For years Natural News founder/editor Mike Adams, the Health Ranger, has been warning Americans that many of the nation’s public sector pensions are underfunded by hundreds of billions of dollars and are on a course to collapse.
In 2013, Adams warned police officers, firefighters, teachers and others who work for government entities that unless funding mechanisms and payout schedules changed, their pensions would be gone in a few years. Referencing the city of Detroit’s bankruptcy, Adams wrote of the larger problem in municipalities all over America:
Across the country, city governments have all spent the pension funds instead of saving them. Almost no large city has the funds necessary to pay its obligations to retirees. Pension financial planning strategies are tragic nightmares of broken promises, dishonest politicians and delusional workers (who still somehow believe they’re going to get paid).
A year-and-a-half later, in December 2014, Adams noted that underfunded pensions were set to take a new economic hit, as Congress considered legislation that would allow local governments to arbitrarily cut the benefits of retirees, many of whom were on fixed incomes. Citing a Washington Post story detailing the plan, Adams wrote:
This is precisely what I’ve long warned Natural News readers was coming. And this is merely the very beginning of the true destruction of the financial collapse headed our way. When the next market crash arrives, billions of dollars in retirement funds will be destroyed virtually overnight, and pension funds nationwide will be wiped out.
He followed up that warning with a prediction two years later that came true: The city of Dallas would have to freeze pension benefits lest the fund go completely broke, suspending withdrawals from the fire and police pension systems to prevent insolvency.
Now, it seems, even entire states are about to be consumed by broke pension funds: Illinois could be the first. (RELATED: Leftist-run cities on the brink of financial collapse thanks to massive debt)
The Land of Lincoln has been wrestling with underfunded pensions and over-promised benefits now for years, but in recent months the situation has gotten so bad that Illinois could be the first U.S. state to declare bankruptcy.
Political stalemate — the Legislature is dominated by Democrats and the governor, Bruce Rauner, is a Republican who won office, in large part, on a promise of reforming benefits and stopping the bleeding — is not helping. There is no agreement from either branch on how best to move forward, and neither side appears willing to give in.
“We’re like a banana republic. We can’t manage our money,” said Rauner, as reported by CBS News, after the legislature failed to pass a full 2017 budget earlier this month.
Moody’s Investor Service, a ratings agency, downgraded Illinois’ general obligation bonds earlier this month to the lowest rating, referencing the state’s growing pile of unpaid bills and skyrocketing pension debt. The state has the lowest credit rating in the entire country; low credit ratings make borrowing money even more expensive because riskier bets mean higher interest rates.
“Legislative gridlock has sidetracked efforts not only to address pension needs but also achieve fiscal balance, allowing a backlog of bills to approach $15 billion, or about 40 percent of the state’s operating budget,” Moody’s noted in an analysis.
The state’s poor fiscal health has prompted some to compare it with cash-strapped Puerto Rico, which is facing a historic restructuring of its massive $70 billion in debt.
Both are also alike in that they suffer from pension crises. CBS News reported further:
So how did the state’s pensions balloon into such a crisis? First, the pension problem has been a long time in the making. The state has more than 660 government pension funds, which are sometimes called defined benefit plans because they promise workers will receive a specific pension when they retire.
But critics say some of those pensions carried overly optimistic assumptions, especially given periods of market turmoil like the global financial crisis, which ate into investment returns.
Worse, the legislature did not require itself to fully fund pensions, meaning tax revenue was redirected to other line items, such as infrastructure and schools.
This fiscal tsunami is being repeated all over the country. Illinois, should it go bust, won’t be the last state to do so. Many cities will follow, as Adams has foretold.
J.D. Heyes is a senior writer for NaturalNews.com and NewsTarget.com, as well as editor of The National Sentinel.