The City’s accumulated unfunded liability in the police and firefighters’
pension funds has been a thorn in the tax side of Evanston for nearly a year – since the City changed actuaries and the new actuary estimated the liability to be about $140 million, which was about $40 million greater than the former actuary had estimated.
After the former actuary agreed last month that the $140 million number was “within the ball park,” City Council decided to fund this year’s required contribution through property taxes and approved the budget for the present year with a 7-percent increase in the City’s portion of the property tax.
The police and firefighters pension funds are mandated by the state but funded locally. Increases in pension benefits approved by the state legislature in the past decade have increased local pension-funding liabilities at least four times.
At $140 million, Evanston’s accumulated unfunded liability for both pensions is greater than that of many municipalities in Illinois, but the City is not alone in its struggle to find ways to fund the pensions.
Turning to the State
City Manager Julia Carroll said during the budget deliberations earlier this year she would support working with legislators to seek relief at the state level for municipalities such as Evanston that are struggling with pension funding.
The Illinois Municipal League, a statewide consortium, has been alert to the problem of increasing pension-fund liability throughout Illinois towns and cities. Last year IML published a pension study that examined the fiscal conditions of the police and firefighters’ pensions. The study found an “alarming” growth in debt among municipal police and firefighter pension funds and concluded the growing debt could “threaten the availability of the necessary funds to cover the retirement promises made under Illinois statute to firefighters and police officers.”
In a statement on its Web site, IML First Vice President Gary Graham said, “The growing debt within the municipal police and fire[fighters’] pension funds is a shared problem among Illinois municipalities.”
In early March of this year, a
ccording to the IML, 15 Illinois mayors – including those from Waukegan, Hoffman Estates, Woodstock, Crystal Lake and Skokie – traveled to Springfield to testify before the House Personnel and Pensions Committee on House Bill 4905, which proposes eight reform provisions applicable to the pension funds for suburban and downstate police and firefighters.
The Northwest Municipal Conference (NWMC) is also gathering support of individual cities and towns to put pressure on the legislature to ease the burden of pension funding for local taxpayers.
The conference has drafted a model resolution for its member cities, asking the General Assembly to “protect” firefighters’ and police pension funds by taking two specific actions: Stop approving “new and increased pension benefits for the police and fire pension funds,” and “embrace sensible pension reforms in the areas of ethics reform, professionalization of fund management, public sunshine and disclosure of pension board activity, conflict-of-interest restrictions, accountability measure, improved cost impact analysis, meaningful regulation and enhanced local government funding authority.”
At present, although municipalities must make the contributions to the pension funds, they have no authority over the investment of the funds. Local pension boards make the investment decisions, and the state has mandated that only 55 percent of the fund be invested in equities.
The Model Resolution
City staff adapted the model resolution and presented it on March 10 to the Administration and Public Works Committee.
Among other things, the resolution states the following:
The pension funds are “facing uncertainty, and a financial crisis is developing”;
The resolution was held for further discussion and verification of the numbers.
Larry Bury, political analyst for the Northwest Municipal Conference, told the RoundTable, “The intent is not to take any existing benefits from police officers and firefighters, but we want to be sure their pensions will be there [when they retire].” He said several members of the NWMC have approved similar resolutions, including Mount Prospect, Skokie, Lake Forest, Libertyville and Vernon Hills, and “a lot are in the process of doing so.”
Mr. Bury also said, “Not every town is in trouble like the extreme circumstances in Evanston … [but] the trend since 1999-2000 is that the funded balances have gone down across the board, leaving taxpayers to make up the difference.”
Included with the packet NWMC sent to municipalities was a PowerPoint presentation that described the decline of the funded portion of the pension funds since 1999. Mr. Bury said he had also included a cartoon from the Springfield Journal-Register that pictured bloated safety personnel riding on the backs of taxpayers. Some Council members said they found the cartoon offensive and said the PowerPoint presentation should not be included in any resolution sent to Springfield.
One Legislator’s Response
State Representative Julie Hamos told the RoundTable there does not seem to be much political will in Springfield for curtailing benefits for safety personnel. “We’re not really good at saying ‘no.’ … What the municipalities are doing a good job of is bringing this to Springfield. Evanston is the poster child for [pension funding problems].”
Ms. Hamos pointed to the pension resolution forged between the Chicago Transit Authority and the unions during negotiations on last year’s transit bill, under which it was agreed that future employees would make increased contributions to and expect fewer benefits from their pensions in order to stabilize the pension fund. Such changes, she said, require participation of the unions.
City Manager Julia Carroll said she hopes the Council will urge the legislature to take action. “We can barely afford what we already have to pay for. Both police and firefighters pensions are among the three richest pensions in the Midwest, and we just don’t need to add to them. … Council needs to send a message to the legislature that we cannot afford any more benefits in the police and fire pensions.”
Alderman Ann Rainey, 8th Ward, referred the matter to the Rules Committee at the March 24 Council meeting.