Tuesday, February 16, 2016
Valerie Jarrett's Pension Demonstrates Why Illinois Government Faces Bankruptcy
Valerie Jarrett spent a career in Chicago getting wealthy from insider deals as a Democratic Party partisan. One of the perks of her loyalty to the party was an appointment as chairman of the Chicago Transit Authority by former Mayor Richard Daley. Jarrett served in that part-time position for an eight-year period from 1995 to 2003 and earned $50,000 a year. Despite her part-time position, Jarrett was entitled to participate in the CTA's pension system. You won't believe the windfall she got from very meager contributions to the CTA's pension system.
According to a BGA study for the Chicago Sun-Times, Jarrett contributed just $11,132 to her pension. Three years after Jarrett stepped down from the CTA board, she became eligible at age 50 to begin collecting an annual pension benefit of $35,660, which she can collect for the rest of her life. At age 59, she's already drawn a pension benefit of $306,080, 27 times what she paid into the system. She now earns courtesy of the federal government an annual salary of $173,922 as a senior adviser to President Barack Obama.
Jobs and board positions at the CTA are highly sought according to the BGA report because their pension benefits are so lucrative. The CTA is paying out $330,000 annually in pension benefits to 19 former board members, about the same amount it contributed into the system from current board members contributing to the system. Fifteen of those retired board members are also collecting subsidized health insurance at the expense of the transit system's riders and taxpayers.
What Illinois elected officials have done in Illinois to bastardize the public pension systems to line their own pockets is unconscionable. Illinois and its political subdivisions are now paying substantial percentages of their operating budgets just for their pension liabilities. Modest legislative efforts to curtain pension benefits have been stymied by the Illinois Supreme Court, which has held that Illinois' Constitution protects pension beneficiaries from any reductions in their benefits. Yet the state and local governments can't raise taxes high enough to pay for these pensions without entering a death spiral where businesses and residents flee the state to avoid the onerous taxes.
I was astonished to see a report the other day that my alma mater, Eastern Illinois University, now pays more than 50% of its operating budget expenses simply to cover pension liabilities. EIU has been forced to lay off hundreds of its civil workers during the current school year just to stay afloat. Meanwhile, enrollment at the university has plummeted from a high of more than 12,000 students just a few years ago to fewer about 8,800 students this year.
I fully expect to see scores of municipalities, school districts and other governmental entities in Illinois forced into bankruptcy because of the pension crisis. The state's governor has already encouraged the Chicago Public Schools to consider bankruptcy to deal with its financial crisis. Chicago keeps raising taxes without making much progress in bringing its spending problem under control. Bonds being issued by Chicago and other political subdivisions in Illinois now have junk bond status or something close to it, greatly increasing borrowing costs. I wouldn't be surprised if the state is forced to petition Congress to file bankruptcy eventually as well.