Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
March 10, 2008
I have promised for a while to post a blog about a police and fire pension bill that is being proposed by the Illinois Municipal League (IML). This is not the kind of issue that generates front page headlines, but it is a critical issue for the future of local government.
One year ago, the IML completed a study indicating that downstate police and fire pension funds are in financial crisis. From 1987-2004, police pension debt increased 500% and fire pension debt grew 352%. [Click here to read a summary of the study or here to read the full report.]
On February 19, the O'Fallon City Council approved a resolution calling upon the Illinois General Assembly to stop approving new or increased pension benefits and pass sensible reforms to protect the pension funds that provide retirement benefits for municipal police officers and firefighters.
On March 6, Mayor Graham went to Springfield along with thirty other municipal officials to support public safety pension reform legislation. They testified before the House Personnel and Pensions Committee House Bill 4905, which contains eight reform provisions applicable to the pension funds for suburban and downstate police and firefighters. A similar bill is the Senate (SB2090).
It is important to note that the bills do not propose to reduce any police pension benefits currently in place. The reform initiatives are a sensible way to make sure the pension systems perform efficiently, are accountable to the public, and maintain responsible stewardship over the money.
Police officers and firefighters deserve a sound pension system and the benefits provided by Illinois' police and firefighters pension systems are generous when compared to the pension systems offered in other states. The current issue with the pension systems is that they are both in unsound financial condition. Recent benefit enhancements passed by the General Assembly in 2000 (fire), 2001 (police), and 2005 (fire) have endangered the pension funds' financial condition despite substantial increases in municipal contributions to the funds.
While blame for the unsound condition of the funds should be shared by city governments and the unions representing the police officers and firefighters, ultimate responsibility for the pension fund fiscal problems rests with the Illinois General Assembly.
The General Assembly determines the pension benefit levels, the funding calculations, and the local authority to impose taxes to keep the funds fiscally sound. When the funds deteriorate to where they are not adequate to assure future benefit payments, it is the General Assembly that is to blame and it is the General Assembly that must take action to protect pension guarantees for police officers and firefighters.
In recent years, there has been a lot of publicity about the financial condition of the Illinois Teachers Retirement Pension Fund and the State Employees Retirement Pension Fund. When comparing the Illinois local government police officers pension funds with these two funds, the police pension funds are actually in much worse financial condition.
Police pension funds currently carry 46 percent more unfunded debt per police officer than the teachers and more than 50 percent more unfunded debt than the state employee fund.
In O’Fallon, the highest percentage of our local property tax goes to pensions and the pension fund’s total percentage of the municipal levy has increased 50% over the past nine years. We don’t have a fire pension system, but O’Fallon’s police pension fund is well funded currently. We regularly budget more money in the fund than is recommended by the state and our funding level is above the statewide average. If the General Assembly continues to pass new and increased pension benefits, it will further strain our budget and an increasing amount of our revenues will go toward pensions rather than providing critical City services.
The General Assembly has mandated ever-increasing benefits without being required to find the money to offset the benefits' significant costs, thereby gaining political credit for new benefits but pushing the actual costs onto the backs of locally elected officials and their taxpaying citizens.
Only the General Assembly has the authority to pass the necessary reforms to assure the financial integrity and sustainability of the pension funds serving Illinois police officers and firefighters.
Our public safety personnel have been promised certain pension benefits when they retire. We cannot afford to allow these pension funds to continue to fall behind to the point where we cannot make those payments and fulfill promises. The difficulty is that the community has other needs as well, and we can only ask the taxpayers for so much money.
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