A new investigation by the Better Government Association details pension problems experienced by dozens of suburban police and fire pension funds. BGA’s senior investigator Andrew Schroedter joins Chicago Tonight with more on the story. Read the BGA story below.
Suburban Pension Tension
Dozens of Chicago-area police and fire pension funds are drying up – which should be a big worry for current and future retirees, and taxpayers.
By Andrew Schroedter and Patrick Rehkamp
Much has been made about the pension fund problems at the state, county, and city levels.
Taxpayers owe billions of dollars to the massively underfunded systems, at a time when budgets are already tight.
But there is another massive pension problem brewing –one that hasn’t drawn as much attention but is no less serious. The Better Government Association closely reviewed the finances of 217 police and fire pension funds in suburban Cook County, and found dozens of the retirement systems are in serious financial trouble.
In all, unfunded liabilities for the funds totaled $3.3 billion, according to the analysis. Fifty-eight or roughly a quarter of the systems were less than half-funded, meaning there was fewer than 50 cents for every dollar owed in long-term benefits, according to the analysis.
Generally, a minimum 80 percent funding is considered healthy. A state law approved in 2010 requires such pension plans to be 90 percent funded by 2040.
“The gravity of the situation goes from grave concern to outright terror,” says Roger Huebner, deputy executive director of the Illinois Municipal League. “Some of the funds are in such bad shape I don’t know how they recover.”
Other key findings include:
- The fire pension funds in Blue Island, Cicero, and Melrose Park have just 32 cents for every dollar owed, the lowest among systems with at least $2 million in assets.
- On the police side, Blue Island, Burnham, Summit, and Willow Springs ranked among the lowest, each with less than 30 cents for every dollar owed.
- Until recently the Stone Park police fund had just seven cents for every dollar owed. The village issued a $2 million bond in April, in essence borrowing money to pay its pension debts. Its funding ratio now stands at an estimated 23 percent, the fund’s attorney says.
- A search of municipal and state records uncovered examples of alleged pension sweetening in Alsip and Blue Island and at the Pleasantview Fire Protection District. In Alsip, for example, two police officers retired days after receiving “longevity bonuses” of more than $20,000 each. Over their lifetimes those pay bumps could result in total additional pension payments of $1.8 million, according to a BGA analysis.
The state law adopted by legislators in 2010 empowers pension funds to intercept (in gradually increasing increments) sales taxes, grants, and other revenues owed to the towns by the state if the required contributions aren’t made. That doesn’t take effect until 2016 but the law’s impact is already being felt, though not necessarily in ways that rank-and-file police and firefighters may appreciate.
North Riverside may privatize its fire department in part because of concerns that the village would go broke if it couldn’t afford its pension obligations and state revenues were intercepted, North Riverside Village Attorney Burt Odelson says.
Municipal officials who are unwilling to go that route shouldn’t look to state lawmakers for immediate relief.
“Legislators understand it has to be done but it’s incredibly contentious and painful,” says state Rep. Elaine Nekritz (D-Northbrook). “No one is chomping at the bit to do that.”
This story was written and reported by the Better Government Association’s Andrew Schroedter and Patrick Rehkamp, with the BGA’s Katie Drews contributing. They can be reached at (312) 821-9035 or [email protected].