Wirepoints founder thinks pension bonds won't fix Streator's problem
The founder of Wirepoints believes issuing bonds to pay toward pensions won't fix the problem Streator is having for fire and police retirees.
Mark Glennon said issuing bonds to pay pension contributions is akin to moving debt from one credit card to another.
"Issuing bonds to pay pension contributions is just another means of kicking the can," Glennon said in an interview with Prairie State Wire.
Glennon said the supposed benefit is lowering interest cost, but the real savings are much smaller and could potentially backfire.
"That's because pensions think they are 'saving' 7 percent or so per year, which is the rate of return they assume on the pension obligations they invest," Glennon said. "That assumption is fiction, however, especially for smaller towns that are legally required to invest mostly in safe, low-return bonds."
Glennon said if markets go the wrong way, pension bonds have the possibility to backfire entirely.
"They are just borrowing to take your chances in unpredictable markets," Glennon said. "Illinois is speeding deeper into the abyss every day. Deny, delay, extend, pretend. Pension obligation bonds are just more of the same."
Glennon said the main problem is that Illinois, and most of his municipalities, have insurmountable debt, including pension obligations.
"Towns and cities are also crippled by unfunded mandates imposed by the state, including pension benefits," Glennon said. "Ultimately, unfunded pension obligations must be cut. That requires a state constitutional amendment or, in some cases, bankruptcy."
The Streator City Council is attempting to make sure that police and fire retirees have pension benefits. They are hoping municipal bonds will fix the issue by bringing the city closer to funding 90 percent of all pension funds by 2040, which is a requirement by the state.
Glennon recently tweeted that some of the comments made regarding the pension obligation bonds were "incredibly irresponsible."