Fed to Plunder Public Pension to Manage Debt Ceiling. Again.

(June 3, 2013) — The US Treasury said it has suspended investments into a federal employee retirement fund for the second time in an effort to stay under the $16.7 trillion federal debt limit.

The move, announced on May 31, will provide $160 billion in additional borrowing capacity, the largest of the so-called extraordinary measures that the Treasury has at its disposal to ensure that the limit is not breached.

Treasury Secretary Jack Lew, in a letter to the US Congress distributed at the Treasury, said the Government Securities Investment Fund, or G-Fund, will be made whole once the debt limit is increased.

A senior Treasury official declined to provide Reuters with a new estimate for how much time Congress has before it must act to raise the limit. Previously, the Treasury had said it could continue to pay US obligations without an increase until some time after the Labor Day holiday on September 2.

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If the debt ceiling is not raised by then, Lew has already warned Congress that the nation would run the risk of an economically damaging default.

In January 2013, aiCIO reported the Treasury had been forced to borrow from the G-fund, freeing up $156 billion worth of debt.

This borrowing spree followed a further incident a year before, when employer contributions were halted while negotiations to avoid breaching the debt ceiling were completed.

The US Treasury has been injecting supplements to the Federal fund for over 30 years in an attempt to resolve the deficit. Since 1979, the department has supplemented the scheme with an annual payment that reached almost $30 billion in 2006. These taxpayer-funded payments were scheduled to increase until 2080.

In 2011, the Obama administration and Congress battled for months before eventually agreeing to raise the debt ceiling to $16.4 trillion – the row hurt consumer confidence, shook financial markets and ultimately cost the US its top-tier credit rating.

(May 31, 2013) — One of the two pension resolution options competing to win over state legislators has been shot down in flames, leaving just hours to resolve Illinois’ multi-billion dollar problem.

Last night state senators voted 16-42 against a proposal that had been approved by the House of Representatives this month, Reuters reported. The bill had been championed by House Speaker Michael Madigan and just this week estimates had predicted it could wipe out the entire $187 billion public pension deficit in 30 years.

However, critics of the plan had deemed it “unconstitutional“, and said it would not survive a court challenge. It would have seen pension fund members and retirees face larger contributions, longer working lives, and potential cuts to their cost of living increases.

Supporters of the plan said told the newswire that they would continue to fight for the proposals, but in the dying hours of the current political session-which closes tonight- it is unlikely to happen soon.

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This leaves all hopes lying with another bill that is making its way through the state’s legislature and is backed by Senate President John Cullerton. He maintains the plan would see a 90% reduction in the deficit and would fall in line with what had been promised to pension fund members and retirees.

The bill has the support of unions, as it gives members options of passing up other benefits and collecting a fuller pension.

The battle continues.

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