Wilmette village president’s pension warning: We’ll go broke
BY CHRISTOPHER S. CANNING June 14, 2012 7:02PM
Wilmette Firefighter Blake Eastman responds to a fire last October. | Joel Lerner~Sun-Times Media
Updated: July 16, 2012 6:25AM
A financial crisis is brewing in nearly every Illinois city, town and suburb as they lose ground in their effort to fully fund police officer and firefighter pensions.
And who’s on the hook for those billions of dollars? The taxpayers, of course.
How did we get here? For years, Springfield lawmakers added sweeteners to police and fire pensions without providing an adequate funding mechanism or considering local government’s ability to pay for them. As a result, obligations have soared while unfunded liabilities have widened.
Over the past 10 years in Wilmette, the annual cost to the taxpayers of our firefighter pension fund has quadrupled to more than $2 million a year, but over that same time our funding ratio plummeted from 94 percent to only 61 percent. In Wheeling last year, the village contributed $2.3 million — or 71 percent — to its police and fire pension funds while employee contributions amounted to just $967,000.
Pension costs increased dramatically after state lawmakers changed the annual cost-of-living adjustment formula for all retirees in 1989, switching it from simple to compounded interest. With automatic COLA increases at 3 percent compounded interest, public safety employees eventually can make more in retirement than on the job. For example, a police officer who works for 28 years and retires at 53 with a salary of $90,000 would get a pension that would exceed that amount at 67.
No wonder the system is spiraling out of control. Illinois mayors have to choose between funding retiree benefits and providing for the health, welfare and safety of residents. Because the General Assembly requires that municipalities continue to fund these pension plans at unsustainable levels, we’ve been forced to lay off critical personnel including police and firefighters, scrap infrastructure projects such as street repairs, and trim back services such as garbage pickup.
What can be done? The Pension Fairness for Illinois Communities Coalition has put forth some commonsense solutions, including many recently adopted in San Jose and San Diego. They include:
1) Require public-safety employees to contribute more toward the cost of their pensions. Currently, employees contribute only about one-third.
2) Adjust cost-of-living-increases from 3 percent so they are “right-sized” and not compounded annually.
3) Increase the retirement age for publicsafety employees, who can retire with full benefits at 50 and, in many cases, receive benefits for longer than they worked.
4) Consolidate the 638 individual public-safety pension funds into a multiple employer pension system similar to the Illinois Municipal Retirement Fund to expand investment opportunities and lower overall operational expenses.
Make no mistake, police officers and firefighters put their lives at risk and deserve a stable retirement system. But under the status quo, we’re all losing the battle, which places these benefit systems at risk.
Unlike in San Jose and San Diego, voters in Illinois cannot resolve this issue at the ballot box. Only the General Assembly can enact a solution. However, we must begin to educate the public about the consequences of an unsustainable system and make it clear that a long-term solution is vital to preserving benefits and essential services.
Let your legislators know you support pension reform and that you expect the state to resolve budget problems without forcing local communities to bail them out.
Wilmette President Christopher S. Canning is also president of the Northwest Municipal Conference.