A report earlier this week revealed that Illinois isn’t paying the $9.1 billion annual interest payment on its pension debt.
You read that right: They’re not going to pay.
And it’s no wonder: As it stands, the Illinois state pension fund is underfunded by $130 billion. And likely to worsen if fund managers fall short of the 7% annual return that’s already baked into the cake.
Larry’s told you about the pension crisis in the past. And I knew it was bad in Illinois.
But not this bad.
Well then again, they haven’t had an annual budget for 19 months and they have accumulated $11 billion in unpaid bills.
What’s worse is that Illinois has the highest property taxes in the nation and the worst credit rating. As a result, residents are leaving at an alarming rate. And that’s crushing the tax base and pushing it toward decade lows.
Result: The debt spiral will get worse.
What are state legislators going to do?
The latest sign of desperation comes as lawmakers consider monkeying with the state constitution to allow for “restructuring.” But that looks like a stopgap measure at best, no ifs, ands, or buts about it.
And it’s not just Illinois facing crippling pension liabilities: It’s also happening in California and New York.
The latest bad new comes from California Public Employees’ Retirement System – CalPERS – which has the arduous task of balancing financial obligations with reduced benefits.
CalPERS has $311 billion in assets and a funding ratio of 68%. Worse yet is the estimated 0.6% annual return in 2016 that missed the 7% target by a country mile.
Moving to the East Coast and the latest casualty: The New York Teamsters Road Carriers Local 707 Pension Fund ran out of money.
Result: A drastic reduction in benefits for its members.
Consider …
One member who paid into the fund for 30 years began retirement with a $3,500 check. After the fund blew up, that monthly stipend plunged to $1,170.
No doubt about it, this is bad.
Also, on the precipice is the Central States Pension Fund, with an estimated 400,000 members across the U.S.
And the pension debacle across the United States will bring more benefit reductions and higher taxes when state and municipal plans go down.
In fact, some estimates indicate that 200 plans are on the fast track to insolvency, representing a mind-boggling 1.5 million to 2 million people.
Larry’s wave model shows that the pension crisis will accelerate this year and threaten your life’s hard work and wealth in its wake.
Best wishes,
Mike
Ricky March 15, 2017
these people with their pensions are making more in retirement than I will ever make working!!!
RonTheKanuk December 16, 2017
Hi Ricky,
I guess you are saying that Government Works…. but, sadly not for Everyone.
Kenneth Henderson March 15, 2017
AS FOR THE PENSION CHRISES IN ILLINOIS, I WOULD BET MY LIFE, THAT POLITICIANS IN THE ILLINOIS
SENATE DID NOT REDUCE THEIR PENSION. ALSO, I AM CERTAIN THEY ARE GETTING THEIR FULL SALARY EVERY MONTH. WHEN ARE THE PEOPLE IN ILLINOIS GOING TO DOING SOMETHING ABOUT THE POLITICIANS IN ILLINOIS THAT ARE PLAYING WITH THE WELL FARE OF OF THE CITIZENS ILLINOIS? THE STATE SENATE IN ILLINOIS SHOULD BE CLEANED OUT AND FRESH, HONEST PEOPLE SHOULD TAKE OVER!
MC-LUVIN WISCONSIN October 26, 2017
hi everyone Wisconsin was in the same state of affairs that Illinois was when it was dominated by democrats , its pension fund was broke its promises to the teachers association of 8% growth per yr in its funds a complete fabrication things looked pretty gloomy and full of despair but hey other states were in the same fiscal shape and our governor doyle a democrat just wanted to raise taxes more in higher property taxes higher sales taxes higher state taxes higher gasoline taxes higher alcohol and cigarette taxes he even proposed creating new taxes well governor doyle was in trouble and so was the state of Wisconsin it was literally going broke quickly well mr doyle left before his term was up and didn’t seek re-election scott walker stepped up ran for office and won the governorship with the help of paul ryan , ron Johnson , and others they straightened out Wisconsins fiscal woes my wifes pension plan as a REA teacher is now intact her benefits secure WISCONSIN IS BOOMING in ways I could have never imagined . companies are moving here in droves FOXCONN is building a 3 stage manufacturing plant totaling over 6.125 square miles U-LINE is still looking for people @ 25-30 per hr amazon is looking for people a german candy company is building a plant here with 6 other companies in the same field to follow other companies from Illinois are buying land to build their companies here in Wisconsin leaving Illinois behind this is truly a wonderous time to live here everywhere I go all I see are help wanted ads THANK YOU SCOTT WALKER, PAUL RYAN, RON JOHNSON, thank you so much for your positive insight this last elction my wife and I stopped voting democrat we even voted for TRUMP maybe with his positive insight he can turn the united states around to be a productive nation again
Tonia Mahnken March 13, 2017
The state of Oregon is also mired in debt for pensions.. This problem is because of Govt. employee unions. These employees were promised a 7 percent increase
Per year and the State is only generating 2 percent. Oregon has tried to lower the return but it has been declared illegal to do so. It doesn’t take a genius to figure the outcome. Our liberal Governor is trying everything she can to raise taxes including excluding mortgage interest and taxes from being a deduction on State taxes. She tried raising taxes on large businesses but the people voted that down. Any way you look at it, it will wind up hurting those that thought they had a secure retirement and it proves the point you can’t give away that which you don’t have. A very liberal policy.
RonTheKanuk December 16, 2017
Hi Tonia,
It almost sounds like you are saying that the solution to the mess is to have more Government Control..
If that were to happen, the hole would be deeper and the politicians would be richer..
It was said that the average that a person needed to survive retirement, was personal cash of $600 K….
That may be true in today’s mess… BUT IF EVERYONE had $600 K Costs of everything would be higher and that amount would not be enough…
Growth in the economy would also be great to help pay government BILLS… BUT
not if they increase their budgets by 7% per year…
More jobs for those who are unemployed is the answer, but how can that be a permanent
fix, when everyone wants a government job to be sure that their job is never going to be exported to the 3rd World ?
We need WALLS more than ever… and Financial Walls as well… Bring BACK the
Glass/Steagal Act to prevent dangerous speculation. It allowed the Banks to use Savings Accounts like their own Easy Money. That would be a start.
Frances March 13, 2017
In addition to the state pension plans you related are having difficulties and apparently are going to continue to have difficulties I would not be surprised to see difficulties arising in other state and even city pension plans throughout the nation. How precarious are the United States Government Employees pension plans and plans like Social Security. What does it portend for the entire nation?
al March 13, 2017
What is in common with CA, NY and IL? CATHOLIC… There is not one successful CATHOLIC nation on earth. Why would these be any different?
Richard December 3, 2017
Wow How bigoted is that?
Valerie March 13, 2017
Thankfully you and Larry have made us well aware of these two problems:
End of the Euro and E Union.
Illinois defaulting on its pension.
However, what I would like to hear is what your computer programs or experience tells you will be the result of each of those two things happening. What will happen to the rest of the world, if the E Union begins to desolve; if Illinois defaults on its debt?
Jon March 12, 2017
I think that a big part of the problem here is in the partial story being told. Pensions like Insurance companies that have sold whole Life policies and annuities, had a 100 plus year data base of interest rates and reasonable investment expectations. When the Federal Reserve changed the game to shift monies to Wall street banks and other member banks it was at the expense of most other programs that had been run fairly soundly. The funds in trouble are in the situation because of paying benefits based on expected returns over a long term. The only way to salvage these programs is to go back and recalculate the rates of return and reduce payouts and even claw back or suspend certain accts. until the overage is back in balance. The real villain here is the Federal Reserve policy of Zero interest (for their friends) CC and many other debt instruments still have default rates of 30%…..Shameful!! At the end of the day one of 2 results will take place. Either ‘all shall share in the pain’ of readjustment or first in and out (by mere age) will reap the lions share of gains and the last ones in who continue to contribute will suffer the greatest burden in the distribution. My advise to you younger readers is to create your own portfolios of assets (ie rental houses, small businesses, ladders of treasuries and or CD’s) and along the way live at or below your means, spend wisely and save so that you can purchase things with cash and not suffer the costs of debt. It has worked for me, but my family will tell you that it has been a long road with very long hours and save first spend later life style. All the Best to the many readers of this comment. M3jonny
Jim Shannon March 13, 2017
I have read that NY State, unlike other states like NJ, California and CT have rules on the books stipulating that Civil Service Union pensions must be financed at some level. It is not at 100% but something like 70% if my memory serves me correctly. Hence, the problem is not nearly as dire in NY State as in these other states who have shirked their responsibilities. It shows the importance of a law on the books mandating a prudent financing program for pensions. However, it is also important that the pensions are sane and not at crazy levels that could straitjacket the rest of the population.
dan March 12, 2017
I was shocked and sad to hear of Larry’s passing. I have read and listened to him for many years. Always enjoyed his thoughts and he turned out to be right on almost all the time. More importantly, he seemed to be a gentle, humble, guy. I am sure many will miss him and his insights.
Randy March 12, 2017
What DID happen to the $870 Billion that Obama said was for “shovel ready” infrastructure projects but was actually given to the unions?
Mike March 13, 2017
You could ask the over 100 Republican Representatives who voted against the projects and then went back to their districts to pose for the cameras at the constructions sites and take credit for the jobs.
Robert Kimble March 11, 2017
If I was part of the Illinois state employees. I’d organize to sabotage everything that can go wrong and put state and local governments out of business.
Dave March 11, 2017
They will meet their pension obligations when a loaf of bread costs $75.
Stephen Ettinger March 11, 2017
This is for Mike Burnick:
My wife has a Pension Plan set up in the State of New York as a Nassau County Educator. She has been contributing into her pension plan for 32 years. We are in our late 50’s and with 1 kid in College and the other going in- in 4 years, – OUR GOAL IS TO WORK 8 more years full time, pay for 4 years of education for 2 children, and then retire. IF my wifes’ pension plan is in jeopardy like so many as your article indicates, how are we (her and I) supposed to control this? It is always good to be aware of what is going on in our country financially. But my question to you is………if pensions are collapsing all around the USA, HOW DOES TELLING US BENEFIT US, MAKE US FEEL BETTER, AND PROVIDE A SOLUTIN TO THIS PROBLEM. I have been reading Weiss Research Reports now for almost 5 years. You, Larry, and some of the other writers that share intel. what troubles me is I am working like a dog to pay for others who have nothing to get a lot of free bees. But none of you share solutions that truly benefit anyone. I read Mr. Weisses rants and about his wonderful trips. I listen to hours of vides. Larry was the only one who told us – Get into this! or get out of that until I tell you it’s time to back up the truck. HE is dead, and the one guy who had clear direction regarding the commodities markets, markels, energy patches etc, is gone. I am sick of reading about the problems in Pensions. YOU TELL US IF WE AHVE A PENSION DUE DOWN THE ROAD,………… how do we collet if the pension is in trouble? Do you have a solution?
SS ETTINGER. Telling us about every states pension problems does not provide a solution. DO YOU HAVE ONE? ——- or are you going to continue to tell us about every states problem? PROVIDING A SOLUTION……..
CAN YOU DO IT????????????????????? That would help people. Truly help people protect their right to live in comfort and not hav eto work like a dog till 70-75……….
Ken March 12, 2017
The solution is………you’re screwed. When your wife started her pension 32 years ago people (money managers, government officials) were more scrupulous. Many deals were closed with a hand shake. Times change. Integrity converts to dishonesty. The Michael Milken’s and Bernie Sanders and their ilk came along, enriched themselves and left the rest of us poorer. They will one day have to explain their actions. In the meantime I as well as Larry would say greed and temptation became too large for these folks and your pension got raided. (along with being poorly managed)
I believe the best place to store your wealth that can’t be raided by these scoundrels is in precious metals and real estate.
Mike C October 5, 2017
Perhaps the best option I would suggest would to go to any oversight meetings of the legislature or the agency overseeing the pension and demand 1 of 2 things:
1) Realistic growth projections of investments. Many projections are based on 7% growth, thus enabling the funders to put in less money because the growth will carry its obligation. A smaller growth projection will require more money to meet the obligations.
2)Demand that the pension monies that the pensioners(present and future) be converted to a 401-k or IRA with multiple options for investing. “A bird in hand is better than 2 in the bush”, as the old-timers use to say.
I wish your wife and you the best!
Richard December 3, 2017
If you wait around and expect someone else to solve your problem, you are doomed. This service reports the facts and conditions that affect our future. The service did not get the country into this mess, politicians did. If there is a clear solution, it would be the duty of the service to point it out, but there is not. I suggest you find a financial management person you can trust and work on the best plan for yourself. We are all in the same boat on this one.
joe March 10, 2017
unbelievable story. so you are saying that the whole state pension has stopped being paid by the government. that should headline nation news. this is a criminal act and politicians should be held accountable and go to jail.
Paula March 11, 2017
don’t hold your breath
Jamshed March 10, 2017
Cash is King and surely not debt. I shudder at the thought of Trump asking Congress to increase debt. The case of Illinois is mind haunting and makes a working man shudder that at the end of his 30 year working life he will be denied a pension which he rightfully contributed to.
Let us seriously try to reduce debt and borrowings as much as possible so we can live well, enjoy normal standard of living and save for ourselves.
paul ellenbogen March 10, 2017
So sorry to learn of Larry’s passing my sincerest condolences to his family and friends he will be missed may he Rest In Peace.
Bob March 10, 2017
Has anyone noticed these all sound like blue states. tax and spend until there is nothing left worth taxing.
I live in southern Illinois and most of our taxes go to support Chicago, The Welfare State. We would be better off if everything south of Interstate 80 became a separate state.
f151 March 11, 2017
Secede!
tim March 10, 2017
Douglas…..I agree. He is aleady missed.
Pierre March 10, 2017
The offshut of this debacle is very very much reduced payments to pensioners
On the other hand the retirees should be allowed to see the amount they actually paid into their pension account and be allowed to withdraw that amount plus a reasonable interest rate (say return being paid on 5 year gov’t bonds).
Those retirees who are presently receiving monies should be told their payments will be reduced drastically as they probably were overpaid to begin with.
Then all monies withheld from employee pay checks shall be invested in US Gov’ t bonds
Sh.. has hit the fan and the smell is atrocious
Guarantees are no longer in vogue. It’s everyone for themselves!
Seb van den Oever March 10, 2017
Compulsory pension funds are a Ponzi scheme run by the government. The last one is left holding the bag.
Dot March 10, 2017
I always eagerly read every word Larry sent. I initially began his Service to learn more about gold but quickly discovered that his knowledge was much broader. It was amazing to read his analysis and watch his “observations and expectations” become reality. I appreciate his willingness to patiently share his research and analysis. He will truly be missed.
nick March 10, 2017
Larry you the best!missed you so much!your spirit your soul your smile will never be forget!love you forever!?
Robert Foster March 10, 2017
It is correct to discuss both public and private sector pensions in the article, as both types are part of the coming disaster. However, it would have been more informative if it had been made clear that two of the funds you cited, New York and Central States, are for the Teamsters Union, not public sector plans like Illinois and California.
Lee March 10, 2017
Illinois always seems to pop up on the (corruption and/or government incompetence) radar. Very sad. I guess it’s hoping for a Fed bailout.
ROBERT REISSNER March 10, 2017
The economists do not understand that wealth which should still be in pension funds, and other locations, still exists in the possession of the super wealthy 01% that owns 40% of our nation’s wealth because our govt. refuses to tax those sacred cows at a high enough rate to funnel the wealth to where it should ethically and morally travel to. This has been occurring for decades.
Wealth just doesn’t evaporate……it still exists and too much of it has been going to those who don’t need it. That is the horror of unregulated Capitalism where excessive wealth travels faster and faster to those sacred cows who don’t spend it but instead, lend it out to those people who badly need it and who then naturally become the perpetual slaves of the inadequately taxed sacred cows.That action destroys the economy.
Mike C October 5, 2017
And some of the politicians who complain about excess wealth in the hands of few are themselves wealthy, and are exploiting the situation for their political future. It’s called hypocrisy.
Also, if the FED govt taxed the rich, who would get the money?
Trump’s desire to bring back the corporate money and jobs is the right way to go. Forget all this nonsense of envy and jealousy- it’s time to grow up and behave ourselves. A fellow employee of mine complains about it not being fair and it being wrong that people make huge salaries. I tell him that there could be others that are envious that his wife and him make a good living(better than us), and shouldn’t make that kind of money. Envy is a nasty way of living.
john November 15, 2017
no such thing as unregulated capitalism. stop calling it that. it’s socialism that is unregulated. capitalism/human nature regulates itself if allowed. you keep voting for idiots who don’t allow it. why?
Vito Puopolo March 10, 2017
I’m still in shock! I always looked forward to Larry’s latest comments. It’s a terrible loss.
Jim March 10, 2017
What a joke! Should have converted all these pension funds to a 401K years ago! States and the participants would all be 10 times better off. You can thank the democrats for this mess!
grover5995 March 11, 2017
ILhas had Republican governors for most of the time during past 30 years.
Chemiker March 13, 2017
Until the latest one (with whom the Democrats refuse to work) the Reps were just a crooked as the Dems. How many went to prison? IL makes LA seem honest.
Mike March 10, 2017
The biggest enemy of pensions, savers and most retirees is the Federal Reserve. The Fed has subsidized Wall Street gamblers and debtors with below market interest rates for 8 years. Fiscal conservatism has been crucified on a cross of quantitative easing.
Angry Max March 10, 2017
All of this was done by people who think they are smarter than everyone else and that they should be in charge of everything and everybody in a global government. The ones who create the problems, are then the same who propose the ‘solution’ which compounds the problem.
acqcon March 10, 2017
More liberal mismanagement. They should file BK.
Johnie Dutch March 10, 2017
Is it any wonder when all 3 areas mentioned have been Democratic bastions for years. People fleeing Illinois like rats of a sinking ship.
f151 March 11, 2017
Bingo!
Ted March 11, 2017
3 failed states Cali, Illinois and New York helped elect and keep Obama in office and now they will fail as they should
Chemiker March 13, 2017
Think of the 50 worst ghettos in this country. Every one is run by liberal Democrats.
BTW, where do they get an 80% yield?
Origbless May 4, 2018
California has had its share of Republican governors – to its detriment.
Richard S McKenzie March 10, 2017
If States are allowed to reduce retirement pensions then retirees ought to be able to reduce their monthly bills by the same percentage. That’s my plan. ?
Origbless May 4, 2018
Local economies will collapse.
Secundino Rodriguez March 10, 2017
Mr. Burnick,
If Larry knew and you know, having learned the situation is “much worse than foreseen”, what was Larry’s (and now, your) next move? Do you have an AI model on this to know what we should buy low and / or sell high?
Douglas March 10, 2017
We will truly miss Larry, his wisdom, and his guidance.