After sounding the alarm on the disturbing trend regarding public safety pension funds, the Northwest Municipal Conference has taken a proactive approach toward a solution now that we have reached the crisis stage.
Over the past decade, annual municipal (i.e. taxpayer) contributions statewide to police pension funds have grown from $92.4 million in 1999 to $225.7 million in 2008 while statewide contributions to fire pension funds have grown from $72.4 million in 1999 to $176.5 million in 2008 (according to Illinois Municipal League data). The annual cost to taxpayers of funding both police and fire pensions is now an astounding 244% higher in just one decade.
During that same period of time, the asset to liability ratio of these pension systems has declined sharply. While police pensions statewide had 76.4% of the assets on hand to cover projected liabilities in 1999 that level fell to 56.2% by 2008. Fire pension assets to liabilities similarly fell from 78.6% to 55.1% during that same period.
Incredibly, the public safety unions blame this decline in the assets to liabilities ratio on municipalities not contributing enough money to their pensions. Despite the fact that taxpayers are contributing TWO AND A HALF TIMES MORE to these funds than they were just 10 years ago the unions accuse municipalities of "living life as a deadbeat" and diverting revenues to "luxury items".
Conveniently overlooked in the union argument are several pension benefit increases that went into effect during the same period that the Commission on Government Forecasting and Accountability, a bi-partisan commission under the direction of the Illinois General Assembly, identified in their December 2009 report as having raised the cost of pensions by over $12 million for just five cities in their study.
Because of the way these pension funds are structured, taxpayers throughout Illinois face ever increasing pension contributions. These increases are forcing taxpayers to either dig deeper into their own pockets to pay for pensions or see vital services eliminated. Examples of increases in 2009 for Northwest Municipal Conference communities such as Arlington Heights ($1.6 million more), Des Plaines ($1.6 million), Hoffman Estates ($1.3 million), Rolling Meadows ($1.8 million), Schaumburg ($2.2 million) and Skokie ($2.0 million) are typical of this pension crisis. As pension benefits are determined by the General Assembly, not your local community, local leaders have little recourse to alleviate this ever growing burden.
This trend is simply not sustainable.
Faced with the glaring need to address the public safety pension crisis that was threatening the very fiscal stability of communities across Illinois, the Northwest Municipal Conference took the bold step of launching the Pension Fairness for Illinois Communities Coalition. Recognizing that a unified approach bringing together government, business and other stakeholder interests was needed, the Northwest Municipal Conference provided the seed money to initiate this effort.
The Pension Fairness for Illinois Communities Coalition quickly grew and now represents over 85 communities and other stakeholders statewide in the quest for meaningful pension reform. Joining the NWMC at the foundation partner level were the Illinois Municipal League, the Illinois City/County Management Association and the City of Naperville. These four entities were supplemented by statewide and local business associations (including the Illinois Manufacturers Association and Illinois Chamber of Commerce), regional councils of government from throughout the state and a ever growing number of municipalities.
To learn more about the Pension Fairness for Illinois Communities Coalition go to: http://pensionfairness.org/
The Coalition officially launched its effort with a press conference in the Capitol on March 3. The press conference focused upon the need to implement pension reform and introduced the Coalition’s five point Pension Fairness platform:
• Enroll all new police and fire employees into a modified pension system
• Recalibrate current employee pension contributions to align with benefits received
• Consolidate public safety pension funds in a pooled multiple employer investment system
• Adopt 30 year rolling amortization (replacing the current fixed 2033 funding deadline)
• Require a legislative supermajority in order to approve benefit enhancements
Almost immediately following the press conference, a negotiation process spearheaded by Senator Terry Link brought the Coalition together with public safety union representatives to begin work on a solution. The negotiations ensued over several weeks and culminated in the form of Senate Amendment #3 to House Bill 5873.
Unfortunately, due to a union requested poison pill inserted into the amendment at the eleventh hour, the Coalition had no choice but to oppose what appeared on the surface to be pension reform. To date, the Senate has yet to act on the legislation. For a detailed recap of the negotiation process and the problems with HB 5873, see linked Illinois Municipal League report at http://pension.iml.org/page.cfm?key=5045.
The Northwest Municipal Conference remains committed to public safety pension reform. Even with the combined strength of the Pension Fairness for Illinois Communities Coalition working on this critical issue, we expect it may take several years to achieve true pension reform. The biggest impediment to producing meaningful pension reform are the deeply entrenched public safety unions who have for decades insisted that legislators approve pension sweeteners that enrich their member’s pension benefits at the expense of taxpayers. The Northwest Municipal Conference and the Pension Fairness for Illinois Communities Coalition will continue their work to overcome this impediment, implement a pension system that provides a fair retirement to our valued public safety employees and provides meaningful financial relief for overburdened taxpayers.