A Weekly Note from Mayor Gary L. Graham
“Traditional Values, Progressive Thinking”
You may have recently read some newspaper articles regarding Illinois’ police and firefighter pension systems. The O’Fallon City Council passed a resolution at their February 19 meeting 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.
It’s important to note that the resolution does not propose to lower any police pension benefits that are currently in place. The City Council believes the reform initiatives are a sensible way to make sure the pension fund performs efficiently, is accountable to the public and maintains good stewardship over the money they already receive.
I believe that almost everyone throughout the state understands and agrees that these two groups of state and local government employees deserve a sound pension system. That belief is proven by the fact that 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 formulae, and the local authority to impose taxes to keep the funds fiscally sound. When the funds deteriorate to a level at which their resources are not adequate to assure future benefit payments, it is the General Assembly which is to blame and it is the General Assembly which must take the lead in securing adequate pension guarantees for police officers and firefighters.
In recent years, there has been much publicity about the financial condition of the Illinois Teachers Retirement Pension Fund as well as the State Employees Retirement Pension Fund. When comparing the Illinois local government police officers pension funds with these two funds, the police officer pension funds are in much worse financial condition. Police pension funds currently carry 46% more unfunded debt per police officer than the teachers and more than 50% more unfunded debt than the state employee fund.
Even more alarming, is that the financial condition of the police pension funds has been getting worse even during the economic boom times of the last two decades when investment returns have been strong. The recent legislative enactments of benefit enhancements to the funds are to blame for the rapid deterioration.
The real problem lies in the fact that the police and fire pension systems in the State of Illinois have been poorly engineered. According to James M. Banovetz and Dawn S. Peters from Northern Illinois University, “while it is the General Assembly that determines benefit levels, it is local elected officials who must levy the taxes to pay the benefits conferred by the General Assembly.” 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 on 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. Therefore, it is the responsibility of local government and the citizens we represent to make our legislators aware of this dire situation and to ask them to stop making the police and fire pension funds worse by adding new benefits before funds are available to cover the unfunded liabilities exacerbated by past benefit increases.
Our public safety personnel have been promised to expect certain pension benefits when they retire. We can’t afford to allow these pension funds to continue to fall behind to the point where they can’t make those payments and fulfill promises. The difficulty is that the community has a lot of other needs, too, and we can only ask the taxpayers for so much money.
The strong working relationship between City Hall and the residents we serve is yet another example of why O’Fallon is such a great community in which to live.
| 
