Some might assert that another domino — or two — has fallen, while others reply they don’t want to hear about it.
There were two more pension setbacks last week, this time associated with local communities’ often underfunded fire and police pensions. Slowly, the noose is tightening around the necks of taxpayers and public officials statewide, proving once again that ignoring pension woes won’t cause them to go away but, instead, to get worse.
For starters, the city of Peoria, being crushed under the pension costs for firefighters and police officers that are eating up virtually all of its property tax levy, passed a special three-year tax to raise money to cover pension costs. It’s akin to similar action taken in Danville.
Property owners are now scheduled to receive a bill in October that will generate $1.2 million for police and firefighter pensions. Patrick Urich, Peoria’s city manager, said the costs of employee pensions are the fastest-rising portion of the municipal budget.
To raise the money needed to make the required contributions, city leaders implemented a new public safety pension fee in their 2019 budget.
Residents’ bills will be calculated based on the size of their property. So while Gov. J.B. Pritzker waits for a report from a special commission he appointed to study the issue of steadily rising property taxes, municipal officials are coming up with new ways to raise taxes calculated on property.
The other shoe dropped in economically depressed East St. Louis. The impoverished community does not have anything approaching a broad tax base, so it doesn’t generate enough property tax revenue to pay its bills.
Consequently, it either skips pension payments or does not contribute what is actuarially required, the result being that the police pension fund is only 9 percent funded, while the firefighter fund is 31 percent funded. Numbers that low foreshadow collapse.
That’s why the East St. Louis Firefighters Pension Board, citing state law, has asked state Comptroller Susana Mendoza to divert $2.2 million in tax payments owed to the city to the firefighters’ pension. Police in that city are expected to make a similar request soon.
East St. Louis is now the third city in Illinois to make such a request to the comptroller’s office. The others are Harvey and North Chicago.
Of course, money that goes into the East St. Louis firefighters’ pension won’t be available to fund public services, including police and fire protection.
Look for more of the same in communities across the state as fire and police pension woes continue to put more and more pressure on local officials.
Pritzker has appointed a public pension task force to study issues. So far, much of the talk has focused on consolidating roughly 650 local fire and police pensions into one single pension entity, much like the Teachers Retirement Systems.
Unfortunately, projected administrative savings and investment gains from consolidation represent mere pocket change in comparison to the pensions’ overall financial problems.
The East St. Louis firefighters made their diversion request Sept. 17. Mendoza has 60 days to respond.
The Bond Buyer reports “their collective unfunded pension tab grew by $1 billion to $11 billion in fiscal 2017, with the funded ratio recording its first decline since 2010, according to the latest figures submitted by the funds to the Department of Insurance.”
Meanwhile, the five statewide public pensions — teachers, judges, legislators, state employees and state university employees — are underwater anywhere from roughly $135 billion to $250 billion, depending on which rules (public or private sector) are used to make the calculation.
These shortfalls, of course, represent political and economic dynamite to this state and its people. Because of the potential ugly consequences, few state officials acknowledge that reality. But — as last week’s pension woes demonstrate — the problem continues to take its toll.