Towns fear they won't be able to keep up with pensions

Illinois municipalities are losing ground in efforts to fully fund their pension plans for police and firefighters. That much is clear.

The question is why? And what can be done?

Municipal authorities and unions representing police and firefighters agree in part. Both call on state officials to relax regulations governing the ways in which police and fire pension funds can be invested.

But, emphasizing their point at a news conference Monday, municipal officials also call state legislators overly generous with other people's money. They say lawmakers -- bearing no fiscal responsibility themselves -- sweeten police and firefighter pensions without regard to local taxpayers' ability to pay.

Police and fire unions take issue on that point, saying lawmakers' changes reflect the importance and hazards of their work.

David Wickster, executive director of the Illinois Fraternal Order of Police Labor Council, has written on the council's Web site that local officials "want to get out from under their obligations altogether."

Not so, say Northwest Municipal Conference officials, who released a survey Monday showing that many member communities have lost substantial ground in funding pensions. For instance, the average funded ratio of their members' police pension funds declined from nearly 90 percent in 1999 to slightly over 70 percent in 2007.

This has occurred, village representatives said, even as they have boosted pension contributions as a percentage of their tax levies.

Municipal conference officials and several village presidents point to state-law changes taking effect in 2000 and 2001 that enhanced benefits. One change, for instance, made police and firefighters eligible for full pensions -- 75 percent of their working pay -- after 30 years of service instead of 35.

"This problem has pretty much exploded since '99," said Northwest Municipal Conference policy analyst Larry Bury.

While Monday's survey came from the Northwest group, village and city officials across the state are lobbying for change, an effort led in Springfield by the Illinois Municipal League.

Municipal officials want a series of measures in Springfield, from looser restrictions on pension-fund investments to a moratorium on benefit enhancements and a requirement that any proposed benefit boost be accompanied by an analysis of the resulting fiscal impact on at least 25 local pension funds.

Without such changes, Northwest Municipal Conference officials say, matters will get worse. They cited current Springfield proposals that would increase their pension load. One would boost firefighter pensions to 80 percent of pay, up from 75 percent. Another would grant retroactive pension increases to firefighters who retired before 1971.

City and village officials say they do not want to roll back existing benefits. They acknowledge that police and firefighters contribute substantial amounts -- 9.91 percent and 9.46 percent, respectively, of their salaries -- to their pension funds.

The problem, local authorities say, is that they have few available means to increase their contributions to meet growing pension obligations. Their options, they say, consist mostly of either increasing local property taxes or cutting municipal services. Both choices, they say, are unpalatable, particularly to local taxpayers who work in the private sector, where guaranteed pensions are increasingly rare.

For most communities, the situation is not immediately dire. Municipalities are meeting obligations to current retirees. State law mandates that all public-safety pension funds be fully funded by 2033. But local officials say trend lines are troubling and that the further they fall behind, the harder it will be to catch up.

When it comes to solutions, union and municipal officials alike point to local funds underperforming in contrast to returns realized by the Illinois Municipal Retirement Fund. The Illinois fund does better, they say, because it enjoys a latitude on making investments that they don't have -- but want.

State Sen. Susan Garrett, a Lake Forest Democrat, is sponsoring a measure that would require a fiscal-impact statement with any proposed benefit change.

"If nothing else, we need to put a fiscal note on these bills so that we and everybody else knows what the impact is going to be to our municipalities and, ultimately, to our taxpayers," she said.

On that point, the Associated Firefighters of Illinois agrees.

"We think it's prudent for everybody to understand what the impact of any change is gong to be on firefighters and on the fund," said Pat Devaney, legislative representative for the group. "Firefighters are interested in solvency and making wise decisions."

What union officials find objectionable, Devaney said, are those mayors who make public pronouncements blaming greed on the part of police and firefighters for municipalities' pension woes.