Sharply rising public safety pension costs are leaving many suburban taxpayers with higher tax bills and reduced municipal services.
And it's a system suburban school districts might be forced to adopt if some Illinois legislators have their way.
An analysis of 62 suburbs across seven counties shows property tax levies for police and firefighter pensions increased nearly 78 percent between 2006 and 2010. Those pension costs gobbled up almost 25 percent of all property taxes collected by those suburbs in 2010, up from less than 18 percent in 2006.
Much of the increase comes from municipal officials planning for large investment returns during years when little to no investment income was seen. In some cases, public safety pension funds actually lost value between 2008 and 2009, and towns had to make up the difference.
To combat the rising pension costs, many municipal leaders have raised property taxes and cut services -- in some cases, that meant eliminating some public safety personnel.
That was the case in Rolling Meadows, where the property tax levy for police and firefighter pensions nearly quadrupled, to $4,171,556 in 2010 from $1,065,282 in 2006.
"We are scaling back services that residents are not happy they're losing," said Rolling Meadows Mayor Tom Rooney. "The biggest, most public examples are the brush collection service we had to cut, and citywide our employee numbers were at 200 and we're down to roughly 160 people now."
That includes police staffing. In 2009, Rolling Meadows had 56 budgeted sworn police positions. Today, city leaders have cut six of those jobs out of the budget.
School district officials are paying close attention to municipalities' woes as state lawmakers debate a proposal to have local schools take over the state's share of pension costs for teachers.
Legislative leaders and Gov. Pat Quinn are scheduled to meet Thursday to try to hash out a compromise on school pensions. While lawmakers generally agree on benefits cutbacks, Republicans are balking at a Democratic plan to make the state's future teacher pension costs the schools' responsibility. That plan could cost school districts from 3 percent to 9 percent of their current payroll expenses, state officials estimate.
"If it's not phased in over a long enough period of time, school districts are either going to make massive cuts or pass it along to taxpayers," said Larry Bury, policy director at the Northwest Municipal Conference, a lobbying group for dozens of suburban communities. "Then it becomes a tax capacity concern for everyone."
Unlike towns, suburban school districts rely almost solely on property taxes for operating funds. While towns with home-rule authority can ignore tax caps, suburban school districts cannot.
Municipalities also can levy sales taxes and charge user fees that, in the past, have covered some or all of public safety pension costs in some towns.
"We've had to increase those other revenue sources just to try and keep services at the same level," Rooney noted.
But as the economy soured, those sources generated fewer funds and towns began to rely more on property taxes to cover pension costs.
Schaumburg levied no property taxes in 2006. But in 2010, the town collected $23 million in property taxes, of which $8 million went to public safety pensions, according to tax data from the Cook County clerk's office.
In Lake Zurich, the village's combined property tax collection for fire and police pensions in 2006 was $369,390, just 5.5 percent of the village's total property taxes collected. By 2010, one-third of the village's property taxes were going to public safety pension costs, records show. Lake Zurich's property taxes collected for public safety pensions grew more than sixfold during that time to $2,468,103.
Like many pension programs, Lake Zurich's public safety pension programs are not fully funded. State law requires public pensions to be fully funded by 2040, said Jodie Andrew, Lake Zurich's finance director.
"It's a serious concern," Andrew said. "Unfortunately, over the last several years assets have grown slowly and liabilities are growing exponentially."
Municipal leaders blame the legislature for increasing benefits over the years with no way to scale back during tough economic times. The Illinois Constitution states that public retirement benefits can't be "diminished or impaired." While the legislature sets the rules for the state's fire and police pensions, the towns have to pay for them, they complain.
"The state is handing out party favors that they don't have to pay for," Rooney said. "This doesn't sound like a great idea."
• Daily Herald State Government Writer Mike Riopell contributed to this report.