Illinois municipalities urge Springfield to overhaul public safety pensions

LOMBARD, Illinois— As local governments struggle to balance their budgets in the midst of skyrocketing public safety pension costs, municipalities across Illinois are urging Springfield lawmakers to vote in favor of reforms for police officer and firefighter pension systems before the end of the current legislative session.

Village of Lombard President, William Mueller, warned that these rising costs have created staggering structural deficits that threaten future benefits and could render local police and fire retirement benefit systems financially insolvent.

Failing to address these widening unfunded liabilities will translate to higher local property taxes, cuts in essential services or police and fire layoffs for local residents across the state.

“The rising costs of pensions have created an unbelievable burden on municipalities and the taxpayers who have to fund them,” said Mueller. “To reduce this burden and to protect the retirement benefits of our dedicated police officers and firefighters, we must seek meaningful reform that will allow the pension costs to become more manageable to local governments without sacrificing services to residents or increasing taxes beyond what is reasonable,” Mueller added.

For example in Lombard, the municipality's police fund was 77.2 percent funded in 2000; it was only funded at 62.6 percent in 2010, despite taxpayer contributions of $849,560 in 2000 compared to $2,279,231 in 2010. In addition, the fire pension fund was 87.8 percent funded in 2000 but was only funded at 74.7 percent in 2010, even though taxpayers contributed $767,090 in 2000, compared to $1,617,320 in 2010.

The Village of Lombard and scores of municipalities across the state have united in the Pension Fairness for Illinois Communities Coalition, which is seeking to address dramatic increases in police and fire pension obligations that local communities must cover through property taxes.

Wilmette President, Christopher Canning, who also serves as President of the Northwest Municipal Conference, which is a founding member of the Pension Fairness for Illinois Communities Coalition (PFICC), noted that residents in his Village have quadrupled their contribution to police and fire pension funds since 2000. Meanwhile, the unfunded liability for fire pensions increased by $20 million, dropping funding from 94 to 61 percent, and the unfunded liability for police pensions grew by $16 million, causing the funding rate to drop from 98 percent to 66 percent.

“Police and fire pension obligations are forcing towns to pay significantly more each year while still losing further ground to fully fund these plans,” said Canning. “Failing to address these widening unfunded liabilities will make further service cuts inevitable, property tax increases larger and shift this suffocating burden to future generations. We cannot continue to do that.”

While most of the discussion surrounding pension reform this year has involved state employees, the PFICC, which held a press conference recently with Chicago Mayor Rahm Emanuel, is highlighting the fact that soaring pension costs are not confined to the

state level.

Municipalities have been struggling for years with the structural deficits and unfunded liabilities created by the pension systems. The economic recession had a significant impact on pension investments, but benefit enhancements were also approved at the state level throughout the years without providing a funding mechanism or calculating taxpayers' ability to pay. This created a severe imbalance between employee contributions and what was required from local taxpayers.

The PFICC has outlined some long-term solutions aimed at reforming public pensions that would provide relief for taxpayers, including:

1.) Requiring public safety employees to contribute more toward the cost of their pensions. Currently, employees only contribute about one-third while taxpayers pay the remainder;

2.) Adjusting cost-of-living-increases from the current three percent so they are “right sized” and not compounded annually;

3.) Increasing the retirement age for public safety employees, who can now retire with full benefits at the age of 50, and – in many cases – receive benefits for longer than they worked for the municipality; and

4.) Consolidating the 638 individual public safety pension funds into a multiple employer pension system similar to the Illinois Municipal Retirement Fund to increase investment returns and lower overall operational expenses.