Springfield, Ill., Wants to Cut Police, Fire Pension Costs
Without a strategy to rein in costs for its police and fire departments, the city faces the possibility of having to dedicate 100 percent of its property taxes to fund the pensions and not totally address the problem.
(TNS) — As the city of Springfield, Ill., began budget deliberations in January, city budget director Bill McCarty gave aldermen and others a Power Point presentation about city finances.
"One of my last slides, I told everyone in the room, this is the most important slide in this entire presentation," McCarty said. "So if you forget everything else, don't forget this."
It showed the additional money the city will need to pump into police and fire pensions over the next 20 years in order to meet the requirement that the systems be 90 percent funded by 2040. It was $269 million on top of what the city already pays into those plans.
"Police and fire pensions are the single biggest concern that I have when it comes to the expense side of our budget, bar none, without a doubt," McCarty said. "Part of it is the expected growth is much larger than what we expect our revenues to grow in order to keep up."
Springfield is hardly alone in this concern. In municipalities large and small across the state, how to cope with the rising costs of police and fire pension obligations is a major concern. It is one of the reasons Gov. J.B. Pritzker created a task force earlier this year to recommend ways to ease those costs.
That task force is concluding months of meetings with an eye toward having recommendations available for lawmakers to consider by the start of the veto session on Oct. 28.
"This is the most optimistic I have been in the last five years," said Brad Cole, executive director of the Illinois Municipal League and a member of the task force. "I think there is a genuine desire to address the issue. Municipalities have been dealing with the reality, but finally others are seeing it and that is the financial hardship that the current situation has caused."
"There's a number of components I think that the parties have agreed on," said Pat Devaney, president of the Associated Fire Fighters of Illinois and co-chair of the task force. "The goal of the committee all along has been to produce recommendations that would be taken up in the veto session."
Devaney said task force participants agreed not to publicly discuss details of the group's work until a final report is delivered.
The pressures of funding police and fire pensions are playing out in cities the same way the financial obligations of paying for state pensions have played out on the state level. As more money is need to keep the pension systems solvent, there is less available for other uses. That puts pressure on governments to either cut budget or raise revenues.
Over the last five years Peoria has cut its city workforce by 16 percent to 18 percent, said Mayor Jim Ardis. Last year the city shut down a couple of pieces of fire equipment due to rising pension costs.
That happened while the city is pumping more money into the pension plans. A decade ago, Ardis said, the police and fire pensions cost the city about $10 million a year. Now it is over $20 million.
"We could very well be looking at 100 percent of our property taxes going to police and fire pensions and still not totally address the problem," he said. "The unfunded part (of pensions) is blowing up. The ability for any of us to get to a 90 percent funding ratio by 2040 is impossible."
Springfield has also been caught in the pension squeeze. McCarty said a "substantial component" of the headcount reduction in the city workforce over the last decade is due to increasing pension costs. A dozen years ago, the police department had 281 sworn personnel, McCarty said. Now it is at 249.
"I believe that a lot of that was a direct result of the necessity of paying for police and fire pension systems," he said.
The experiences of Springfield and Peoria are being repeated around the state, which is why Cole thinks lawmakers will finally be ready to take some action.
"More than one municipality's back is up against the wall," Cole said. "I think the widespread effect of the financial hardship has resonated with legislators and certainly with the governor's office."
How to deal with the problem is going to be the trick. No one is discussing the idea of curtailing future pension benefits, but other options are available. One would give cities more time to reach the 90 percent funding level. Another is one that's been pushed without success for some time by Cole and the Illinois Municipal League. The idea is to combine the more than 650 police and fire pension systems in the state under one umbrella.
"It's the easiest solution to see immediate financial returns through greater investment capabilities and reduced administrative overhead," Cole said. "It's the most commonsense approach."
Cole said Illinois is alone in the glut of individual pension systems each with its own board and making its own investments.
"I don't think anybody would ever set it up like this from scratch again," Cole said.
There's been opposition to the idea before, ranging from perceived loss of local control to the idea of mingling funds from comparatively well off systems with those of nearly bankrupt systems. McCarty, though, likes the idea. McCarty is a member of the Springfield pension boards and said he can see obvious savings to be had from reducing overhead costs by consolidating. He also said consolidation can provide an avenue to better investment returns, which also eases the pressure on local government finances.
As for fears of mingling funds, McCarty said it is "a completely unfounded fear." All other municipal employees in the state — from the wealthiest cities to the poorest — are covered by the Illinois Municipal Retirement Fund, which manages benefits for all of the various participants.
Whatever solution is recommended, it won't apply to the city of Chicago. The task force is only looking at the problems faced by police and fire pension systems in cities outside of Chicago.
"The inclusion or exclusion of Chicago is really indifferent as far as how easy or hard this will be," Cole said. "I do think if we can see progress (for other governments) it will show significant momentum to support what the governor wants to do with the state (pension) funds and what the city of Chicago is looking for."
©2019 The State Journal-Register, Springfield, Ill. Distributed by Tribune Content Agency, LLC.