City of Evanston Mayor Elizabeth Tisdahl testified before the Illinois House of Representative’s House Pension Committee on the topic of pension reform this morning, Wednesday, July 21, 2015. She traveled to Springfield in order to explain the steps the City took several years ago to address its underfunded police and firefighters pension.
These are her prepared remarks:
Thank you and good morning, my name is Elizabeth Tisdahl, Mayor of the City of Evanston.
I’d like to begin by thanking the Governor and his administration for taking a holistic approach to the State’s pension problems and thanking the members of this committee for their continued interest in helping find solutions to the pension problems at the municipal level.
Evanston’s Police & Fire Pension
The City of Evanston took steps in 2007-2008 to address its underfunded police and firefighters pension by appointing a Blue Ribbon Pension Committee of interested Evanston citizens to gain an understanding of the pension funding shortfalls. At the time, police and firefighter pension funds were underfunded by $145.8 million. The City staff and City Council took several actions through which the City raised funds to contribute to the plans including:
1) Made one-time payments when funds were available above the minimum Actuarially Required Contribution.
2) Adjusted actuarial assumptions through a joint committee comprised of the City Treasurer, Both Pension Board Presidents, and the Actuary.
By 2008, the police and fire tax levy was approximately $9 million and the pensions funded at 40%. In the following years, we made hard choices to increase contributions with budget cuts, including personnel and programs. As a result, we stabilized our contributions. These contributions have remained high, but stable.
Evanston has contributed an additional $16 million over and above the state actuarial required contribution over the last four years and even more than our own actuarial requires. In 2014, $14.8 million will go to the police and firefighter pension and the system will be funded at an estimated 49.9%.
This year, Evanston will pay an additional $2.5 million above the state-required Police contributions and $1.8 million above the state-required Fire contributions.
These 2015 contributions represent 60% of covered Police payroll per the independent actuary report and 65% of covered Fire payroll per the independent actuary report.
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I would also point out that in 2007-08, the interest rate on the assumed interest rate was 7.5% and today it is down to 6.5%. This is the recommended rate by Fitch Investment Services.
Evanston has worked hard to right its financial ship and continues to stabilize our contributions to ensure we provide the pension for the men and women who protect and serve our residents.
Governor Rauner’s Pension Proposal
As part of the Pension Fairness for Illinois Communities Coalition, Evanston has partnered with municipalities throughout the state to advocate for sensible pension reform. Here are some of our initial thoughts.
We agree consolidating the over 640 individual public safety pension funds into IMRF is a constitutional way to save taxpayers’ money and provide a more stable environment for the pensions of all public safety employees. Consolidation would increase investment returns, which reduces the burden on taxpayers. We believe there is more opportunity to create additional economies of scale by further consolidating the individual pension boards and that should be considered in any additional proposals.
Changing the funding schedule for police and fire pensions will provide relief from the escalating pension costs facing our municipalities in the short term; however, the length of the funding schedule could raise concerns about accounting best practices and auditing opinions.
The coalition has long advocated for clarifications to the Public Safety Employees Benefit Act (PSEBA) to ensure that taxpayer money for lifetime insurance benefits are only awarded to those police officers and firefighters who suffer a truly catastrophic injury.
A number of proposed reforms have yet to be vetted by the coalition. The consideration model for Tier 1 employees and the proposed creation of a hybrid Tier 3 for new hires have not been actuarially tested. Ensuring that Tier 3 complies with Social Security requirements must also be addressed. Until we have a better understanding of multiple issues involving these proposed changes, it is impossible for us to offer an informed position as to the extent of any taxpayer relief.
The Pension Fairness coalition’s goal is to ensure that our valued public safety personnel will be able to rely on their pensions at retirement while reducing the burden on taxpayers. We are highly encouraged to see that discussion continuing today and are committed to working on solutions that achieve both of these goals.
Again, thank you for considering a holistic approach to the State’s pension problems and your continued interest in helping find solutions to the pension problems at the municipal level.