in the IWCC’s modernization and technological upgrade of operations. Pursuant to the IWCC’s Rules, as found in Section 50 of the Illinois Administrative Code, parties will receive case activity notices electronically beginning on July 2, 2018. The IWCC will no longer send case notices via U.S. Mail as of this date.* All parties (law firms on behalf of clients and pro se litigants) will be required to maintain a designated electronic mail (“e-mail”) address for receiving case notices, just as they are now required to maintain a physical address to receive them by U.S. Mail. You only need to fill out the “E-Mail Registration Form” once (just like providing the IWCC your physical address), so they can update their system. PLEASE NOTE it does not matter if you already have an e-mail on file or in use with the IWCC – they are populating the system with new and updated information. So, please submit a law firm/pro se e-mail address again.
* The only exception to electronic notices is respondent parties at the time a case is initially filed, whom will be notified that a case has been filed against them by U.S. Mail at the address provided by petitioner. This is the current practice.
Attorneys – Their system links cases before the IWCC to the law firm, not the individual practitioner. Please provide your firm’s e-mail address for receipt of electronic notices. If one of your attorneys “updates” your firm e-mail address with their own, all firm notices will go to the most updated address.
INSTRUCTIONS (for law firms and pro se litigants) There are two ways to provide the IWCC an e-mail address:
1. Go on their website to: https://www2.illinois.gov/sites/iwcc/resources/Pages/Request-for-Attorney-Code-Number-.aspx (their website, followed by “forms”).
Fill out the “E-Mail Registration Form” and click “submit.”
2. Fill out the “E-Mail Registration Form” in person at the IWCC’s Chicago office located at:
Illinois Workers’ Compensation Commission
100 W. Randolph St.
Chicago, IL 60601
You will receive a confirmation e-mail to the address provided in three to five business days. If you are concerned you failed to receive an e-mail from the IWCC, please contact Greg Ettling at (312) 814-6639.