As Illinois homeowners brace for higher property tax bills this summer, readers would be wise to take an even closer look than usual at where their tax dollars are going and why.
As you do, give special attention to the ever-increasing amount of your annual contributions to local police and fire pensions. That’s what you and every one of your neighbors are paying, not just to provide well-earned pensions for the people who protect your community, but to shore up a fragmented pension system that under-serves everyone.
Pensions for uniformed city employees have become a drain on city coffers and taxpayer pocketbooks while threatening the economic well-being of current and future retirees. Indeed, reformers and city officials, led by the Illinois Municipal League, believe the public safety pension system is in crisis.
"This really is critical," Brad Cole, IML executive director, said in a Dispatch-Argus editorial board session that included Moline Mayor Stephanie Acri. "Time is of the essence. The house of cards is coming down."
If that happens, it will be taxpayers and the men and women who dedicate their lives to protect and serve our communities who must pick up the pieces.
In recent years, there have been sporadic efforts to address the growing problem, but none have gained traction. Reformers hope that will change now that Gov. J.B. Pritkzer has appointed a Pension Consolidation Feasibility Task Force to study whether to harness the investment power of the 650-plus small local police and firefighter pension funds to which city taxpayers contribute.
In addition to serving on that panel, Cole and leaders of the cities the IML represents are working to draw attention to the problem. They make a persuasive case that the best solution involves gathering that legion of small, underfunded local pension funds under one investment umbrella, managed by professionals. That would save money in fees and other costs and significantly increase the return on the investment of taxpayer and and retiree pension contributions.
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"The issue is, we are wasting all this money in duplication," Cole said. "We're not earning the kind of money that we should. We've got to do something about all the money we're losing."
How bad is it? Cole estimates that collectively the funds would have made $1.7 billion more in interest dividends if they had been invested in the well-managed Illinois Municipal Retirement Fund, which covers non-uniformed local government workers. Absent those higher returns, it is city taxpayers who must pay the price.
For example, Moline put $6 million in pension funds in 2012, Acri said. In 2019, taxpayers are expected to spend $10 million to try to gain some traction on rising pension obligations.
Despite also regularly putting additional dollars in pensions, Cole said Moline's fire pension fund is only 33% funded, and the police pension fund is 44% funded.
"It's a dramatic ramp up," Acri explained. "How much we're putting in doesn't stop, so eventually you're in a situation where you don't pay for anything else, and it starts collapsing on itself because you can't hire new employees, either."
Increasing cost puts pressure on the city services taxpayers have every right to demand. "It's a very challenging thing," Acri said. "We lose sleep (over) it. It's a matter of navigating it so you're not the first ones to go bankrupt."
Agreeing on a solution to this complex problem won't be easy, and merging funds has plenty of critics, including local pension board members and uniformed workers worried about losing local control and the costs of transitioning the funds into one. Those concerns need to be addressed but they must not be allowed to derail the effort to fix this crisis before that police and fire pension house of cards collapses on top of retirees and taxpayers.
Fortunately, Illinoisans have powerful persuasive weapons at their disposal: their voices and their votes. We urge readers to use them to demand that lawmakers make the hard choices necessary to protect police, firefighters and the taxpayers they have served.