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With few options, local towns take loans, sell property to pay growing pension tab

Illinois Watchdog.Org

Tuesday, March 13, 2018  |  Article  |  By Cole Lauterbach

Local Government (60) , Pensions (70)
More Illinois cities are facing budget shortfalls due to increasing pension bills and some are selling off property or borrowing money to cover the costs.

Illinois’ local governments are continually seeing more pressure on their budgets because of escalating public safety pension costs.

In downstate Alton, officials are in the process of selling the city's aging water treatment plant to cover the cost of Alton's coming $8 million police and fire pension bill in 2018. The city's total budget is $31 million.

Mayor Brant Walker said the pension tab is slowing down an otherwise growing city.

“It’s devastating,” he said. “Unfortunately, the revenue’s just not there to deliver on the promises that were made 30 years ago.”

Granite City took out a loan to pay for police and fire pension costs. After changes in the way the state estimates the funds, Mayor Ed Hagnauer said the $20 million that Granite City invested into the funds is essentially gone and the city's bill this year will be higher.

“It’s like we didn’t put $10 million into each of these funds,” he said. “We’re right back at square one.”

He said the increase in the city’s pension tab comes from the state updating the actuarial standards used to calculate life expectancy and investment returns.

Granite City brings in close to $8 million in property taxes. If the city were to pay the required amount, more than $6 million of that would go to pension payments.

“We’ve had to cut four police officers and seven firefighters as of today,” Hagnauer said.

While the state's five public pension systems are underfunded by at least $130 billion, the General Assembly passed legislation in 2011 requiring municipal governments to bring their pension systems up to 90 percent funded by 2040, with certain thresholds to be met before then.

Fiscal year 2018 is the first year under that law that Comptroller Susana Mendoza can legally withhold the amount that a city falls behind on its pensions from state disbursements to that city. This raises the stakes for municipalities. Should a city not be able to make the required payment, the boards that oversee the pension funds can ask the comptroller to withhold money owed to cities from their share of state income taxes as well as other funds.

“Every service you see in this city is in jeopardy if that were to happen,” Walker said of a potential seizure of funds by the comptroller.

A recent report by Illinois’ Commission on Government Forecasting and Accountability shows Illinois’ 653 police and fire pensions outside of Chicago are nearly $10 billion in debt.

Other cities in central Illinois facing budget shortfalls include Decatur, Springfield, Bloomington, Normal and Peoria.

Just last year, the First District Appellate Court ordered the city of Harvey to pay $15 million in damages to its firefighter pension fund and approve a property tax levy specifically for the pension system, which the court said was on the brink of bankruptcy.