Bill seeks to delay villages’ higher public pension payments
**Note: this story was modified several times by other Triblocal staffers and served as the structure for localized stories around the northwest suburbs
Due to losses in investment funds and increases in payments required by the state legislature, municipalities must pay more money into public pension funds in 2010 than before, according to figures obtained by the Northwest Municipal Conference. All fire, police and non-public safety personnel are covered by public pensions.
“The average increase is about $900,000,” said Larry Bury, policy analyst for the Northwest Municipal Conference, an advocacy group that represents municipalities in the northwest suburbs of Chicago.
According to a survey Bury took of NWMC’s member municipalities, Barrington will have to find $334,000 to fund pensions next year. Other communities are facing even larger bills. Arlington Heights must pay $1.6 million, while Hoffman Estates must find $1.3 million and Rolling Meadows must find $1.8 million to add to their public pension funds.
“These towns, as they’re getting these numbers in, they’re struggling with how they’re going to get this money on the tax roll,” Bury said. “This is not a great time. Barrington and Rolling Meadows made a lot of cuts.”
The Village of Barrington has already reduced the size of its staff by 20 percent because of a reduction in revenue, according to Jason Hayden, Village of Barrington Director of Community and Financial Services.
Area municipalities are facing two major problems in funding their employees’ pensions. Villages have lost significant money on their pension fund investments. Furthermore, current legislation requires municipalities to fully fund their pensions by 2033, meaning 100 percent of the money paid out to pensioners is available at any given time. To make this target, many villages face high payments in 2010.
“The most pressing factor is the investment losses and that’s money that’s required to be made up,” Bury said. “With investment going down and employee contribution locked, the employers have to make it up.”
Employee contributions to pension funds are locked at 9.54 percent, Bury said.
Although the villages must make up the investment losses, the increased funding required by the state legislature can be altered.
Senate Bill 2011, sponsored by Senators Pamela Althoff (R-32nd District) and Susan Garrett (D-98th District), would extend the amount of time governing bodies have to fully fund municipal pension funds, moving the target date from 2033 to 2049.
“It would give each town an additional 16 years, which doesn’t solve the problem, but with a town like Rolling Meadows, that change would spare them about $500,000 of that [$1.8 million] increase,” Bury said.
The bill has been passed by the Illinois State Senate 48-8, but is currently stalled in the Personnel and Pensions Committee in the House.
“This next year is very crucial and many municipalities are forced to increase taxes,” Althoff said. “Home rules can, non-home rule who do not have the ability to increase taxes, will simply have to determine which services and capital investment projects to cut.”
Barrington and Cary, for example, are non-home rule communities.
In order to get the bill passed before the General Assembly is dismissed for the year, the bill must be discussed during the veto session next week. According to Althoff, the bill will be considered at that time.
The bill is apparently stalled, in part due to opposition from police and fire organizations.
Illinois firefighter and police organizations say that Senate Bill 2011 doesn’t solve the pension problem, and may even worsen it.
“It’s sort of extending the mortgage out another 40 years instead of addressing any of the fundamental problems,” said Pat Devaney, President of the Associated Fire Fighters of Illinois. “This is going to do nothing to improve the solvency of our funding.”
According to Devaney, the AFFI proposed several measures “that would require municipalities to take a responsible long-term funding approach to these plans” and will continue to do so regardless of whether or not the current bill passes.
“I certainly don’t think [the bill’s] a good idea and I don’t think it’s a good for the public,” said David Wickster, executive director of the Illinois Fraternal Order of Police labor council.
“The municipalities have consistently, historically come to the legislature asking that the target date for fully funding pension funds will be moved off into the future,” Wickster said. “That’s happened a number of times and they’re doing it again.”
The current target date of 2033 was set in 1993, when the legislature voted to move the then-target date of 2020 back 13 years.
Like the Associated Fire Fighters of Illinois, The Illinois Public Pensions Fund Association is looking for in-depth discussion about keeping pension funds solvent in the future.
“What we don’t want to do is dig a bigger hole. We have to protect the funding stream,” said James McNamee, President of the IPPFA.
McNamee added that fire and police personnel do not get social security, and many rely solely on their pensions to support themselves and their families after retirement.
“If the bill’s just designed to refinance the mortgage, we need a couple other tools thrown in there,” McNamee said. “Are we pushing this thing further out and still not funding it appropriately?”
Despite these issues, the measure will take off some of the immediate pressure on the municipal budgets, Bury said.
“Long-term, we need to sit down with all parties and come up with a sustainable public pension system balances the interests of public safety employees with the tax payers that fund them,” he said. “If we don’t come up with a solution in the next couple years, Bury said. “This is a problem that’s only going to get worse.”
Both sides of the issue agree that measures currently being taken to fund Illinois fire and police pensions are not ideal.
“It’s nothing the state of Illinois hasn’t done for the past 25 years,” Althoff said. “In a perfect world, this is not something we would do.”
—By Michelle Stoffel, Triblocal.com reporter
