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"I Pay $271 A Month To Schools And I Don't Have Kids": Illinois Bureaucracy Sucks Homeowners Dry

Tyler Durden's picture




 

Ever since the Illinois Supreme Court struck down a pension reform bid in May, prompting Moody’s to downgrade the city of Chicago to junk, the state’s financial woes have becoming something of a symbol for the various fiscal crises that plague state and local governments across the country. 

The state High Court’s decision was reinforced late last month when a Cook County judge ruled that a plan to change Chicago’s pensions was unconstitutional.

As we’ve discussed at length, these rulings set a de facto precedent for lawmakers across the country and will make it exceedingly difficult for cities and states to address a pension shortfall which totals anywhere between $1.5 trillion and $2.4 trillion depending on who you ask.

For Illinois, the situation is especially vexing. As you can see from the following graphics, the state’s unfunded pension problem is quite severe. 

(Charts: Chicago Tribune)

As the New York Times explains, "pension costs in many American states and cities are growing much faster than the money available to pay them, causing a painful squeeze. Officials who try to restore balance by reducing pensions in some way are almost always sued; outcomes of these lawsuits vary widely from state to state. Some of the worst problems have been brewing for years in Illinois, particularly in Chicago, where the city’s pension contributions have long been set artificially low by lawmakers in Springfield, the state capital. With more and more city workers now retiring, a $20 billion deficit has materialized."

And while we’ve spent quite a bit of time discussing the various issues involved in the pension debate from overly optimistic return assumptions to the use of pension-obligation bonds as stopgap measures, even we were surprised to learn just how convoluted the fiscal situation truly is in Illinois.

As the following excerpts from a Reuters special report make clear, Illinois is in bad shape, and fixing things isn’t going to be easy.

*  *  *

From Reuters

"Multitude of local authorities soak Illinois homeowners in taxes"

Mary Beth Jachec [a] 53-year-old insurance manager gets a real estate tax bill for 20 different local government authorities and a total payout of about $7,000 in 2014. They include the Village of Wauconda, the Wauconda Park District, the Township of Wauconda, the Forest Preserve, the Wauconda Area Public Library District, and the Wauconda Fire Protection District.

Jachec, looking at her property tax bill, is dismayed. "It’s ridiculous," she said.

A lot has been said about the budget crisis faced by Illinois - the state government itself is drowning in $37 billion of debt, and has the lowest credit ratings and worst-funded pension system among the 50 U.S. states. But at street level, the picture can be even more troubling.

The average homeowner pays taxes to six layers of government, and in Wauconda and many other places a lot more. In Ingleside, 55 miles north of Chicago, Dan Koivisto pays taxes to 18 local bodies. "I pay $271 a month just to the school district alone," he said. "And I don't have children."

The state is home to nearly 8,500 local government units, with 6,026 empowered to raise taxes, by far the highest number in the U.S. 

Many of these taxing authorities, which mostly rely on property tax for their financing, have their own budget problems. That includes badly underfunded pension funds, mainly for cops and firefighters.

A Reuters analysis of property tax data shows that the sheer number of local government entities, and a lack of oversight of their operations, can lead to inefficient spending of taxpayer money, whether through duplication of services or high overhead costs. It leads to a proliferation of pension funds serving different groups of employees. And there are also signs that nepotism is rife within some of the authorities.

On average, Illinois’ effective property taxes are the third highest in the U.S. at 1.92 percent of residential property values.

In many Illinois cities and towns, high taxation still isn’t enough to keep up with increasing outlays, especially soaring pension costs, and some services have been cut. For example, in the state capital Springfield, pension costs for police and fire alone will this year consume nearly 90 percent of property tax revenues, according to the city's budget director, Bill McCarty. 

Sam Yingling, a state representative who until 2012 was supervisor of Avon Township, north of Chicago, has become an outspoken critic of the multiple layers of local government.

Yingling said when he left the township three years ago, the township supervisor's office had annual overheads from salaries and benefits of $120,000. He claimed its sole mandated statutory duty was to administer just $10,000 of living assistance to poor residents.

The large number of local governments is a legacy of Illinois' 1870 constitution, which was in effect until 1970. The constitution limited the amount that counties and cities could borrow, an effort to control spending.

So when a new road or library needed building, a new authority of government would be created to get around the borrowing restrictions and to raise more money. Today, for example, there are over 800 drainage districts, most of which levy taxes.

And it isn’t only the number of authorities that is a concern. Illinois has about one sixth of America’s public pension plans – 657 out of almost 4,000.

Local authorities in Illinois are mandated by law to keep the Illinois Municipal Retirement Fund, with 400,000 local government members, fully funded. They had to contribute $923 million in 2014, up from $543 million in 2005.

However, there is no such requirement for the local pension funds. The result: Many of these funds throughout the state are woefully underfunded, and some have less than 20 percent of what they need to meet obligations.

*  *  *

The piece - which you're encouraged to read in full as it contains several of the most egregious examples of government waste and inefficiency you'll ever come across - goes on to say that reform simply isn't an option, as the Illinois legislature is filled with lawmakers who have at one time or another themselves benefited from the state's sprawling local bureaucracies. Reuters also says it has identified nearly a dozen instances where husbands employ wives, mothers employ daughters, and fathers hire sons," suggesting nepotism weighs heavily on the already elephantine system. 

Bear in mind that this is the same state whose court system refuses to allow efforts at pension reform to move forward, and while all of this may seem like a recipe for default disaster, just remember, PIMCO sees a lot of "long-term value" in Chicago's debt.

 

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Thu, 08/06/2015 - 08:42 | 6396715 Heywood Jahblohmee
Heywood Jahblohmee's picture

Thank you for showing what a true fucktard you are.

NO wonder your shithole country looks more 3rd world everyday with knuckledragging shitheads like you in it.

Thu, 08/06/2015 - 07:00 | 6396532 headhunt
headhunt's picture

Appropriate picture

Thu, 08/06/2015 - 08:58 | 6396774 NoBillsOfCredit
NoBillsOfCredit's picture

You don't have to have insurance, just financial responsibility. The answer is because you might accidently hit someone ELSE! AND you don't HAVE to drive to lve. Medical insurance requirement is tyrany.

Thu, 08/06/2015 - 08:59 | 6396786 Heywood Jahblohmee
Heywood Jahblohmee's picture

don't buy insurance and I can come visit you and Bubba in prison.  Or you could be like the drunk guy who rear ended  me when I lived in the USA.   he had No insurance and I sued him BIG TIME and WON>

Thu, 08/06/2015 - 09:03 | 6396804 NoBillsOfCredit
NoBillsOfCredit's picture

Go read the law. You are ignorant.

Thu, 08/06/2015 - 09:13 | 6396848 Heywood Jahblohmee
Heywood Jahblohmee's picture

The ignorant fucktard is YOU.  I don't live in your shithole country anymore , thank goodness.

I live in a modern country with intelligent people.

Shove your idiotic law up your ass, sonny.

Thu, 08/06/2015 - 09:02 | 6396801 Heywood Jahblohmee
Heywood Jahblohmee's picture

The biggest ripoff is LIFE insurance.

Auto insurance and home insurance are necessary evils.

 

Thu, 08/06/2015 - 09:24 | 6396903 Heywood Jahblohmee
Heywood Jahblohmee's picture

You don't know shit from shinola about the real world, kid. 

You are IBB  (ignorant beyond belief)

Go crawl back in your tent under the viaduct you fucking loser.

Thu, 08/06/2015 - 09:24 | 6396904 Heywood Jahblohmee
Heywood Jahblohmee's picture

You don't know shit from shinola about the real world, kid. 

You are IBB  (ignorant beyond belief)

Go crawl back in your tent under the viaduct you fucking loser.

Thu, 08/06/2015 - 10:51 | 6397271 falconflight
falconflight's picture

DoucheBoy2015 with another account?  I hate the Douche almost as much as the German Vermin.

Thu, 08/06/2015 - 07:08 | 6396542 uhb
uhb's picture

Stop whining and move somewhere else!

Thu, 08/06/2015 - 08:30 | 6396687 headhunt
headhunt's picture

Why should we have to run from communists in government?

Fuck them.

Thu, 08/06/2015 - 09:11 | 6396842 Heywood Jahblohmee
Heywood Jahblohmee's picture

You don't have a fucking clue about how the real world works ,do you?

''Coming from Northern Europe back to the USA is like leaving the Jetsons and returning to the Flintstones'  -NYT reporter quipped in 2011.

You morons and your communist shit.   LOL

 

Thu, 08/06/2015 - 09:48 | 6397006 Bloodstock
Bloodstock's picture

And you're quoting an NYT reporter like you have a fucking clue of which proves reading your posts are a complete waste of time. Just continue to blohyerself moron. 

Thu, 08/06/2015 - 09:59 | 6397061 Heywood Jahblohmee
Heywood Jahblohmee's picture

I have lived in 5 countries and been to 73 during my 70 years on this planet.

You don't have a fucking clue about the real world. 

Thu, 08/06/2015 - 10:50 | 6397259 falconflight
falconflight's picture

And Northern Europe is what other than the epitome of Ordered Liberty and a dash of Muttslum "no-go" zones?

Thu, 08/06/2015 - 07:27 | 6396574 J J Pettigrew
J J Pettigrew's picture

20 years and you retire for fourty years at 80% of your spiked salary.  All on the taxpayers back.

People with no kids in school, OR retired people...should NOT be required to pay into the system.  Compensation and retirement packages passed by nameless boards that disappera into the night...and the homeowner is taxed to death.

No wonder home ownership levels are down and apartment construction is up...

Administrators and teachers retiring with well into the six figure pensions is absurd.....

Mortgage rates went down and the taxing bodies filled the gap with higher taxes.

Thu, 08/06/2015 - 07:27 | 6396575 Flash44
Flash44's picture

You basically have to move to an area where others are so poor that they cannot pay higher taxes or 

the area would be left with no residents.  I am paying now almost the same in property taxes as

my mortgage.  All for an incredibly corrupt Illinois government with so many hands in my back 

pocket they are forcing me to move out of state. 

Thu, 08/06/2015 - 07:33 | 6396576 Flash44
Flash44's picture

Or move to a city with no schools or overburdened pension plans.

Thu, 08/06/2015 - 09:36 | 6396966 dizzyfingers
dizzyfingers's picture

Where's that? If it's in a US state, same problems.

Thu, 08/06/2015 - 07:57 | 6396626 NoBillsOfCredit
NoBillsOfCredit's picture

Check your State constitution. No such requirement in Texas! Illinois, amend yours.

Thu, 08/06/2015 - 10:48 | 6397246 falconflight
falconflight's picture

I paid nearly $400 a month to fund my former ISD (school district) in Texas and I too didn't have any children attending.

Thu, 08/06/2015 - 08:15 | 6396660 lucyvp
lucyvp's picture

I live in illinois too, I pay 540 dollars a month to the school districts through ptax, and I don't have any kids either.  This is on a 2000 sq ft. tract home.  The 540 does not include all the other taxing bodies as this example mentions.

When I retire, I may not be able to afford to keep the house that I raised my children in because of the taxes.  Very sad.

Thu, 08/06/2015 - 08:27 | 6396680 headhunt
headhunt's picture

The communists/unions (yes they are) in our government have taken over our country and as you note, made sure you never, ever, own your home. All to pay these MF'rs their fat pensions and healthcare.

I pay over $12,000/year in property tax for the privilege of paying lazy communists in government jobs and their retirement.

If you are not a government employee, you are a slave to support them and their communist ways.

Fuck them with a pitch fork.

Thu, 08/06/2015 - 09:10 | 6396833 Heywood Jahblohmee
Heywood Jahblohmee's picture

Thanks for admitting you live in a fucking archaic shithole of knuckle draggers.

Thu, 08/06/2015 - 10:26 | 6397165 mombers
mombers's picture

"I pay $271 a month just to the school district alone," he said. "And I don't have children."

Well I hope that he didn't attend state school or intends to do business with anyone who did, or rely on current school children to run the economy when he's retired. If you don't want to pay for public education (even if you've had it yourself as a child) there are numerous countries with very low public education spending, none of them are safe to live in. Taxes are the price you pay for civilisation, an dproperty taxes are vastly superior to avoidable taxes on labour and capital

Thu, 08/06/2015 - 11:04 | 6397304 libertysghost
libertysghost's picture

Did you even read the article?  Very little was about "that guy" and aside, the tired meme you're trotting out may have worked with your Teacher Union friends, but not so much on here where people actually read and don't believe a monopoly on education funded through threats of force and violence will produce a very good "educational system".  I've travelled to other parts of the world...the xenophobic claim you make is of course much more complicated than you would like to believe.  You're entitled to your own opinion, but as the late Daniel Moynihan once said, "...not your own facts."

So the higher the forced taxation for government schools has risen the quality of government education, right?  hmmmm?  It's not a matter of not wanting to support kids going to school, it's more about how to support that but you don't want to have that debate I'm sure because in the end, you're going to have to try and support a few insane and illogical arguments:

1) That competition is good and will improve quality in everything BUT education...it won't help in education you say.  Why?  Basic question.

2) People should not have the freedom to choose what school to send their kids to, the government should mandate that based on where you happen to live because they know better than parents and their opinion won't be corrupted at all.

3)Rewarding failing systems (in this case government education) with more money IS A GOOD THING and despite all logic and and every example in economics and history, rewarding government monopies on education won't incetivize them to continue to do poorly knowing they will just get more money the worse they do.

In the end this is a math problem...though they are trying to make sure kids no longer can do math so they might not understand the problem.  People making more money NOT TO WORK (retired government employees in this case) than the people working cannot be paid eventually when the people claiming they are OWED that money chose to elect people who didn't save the money they said they were "putting aside" for the pensions.  The people knew they weren't funding them at the time but liked the other crap the governments and unions gave them with the money and accepted any rationalization doled out to them that "all would be fine" even when it made absolutely no sense.  They hoped, in the back of their minds, that other people (people not even born...you know, "the children" they claim to care so much about) would be forced by the government to pay for it later through violent threats of arrest and property seizure.  

It won't end up working.  People can move and as Illinois shows already...they will.  Please feel free to tell me how you support your argument and if you think I put words in your mouth and you can argue differently than just keeping and raising high taxes is the solution while allowing no school choice, enlighten all of us as to your yet unrevealed grand plan. 

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