Pension Crisis Information

Public employee pensions are a significant concern for the Northwest Municipal Conference membership. For several years we have been raising the alarm on a disturbing trend regarding public safety pension funds. Over the past decade, municipal (i.e. taxpayer) contributions to police and firefighter pension funds have more than doubled, yet during that same period the funding level of these pension systems has declined sharply.

We argue this trend is simply not sustainable.

The market decline of 2008 has exacerbated the problem. Municipalities fund police and firefighter pensions through a combination of employee contributions, market investment returns and taxpayer contributions. A recent survey of 29 NWMC members (covering 54 individual pension funds*) revealed that the required contributions to these funds will increase by an average of nearly $800,000 per municipality for 2009. Ten of these members will see increases of more than $1 million.

Taxpayers in larger communities such as Arlington Heights ($1.6 million), Des Plaines ($1.6 million), Hoffman Estates ($1.3 million), Rolling Meadows ($1.8 million), Schaumburg ($2.2 million) and Skokie ($2.0 million) will bear the hardest impact of the required increases which must be paid in 2010.

These towns (along with many throughout the state of Illinois) are struggling to balance their 2010 budgets and determine their property tax levies without severely impacting taxpayers or dramatically reduce vital services.

The Northwest Municipal Conference sought legislation in 2009 that would mitigate these increases. We introduced Senate Bill 2011 which originally proposed to provide critical taxpayer relief by resetting the amortization of public safety pensions to 2049 from the current 2033 deadline. The bill, sponsored by Senators Pam Althoff and Susan Garrett, passed the Illinois Senate with strong bipartisan support. Unfortunately, opposition from public safety unions caused the bill to stall in the Illinois House despite repeated attempts toward compromise by the Conference.

Unfortunately for taxpayers, this problem will not go away and threatens to become much worse in the coming years unless significant legislative action is taken. To that end, the Northwest Municipal Conference plans to undertake a major initiative on behalf of taxpayers in 2010.

Please check back here in early 2010 for additional information on the Conference’s pension initiative.

* Any municipality with more than 5,000 residents that has a police and/or fire department under municipal control is required to create and maintain a pension fund for that individual department. The pension fund is managed by a board consisting of two active employees, one annuitant and two representatives from the municipality. The pension fund board is responsible for investment decisions and benefit awards. Pension benefits are determined by the General Assembly and not the municipality responsible for funding them.