Public safety pension woes

Rising obligations strain budgets, local officials say

Addressing Chicago’s pension problems this spring, state lawmakers left Springfield without an agreement on another pension issue that local officials fear will squeeze resources for road repairs, neighborhood enhancements and other projects residents desire.

A potential bill that addresses ballooning unfunded pension liabilities to suburban and downstate police and firefighter retirement funds never made it to committee, after negotiations led by Sen. Terry Link, D-Waukegan, failed between municipal officials and police and fire unions.

The lack of consensus on a reform to the more than 600 public safety pensions comes as McHenry County officials see more property tax dollars go toward state-mandated pension contributions.

Altogether, the public safety funds are projected to have just more than half of the money needed to pay future retired policemen and firefighters. Suburban and downstate public safety pensions in 2012 had an aggregated $8.4 billion unfunded pension liability, a total that has increased eight-fold since the early 1990s, state figures show.

“The only way to correct unfunded liabilities is change the rules or invest more money into it,” Cary Administrator Christopher Clark said. “We have been doing that, but we need help from Springfield until this becomes sustainable.”

Cary officials have about 55 percent of the money needed to pay future police retirees, despite the village increasing its police pension contributions 30
percent in the past two years.

It’s a dynamic universally affecting McHenry County municipalities, from Fox River Grove to Huntley, and one officials said will only worsen in the future without changes from lawmakers.

Local officials see the continued strain on their budgets taking away money in areas used to fund infrastructure projects. Chicago suburbs, such Elk Grove Village, even created new taxes to pay for its increasing pension obligations.

“As more and more property tax dollars are required to fund police pensions, the less dollars are available for operations,” Fox River Grove Administrator Derek Soderholm said. “To keep the doors open on a day-to-day basis, you would need to pull from other resources.”

With a newer police pension fund, the small village has only about a quarter of the money it needs to pay future retirees. The village board soon will consider borrowing nearly $1 million to up its funding and get better returns on investments, Soderholm said.

A coalition of more than 100 villages and municipal groups, including the county’s Council of Governments, has ratcheted up the pressure this spring to pass a public safety pension reform akin to the one lawmakers approved to the state’s pension systems.

The Pension Fairness coalition argues the economic downturn and pension sweeteners the Legislature passed to enhance the retirement benefits for police and firefighters ballooned the funds.

Statewide unions, such as the Associated Fire Fighters of Illinois, contend villages ignored the current problems by making artificially low pension payments for decades.

Aside from contributing more tax dollars to its police pension, Cary officials have lowered their assumptions on investment returns and worked with their police pension board to better manage the fund’s assets.

But without a change to the rules the Legislature controls, Cary inevitably will have to look at slashing services to pay its required pension obligations.

“As we continue to have these pension pressures put on us, we have to look at more draconian cuts to our core services,” Clark said.

Huntley trustees this winter flirted with the idea of increasing its property tax levy for the first time in three years, as officials warned that more property taxes in the future will go toward police pensions. Board members ultimately held the levy flat.

But the village still contributed about 30 percent more to its police pension from 2012 to 2013. Officials currently have only half the money they need to pay future retirees, village figures show.

In Crystal Lake, officials want to continue to keep property tax levies the lowest in the region. The city joined the Pension Fairness coalition to ensure the Legislature helps make that happen, Finance Director George Koczwara said.

“It is taxpayers that bear the burden of funding the city’s contribution to the pension funds,” Koczwara said. “By pursuing much needed pension reforms, it is our intent to lessen the burden on taxpayers.”

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