By Monique Garcia and Kathy Bergen | The Securities and Exchange Commission is conducting an inquiry into the state’s financial disclosures about potential savings expected from the pension reforms enacted last spring, Gov. Patrick Quinn’s office confirmed Tuesday morning.
“This is not an investigation, this is an inquiry,” said Kelly Kraft, the governor’s budget spokeswoman. “The SEC has stated this is not an indication of any violation. We feel our disclosures have always been accurate and complete.”
The inquiry began in September, according to a report by Moody’s Investors Service issued late Monday.
The SEC is looking into whether the state was taking projections of future savings and treating them as reductions in the state’s current pension costs, Robert Kurtter, a managing director in the public finance division of Moody’s, told the Wall Street Journal, which first reported the inquiry.
Quinn downplayed the probe, saying it won’t have an effect on the planned sale of the pension obligation bonds Feb. 17.
“It’s a non-public confidential inquiry. They wanted to just look at the (pension reform) bill that we passed a couple years ago and the pension borrowing,” Quinn said. “But I don’t see any problem there at all.”
“They called, and I think nationwide they are probably looking at everything in light of what happened in New Jersey,” Quinn added. “So, you know, we want to make sure that we answer any and all questions. We’re totally confident that everything we do here is done in the right way and that’s the way it will always be.”
“We’ve never had a problem going into the market and getting plenty of bidders to lend money to Illinois, and I think that’ll be even more so in light of our most recent action,” Quinn said, referring to the income tax increase.
Last April, Quinn signed into law pension reforms that he estimated would save taxpayers $200 billion over nearly 35 years and stabilize current employee pensions. The changes included an increase in the retirement age and a cap on the salary level on which pension benefits are based.
The SEC last year accused New Jersey of not properly disclosing the condition of two large pension funds. New Jersey settled the case without admitting or denying wrongdoing.
“In light of the New Jersey order, and prior to being contacted by the SEC, the state took proactive steps to update its disclosures, and we now feel our disclosures exceed the new, more rigorous standards,” Kraft said.
She said the SEC told the state the inquiry “should not be construed as an adverse reflection on any entity or individual involved, nor should it be interpreted as an indication by the commission or its staff that any violations of the federal securities laws has occurred.”
The news of the SEC inquiry comes as the state prepares to sell about $3.7 billion in bonds, which would let it pay its required annual contributions to employee pension funds.
Illinois employee pension funds are severely underfunded, and the situation continues to deteriorate, according to the Moody’s report.
The funded ratio for the five plans dropped from 50 percent to 45 percent in the last fiscal year, as combined liabilities grew to $138 billion from $126 billion, the report stated.
It really is ABOUT TIME THE FEDS destroyed the sharks running around the state
So the federal government is going to fine the state and leave even less money to pay our state obligations? The SEC is worthless, it should be one of the first programs to be axed by the new congress. Pull the 15% of people who may be worthwhile out of there and develop a regulatory agency that actually does something of value. Not a single person on the SEC payroll has any idea how a financial institution is run or how to appropriately analyze it. Given that a large portion of our economy is in this sector, it makes little sense why this agency is continually funded. They do not protect the public at all.
The SEC has no jurisdiction over State of Illinois pension funds. There must be more to the story or the SEC has gone way way of base.
@Chris..The SEC was purposefully staffed with morons from 2000 to 2008. Properly staffed, it has been an effective group. Weird how Republican Presidents lax on regulation end up screwing us. (See black monday – Bush Sr. – Great Recession – Dubya)
Inquiries always proceed more serious investigative actions…This will be Quinn’s first serious financial improprieities causing bond issuance to be “at-risk.” Do not down play this inquiry!
The SEC does have jurisdiction over securities fraud, which it may allege against the State of Illinois if it finds that the State did not properly disclose the poor health of its pension plans in bond offerings by the State. In these situations, fines are not typical because the taxpayers would bear the burden of the intentional misrepresentations by the government officials responsible for preparing the disclosure.
I still can’t understand why your newspaper has not broadcast the fact that Illinois pension reform was bifurcated into two bills. One that affected the rank and file, which passed and the other that affected the fat cat judges and office holders, which did not pass. So the fat cats pensions were not reformed (read reduced). Why doesn’t the Trib focus on this outrageous unfairness. It should have been an election issue. Shame on the Illinois legislators and shame on the Tribune.
Personally, I’d like to see Pat Quinn, Mike Madigan and John Cullerton in jail over this.
Sounds like another democrat is going to show his “true motivations” and how well his agenda is executed will serve to potentially further undermind the “mantle for change” he claimed after a very close election. What’s new? in this state likely NOT much, except for who gets to be held up for close investigation AFTER the recently passed laws are overturned.
Wait, watch and get ready for another really good belly laugh … its democratic politics in full bloom under the “next character”. Why has the merry-go round been so silly since the republicans left the governorship is a GREAT question to ask the democratic leadership!
Cheers!
…and New Jersey wants companies to move there?
Public sector unions and their platinum-plated pension benefits are bankrupting our state. Sad.
They should send a search party to try and find the funds
It’s funny how many complaint about how the Feds shouldn’t get into State business, but then when immigration, pensions, budgets, etc, in states threaten the peace and the solvency in the country, every one blames the Feds… which way do you all want it?!
I see nothing wrong with the pension levels. If we need more money, let’s just tax the people even more.
@Governor Christie is hungry-
So the SEC has only been useless from 2000-2008? By my count, it has run the same model for many years outside of that range, but happened to not encounter major negative movements in financial markets. Even in the best of times, if the SEC properly regulated financial institutions nationwide you would have seen dozens of them being closed every week – many of the same institutions that started giving out jumbo mortgages with library cards. It is not a Repuiblican or Democrat issue, it is a fact that the SEC (and basically all government organizations) rarely do a good job at completing the task they were charted to perform. The SEC is understaffed and filled with many individuals who do not have the education or will to work to perform a satisfactory job of ensuring the investing public can have trust in the financial markets.
People you are confusing regulators. The SEC and it’s private partner FINRA (formerly the NASD), are the regulators for securities firms, mutual funds, pensions, etc. The banks are insured by the FDIC and regulated by the Federal Reserve Bank, OTS, and the OCC which both merge into the OCC.
So the liability went up to $138b, actual cash reserves dropped to 45%…. I believe that leaves a $76b unfunded hole. And that’s just the pensions in IL. God help all of you
If this inquiry began in September, why weren’t the voters of Illinois informed about this obvious shell game before the election? These government unions took over the election process in Illinois back in 1960. Nothing has changed since then. Holder and the rest of the Obama lapdogs will do nothing while Quinn destroys what’s left of the economy in Illinois. The sad part is disenfranchised voters can’t even sell their houses to flee this mess without taking a huge hit.
Julie, how about the fact the pension funds for judges and legislators are seperate from those for the rest of state employees and teachers. Better yet, those 2 small funds have way more advantageous rules for pensioners and have been kept fully funded. Virtually every outrageous circumstance touted in the Tribune comes from those 2 funds, except for the underfunding articles, the Tribune points at the larger funds then. They mix and match to make things look as bad as they can.
It’s just time to abandone this state to the corrupt politicians that live here. The state and the city of Chicago are a national joke. The problem is, most people educated and informed here don’t care because they aren’t from here. Everyone who lives east of Western Avenue on the Northside is from some other midwestern state. They don’t care, they don’t vote, they just drink…
@ ScrewIllinois
Wow, talk about generalizations! (“Everyone who lives east of Western Avenue on the Northside is from some other midwestern state. They don’t care, the don’t vote, they just drink…”) I’ll wager you probably have similar views on race, sexual orientation, etc. It’s 2011, not 1911.
The question for the private citizen taxpayer is do you want to bailout your public employee neighbor who wants you to pony up big time to pay for their retirement benefits?
Do you want to work until you are 67 or longer so your neighbor can retire at 50 or 55 under sweet buy outs? Are you happy when your 401(K) was blown up and no one came to your rescue?
Does the private taxpayer want to pay for Lipinski to receive $200,000 plus in retirement benefits, so Bobbie Steele can get her extra $40,000 in retirement per year because she worked 4 months as at a higher grade pay. Same for Carol Ronan. Same for a lot of judges who were made appellate court judges so they could earn more money at retirement. Do you want to pay more in taxes so that your legislators get life time health benefits in exchange for a few years of service.
Do the people in Palatine and Kankakee want to pay more so that a Chicago fireman who worked 2 out of every 5 days can be paid $100,000 plus in retirement benefits? So that former police officers can be put on new city payrolls and double dip and increase their pensions.
I think the revolt is coming soon and if the participants named above do not budge big time it will get ugly; there is not enough money to pay for the past debts as well as to pay for the infra-structure and social needs of the future.
Just thank your local representative, senator, alderman, judge, clerk, etc.
That must be why the crackerjack SEC stopped Enron, Worldcom, etc. from cooking their books in the late 1990s. And the last time I checked, Clinton was President throughout all of 2000. Are you saying that he’s the one who staffed the SEC with incompetent buffoons?
The Illinois Pension Funding/Campaign Contribution Cycle
Is my understanding of the situation in Illinois correct?
Unions give Quinn $10 million in campaign contributions to run for governor.
Quinn wins the race and becomes a union puppet.
Quinn proposes a multi- billion dollar increase in income tax to fund the underfunded union pension plans. The funding would be immediate because the state would sell muni bonds to investors. The income tax increase is needed to persuade investors to lend money at low interest rates.
The union members receive billions in exchange for $10 million in campaign contributions.
Quinn, when he decides not to run again for public office, pockets the leftover campaign contributions, because in Illinois politicians have made it legal to steal, and called it “campaign finance reform”.
The names change but to game is the same.
As Yogi Berra once said “its like deja vu all over again”.
The only way I know to stop the cycle is to stop funding it. Perhaps investors should consider not buying muni-bonds from California and Illinois.
The Unfunded $8.75 million State of Illinois Bill backlog
The $4 billion State of Illinois muni-bond issue will not provide for payment of the $8.75 billion bill backlog.
Who is holding the State of Illinois $8.75 billion accounts receivable?
Certainly the businesses that provide the goods and services to the State are not holding the receivables because, if they were not paid, they would immediately cut off services and products going to the State.
Is it possible these receivables have been sold through factoring, and banks are holding the paper—FDIC insured banks?
Are federal bank examiners assuming receivables from the State of Illinois are collectible?
Is the FDIC responsible for payment when and if banks fail?
Has the State of Illinois debt and spending problem spread to the national level? (This is not unlike the euro-spending problem, which spread from the big spending countries (like Greece and France) to all of the euro dollar countries participating)?
Should each and every Federal taxpayer be concerned because of the possible backdoor financing of the State of Illinois debt?
From another view, are these State of Illinois receivables being held by mutual funds, which are being sold to the public?
Will the Illinois debt problem eventually torpedo our 401k and IRA savings in the same manner as the sub-prime mortgage write offs did?
The population of the State of Illinois may increase because Illinois policies will draw in more entitlement thinkers to collect something from the government.
Only the self- reliant people who pay taxes will leave. The tax rates will be increasing on a base that is decreasing. More entitlement thinkers will mean more government spending. The debt creation cycle will continue until the funding is cut off.
I hope you agree that this is not a spectator sport—what happens in Illinois should be a concern for all citizens because the debt being generated does not stop at the Illinois border.