$10 Billion Illinois Pension Bailout Request Ignites Controversy

Republicans are furious after a leaked letter showed Illinois Senate Democrats asked US members of Congress for a $10 billion pension bailout, nearly one-quarter of a requested $41 billion coronavirus relief package.

State and local governments, which are facing depleted tax revenues and constrained operating budgets because of the coronavirus pandemic, have been calling for federal aid for weeks. Illinois, which generates revenue from personal income, corporate income, and sales taxes, could lose up to $14.1 billion in the coming year, according to the letter obtained last week by research firm Wirepoints.

But Illinois, with a notoriously underfunded public pension fund, also asked for $10 billion in direct cash assistance—as well as a low interest federal loan—for its retirement systems over the next three fiscal years until early 2022, according to the letter from Illinois Senate President Don Harmon on behalf of the 40-member Democratic caucus. The figure amounts to about one year’s full payment into the state pension fund, or about 2.5 years of normal costs.

It also asked for $9.6 billion in direct aid to municipalities to support challenges in funding pensions for police, firefighters, and other first responders in the state.

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“So far, the federal relief targeted costs directly related to the COVID-19 outbreak,” Harmon said in an emailed statement. “The massive negative effects to state and local economies across this country have not been addressed and need to be.”

But the request angered Republican lawmakers and other critics both in and out of the state who derided it as both grossly inappropriate and an irresponsible bailout for what they see as poorly run retirement funds.

The Illinois pension fund, which is among the nation’s poorest, has a $138 billion unfunded liability, as well as other retiree benefit liabilities of $54 billion.

“IL Dems brazenly using a global pandemic as an excuse to ask the Fed govmt to bail them out of the fiscal disaster they manufactured over the last two decades,” read a tweet from the Illinois Republican Party.

“This is infuriating. We can’t bail out Illinois’s notoriously corrupt and mismanaged pension system,” Nikki Haley, former Republican governor of South Carolina and former US ambassador to the United Nations, said in a tweet on Sunday. “States should not get windfalls. It All has to be paid back.”

On Sunday, the Chicago Tribune editorial board wrote: “Even by this state’s low standards, asking federal taxpayers from California to North Carolina, from North Dakota to Texas—farmers, small business owners, teachers, nurses, bus drivers, bartenders—to help dig Illinois out of its pre-coronavirus, self-inflicted, financial hellhole is astonishingly brazen.”

Other fiscal relief provisions in the COVID-19 aid package sought by state lawmakers include a $15 billion grant to stabilize the state’s operating budget, as well as $6 billion to fund unemployment benefits.

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Tags: bail, Bailout, Chicago, Coronavirus, COVID-19, Funding, Illinois, Pension, Pension Funds, Retirement

Norway’s Government Pension Fund Global (GPFG)’s current CEO Yngve Slyngstad and incoming CEO Nicolai Tangen have found themselves in the middle of controversy amid reports of potential impropriety with Tangen’s hiring, and the country’s central bank is conducting an investigation into the matter.

The Supervisory Council of Norges Bank, Norway’s central bank, is investigating the conduct of Slyngstad and why he accepted a flight paid for by Tangen, the billionaire chief executive of London-based hedge fund AKO Capital, before Tangen was hired to run the sovereign wealth fund.

Norwegian newspaper Verdens Gang reported that a few months before Tangen was hired, he spent millions of dollars on a trip to attend a private seminar he held at the Wharton Business School of the University of Pennsylvania in Philadelphia. Slyngstad, who took part in a panel discussion at the seminar with then-Bank of England Governor Mark Carney, was among those who accepted a ride from Tangen aboard a luxury Boeing 777 to the event, which took place just one month after Slyngstad announced his resignation.

The event also included a two-hour concert by the musician Sting, whom Tangen paid NOK9 million to perform, which was the equivalent of more than $1.3 million at the time.

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Verdens Gang also published an email from Tangen to Slyngstad dated Jan. 6 in which Tangen indicated he was interested in becoming Slyngstad’s successor and asked for a “little favor” from Slyngstad to engage in a phone conversation about what the job entails.

Although the optics and timing have raised concerns, the fund said Slyngstad “had no role in the appointment of his successor,” and that no one involved in his hiring process participated in the seminar. It also said that Slyngstad never replied to the email from Tangen.

“Tangen was appointed by Norges Bank’s executive board against the background of his work in building up one of Europe’s leading investment companies and his outstanding performance as an international capital investor,” the fund said. “The executive board gave weight to his broad experience and good leadership qualities.”

The fund added that Slyngstad’s participation at the seminar was “entirely independent of the appointment” and that “Tangen has been, throughout the selection process, entirely open toward Norges Bank about all conditions that may be relevant to the post of chief executive of the fund.”

However, the fund acknowledged that it was the first time Slyngstad did not travel on a scheduled flight covered by Norges Bank while he was head of the fund, saying that “he has stated himself that this was unfortunate.”

The fund said it usually covers expenses associated with work-related travel but that exceptions may be made, such as when a fund employee is a speaker at a seminar. However, Norges Bank said it has decided to pay for Slyngstad’s accommodation and air travel related to the seminar.

“CEO Yngve Slyngstad has extensive contact with a number of other funds and investors,” the fund said. “The contact between Tangen and Slyngstad has been in their professional roles as chief executives of their respective organizations.”