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Saving Illinois: Getting More Bang for the State’s Bucks


Saving Illinois: Getting More Bang for the State’s Bucks

Ellen Brown

Illinois is insolvent, unable to pay its bills. According to Moody’s, the state has $15 billion in unpaid bills and $251 billion in unfunded liabilities. Of these, $119 billion are tied to shortfalls in the state’s pension program.


When more than a decade ago US Senator from Illinois Dick Durban told us that “Wall Street owns the place”, Washington DC was the place he was referring to.

Unfortunately Wall Street’s ownership of politicians continues to expand beyond DC and includes Springfield and other state capitols.

Establishment of state banks AND restoring Postal banking that was discontinued a half century ago ARE the solutions.


Thanks to Ellen Brown for repeating the mantra - Public Banks are the solution.


Public banks are a useful tool, as the ND bank shows. However, her math is dramatically off-base in terms of taking the pension money…

  1. The Illinois pension debt is $250B, assuming a 7.5% rate of return. If we assume the return is the is less than 3%, that increases the actuarial debt to probably $500B or more.

  2. The author calls for guaranteed COLA, which moves independent of interest rates and will rapidly eat up the “$300M for misc/profits”

  3. It doesn’t cover any new accruals of pension benefits or new hires.

Bottom line, the IL pension system is bankrupt, due to the fact that they’ve made generations of unfunded promises, and a state bank, although sensible, isn’t going to save it.


The problem is not state pensions. It certainly is reasonable for these jobs to include pensions. The basic problem is that tax revenues are too low. These politicians should raise the money to pay for promised salaries and pensions.


No, Illinois has the 5th highest tax burden in the country already. It doesn’t need a higher tax rate. The problems are that:

  1. For decades Illinois (like most states) has inadequately funded the pension;
  2. They’ve used bogus actuarial assumptions (e.g. assuming a 7.5% return when interest rates are yielding a fraction of that);
  3. They continually give cost-of-living increases when pensions are supposed to be based on your actual salary at the time you retired.

Any of these alone is a recipe for fiscal disaster. Put them all together and you have a basket case.


I knew this was all coming down when last year, Lotto winners were being given IOUs instead of cash for their winning tickets- How desperate is that?


Ellen Brown has been throwing out this State Bank solution for some time now, every time there is A financial crises within A State- Why in the hell are there not more State Bank start ups or even attempted State Bank start ups? Is the FED involved in this?


The timeframe for a hypothetical - and suspiciously round - figure of $250B being due must be so far into the future, decades away, that for all practical purposes, this allegation must be rated as false.
Illinois does NOT owe $250B in pensions. Not this year, not in 10 years, Not for decades. They paid $1.8B in the most recent year. At that rate it’ll take 125 years to pay out that amount, OK, somewhat less if you factor in inflation, but then, to be fair, you have to factor in greater contributions and nominally greater returns, which the commenter dismisses.

The COLA is NOT independent of interest rates,since interest rates,at least in the short term, are determined by the Fed, and based on inflation. And Cost of Living Adjustments (COLA) are to offset inflation by definition.

The proposal - which at its core was mine (full disclosure: I am a Senior Advisor to the Public Banking Institute, which Ellen Brown founded) and Ellen has graciously expanded upon it - is sound. It merely asks why a state needs to designate 98% of a huge fund to receive 2% in ROI (I agree with the commenter that the projected rate of returns are bogus and wildly unrealistic, but you can thank Wall Street hucksters for that misleading fantasy, not State fund managers).


The notion that it will take 125 years to owe the $250B is disingenuous.

  1. The $1.8B represents the current year’s payment, which by definition will never be lower because:
    a) Salaries of employees only go up, and therefore their pension accruals go up;
    b) Those COLAs will guarantee that even if there is never another Illinois employee drawing a pension, the $1.8 billion will increase annually.
    c) There are at least a quarter of a million current Illinois government employees who will be added to the undefunded pension pool.

  2. Any defined benefit pension plan is required to accrue its future liabilities, and fund them. According to the Illinois Commission on Government Forecasting and Accountability, as of the close of FY16, the accrued liabilities were only $207B, but the assets of the plans were only $78B, or 37.6% of the liabilities.

  3. Illinois has historically assumed a return on investment of 7-8% on the funds, which they have not achieved.

  4. Even the estimated return on your state bank will be no where near the projected rate of return needed to fully fund the pension plan. Your proposal is barely higher than the 2% the state is earning. However, a state bank is not going to solve Illinois’ pension crisis. Only a drastic increase in funding, a dramatic decrease in benefits, or a really big series of lucky lottery tickets will help that.