llinois state legislators and Gov. Pat Quinn are on notice: “Here comes the judge!”
As Illinois Appellate Court Justice Thomas E. Hoffman puts it, the state of Illinois runs three Ponzi schemes, otherwise known as the Illinois State Employees' Retirement System, Illinois Judges' Retirement System and Illinois General Assembly Retirement System.
“These three plans are nothing more than state-operated Ponzi schemes,” said Mr. Hoffman, chairman of the judicial retirement system and a trustee of the Illinois State Board of Investment, Chicago, which oversees the combined $10.2 billion in assets of the three systems, all based in Springfield.
Mr. Hoffman was speaking at an ISBI meeting in September about the systems' liquidity crisis, compelling their use of the $250 million in annual contributions by public employees, as well as selling investments, to pay pension benefits of the current retirees rather than investing the employee contributions on behalf of their future retirement. The state triggered the crisis by neglecting to make any of its required roughly $1.2 billion combined in annual contributions to the systems this current fiscal year, which began July 1.
“We are taking current contributions and using it to pay present-day benefits, and if we are hemorrhaging $80 million a month, this plan is going to have zero money in it in 10 years,” Mr. Hoffman said, referring to all three systems. “These people are contributing their money, and we are using it for current retirees. (Current employees) are never going to see a dime of it ... So now we have a question: Are these current employees justified in turning around and saying, "You shouldn't use my contributions in order to pay current (retirees). You should put it away for my retirement'?”
As the judge continued, “As trustees of this board, our fiduciary obligation is to the participants of these three funds, to get the highest return we can that's prudent for their benefit. ”But if I'm operating a Ponzi scheme here, I'm not doing anything for the benefit of people who aren't going to retire until more than 10 years from now. So the question I have is why aren't they suing?”
“It's a Ponzi scheme,” Mr. Hoffman told other trustees. “It's exactly what it is. It's a state-operated Ponzi scheme. We have three funds here that are Ponzi schemes.”
