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Expensive local pensions draining municipalities’ share of property taxes with not much state relief in sight

Illinois Watchdog.Org

Monday, March 5, 2018  |  Article  |  By Greg Bishop

Local Government (60) , Pensions (70)
Municipalities across the state are feeling the pension pinch.

In fact, some are seeing most, if not all, of their share of property taxes going to police and fire pensions and there’s not much relief expected from the state.

With a growing local pension problem eating up the city’s share of property taxes and then some, Springfield Alderman Joe McMenamin said cities like Springfield must get control of city employee pay and benefits.

“In the long run, we need cost containment and we need contributions from our city employees,” McMenamin said.

McMenamin also noted a growing number of retired city employees getting pensions of more than $100,000 a year.

Springfield Mayor Jim Langfelder blasted state lawmakers last month for tying cities' hands on local pensions.

“Those are decided at the capitol,” Langfelder said. “That’s the unfunded mandate that we have to pay for. It’s easy to vote for sweeteners.”

Springfield projects all its share of property taxes, plus an additional $600,000 will be needed in the coming fiscal year. Other municipalities are in similar situations. City alderman just approved an increase in the city’s sales tax and telecommunications tax. They’re considering establishing a natural gas tax that Langfelder said would go entirely to police and fire pensions.

Mattoon's proposed budget is $1.3 million upside down. Of that deficit, $900,000 is attributed to growing pension and employee healthcare costs. Macomb’s city administrator said growing public pension costs have created budget deficits there and it’s only getting worse.

Illinois Municipal League Executive Director Brad Cole said what makes it worse is the state reducing shared revenue with local governments.

“So at the same time, while we’re paying more, we’re seeing less money coming in and that’s where the real rub goes the wrong way for municipalities,” Cole said.

Cole said one of the major proposals the IML is pushing is to consolidate the more than 600 police and fire pension funds into one for greater economy of scale and lower administrative fees.
State Sen. Tim Bivins, R-Dixon, said there aren’t many options at the statehouse for the local pension problems.

“I think you have to change the constitution and there doesn’t seem to be a lot of will to do that,” Bivins said.

The state Supreme Court has ruled the constitution doesn’t allow for pension benefits to be diminished.

Credit ratings agency S&P said the combined unfunded liability of the state’s 600-plus single-employer municipal police and fire pension plans is more than $9.9 billion. That “jarring” figure, the agency said, means large budget deficits, large tax hikes and generally weaker credit quality over time.