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Behind the outrage

Monday, May 26, 2014

* You may recall this astonishing statement made earlier this month

Rockford Mayor Larry Morrissey said Wednesday that Illinois towns and cities would be in a better position to face their public safety pension obligations if they had the ability to file for bankruptcy.

The statement came during a downstate and suburban mayors’ news conference held in Illinois’ state capitol.

“If the state doesn’t give authorization to go to bankruptcy court, you simply cannot do it,” Morrissey said. “Without that … cities are simply left with no recourse when dealing with collective bargaining … in police and fire pensions. So what we end up being is boxed in. … Frankly I wish we could appeal directly to a bankruptcy court, I think it would give us more leverage to get deals done.”

* The firefighters gathered some numbers to show some of the hypocrisy behind the mayors’ outrage about their rising first responder pension costs

According to the documents, Decatur has seen a 141 percent increase in the amount they’ve contributed to the firefighter pension system since 2003. By contrast, the city’s [Illinois Municipal Retirement Fund] contribution has risen 170 percent.

In Carbondale, city contributions to the firefighters rose 194 percent in the past 10 years. Contributions to IMRF rose 183 percent.

Bloomington’s contributions to firefighters have risen 146 percent since 2003. Contributions to IMRF rose about 82 percent.

Pat Devaney, president of the Associated Fire Fighters of Illinois, said one reason for the silence from mayors on IMRF is that the mayors are covered by IMRF.

Sen. Terry Link, who is trying to put together a first responder pension reform plan, was on Rick Pearson’s WGN Radio show over the weekend and talked about his efforts. Click here to listen.

- Posted by Rich Miller        


14 Comments
  1. - Joe M - Monday, May 26, 14 @ 1:31 pm:

    If cities like Rockford were allowed to file for bankruptcy, could they selectively choose the bills they wish to renege on? Or if they filed for bankruptcy, wouldn’t they also have to be reneging on other bills they owe - such as money owed to bondholders and vendors?

    Cities filing for bankruptcy to renege on bills seems a very slippery slope. Who would ever want to buy their bonds or do business again with such a city?


  2. - Judgment Day - Monday, May 26, 14 @ 1:56 pm:

    “Cities filing for bankruptcy to renege on bills seems a very slippery slope. Who would ever want to buy their bonds or do business again with such a city?”

    Actually, that’s one key element as to why the Cities want to go there. Their financial situations are becoming ‘needs’ vrs. ‘needs’, and the pension funding requirements are starting to hollow out all the funding for most other operations within the municipality.

    Here’s the statuatory reference for non home rule municipalities for funding both fire pensions and police pensions. Note there is no rate limit.

    “Firefighters’ Pension 40 ILCS 5/4-118

    DOR Code 013

    No rate limit. An amount sufficient to meet the needs of the pension fund requirements of the municipality of not less than 5,000 nor more than 500,000 population. Municipalities of less than 5,000 population with a full-time fire department can adopt by referendum.”

    Here’s the statuatory reference for police pension:

    Police Pension 40 ILCS 5/3-125

    DOR Code 015

    No rate limit. An amount sufficient to meet the needs of the pension fund requirements of the municipality, of not less than 5,000 nor more than 500,000 population. Municipalities of less than 5,000 population may establish fund by referendum.”

    Link is: http://tax.illinois.gov/publications/localgovernment/ptax-60.pdf

    Here’s where the problem comes in. Rockford is home rule, but they are also tax capped. So, they can keep raising the tax rates pretty much forever and the taxpayers bleed. But, the problem is, IF the City sets a self imposed max limit, the police and fire pension portion of the RE taxes are eating them up from the inside out.

    And, to make things worse, the tax base (what is often called EAV, or ‘Taxable Value’) has been pretty stagnant, if not lower due to the so-called ‘Great Recession’. So, the end result is the tax base stays the same, but the tax rates increase, and guess where much of the ‘increase’ gets directed to.

    Haven’t seen the tax calc. sheet from the County Clerk’s office for the last few years, but if they are like most places, the RE taxable value (tax base) has been going down, and the tax rates are going up, and under Tax Cap, you can ‘adjust’ your tax rates, so guess which tax rates are getting ‘fed’ - funds for retirement costs.

    Be interesting to see what the trending is on those tax extensions for municipalities…..


  3. - Pacman - Monday, May 26, 14 @ 2:07 pm:

    Joe M; It’s monkey see, monkey do. The cities want to follow the states lead and selectively renege on contractual obligations, i.e. pensions. If a city really has to file bankruptcy then all creditors have to share the pain, likewise at the state level. The last time this story was on Capitol Fax. I asked if anyone knew of any city in the state thats on the verge of bankruptcy. Can anyone name one? Also would cities have to sell any assets, for example if Springfield filed bankruptcy would they have to sell the land they own to build a second lake or even CWLP?


  4. - Joe McCoy - Monday, May 26, 14 @ 2:10 pm:

    That’s a nice try, but looking at the percentage growth in employer pension costs doesn’t tell the full story about the rising pension costs confronting cities. It’s a statistic offered to misrepresent a reality. One needs to look at the actual DOLLAR AMOUNTS being allocated to fund pensions. IMRF participation costs MUCH less money per employee compared to the police and fire systems. It’s also important to know that the total number of IMRF employees is larger than the number of firefighters or police officers in most cities. Police and fire pensions cost much more when you analyze the cost on a per employee basis. As a defined benefit plan, IMRF is a much better value for taxpayers than the police and fire systems. And not all mayors and other elected municipal officials are in IMRF, either.


  5. - Joe McCoy - Monday, May 26, 14 @ 2:12 pm:

    Judgment Day - Rockford is non-home rule. The voters rescinded home rule powers by referendum years ago.


  6. - Judgment Day - Monday, May 26, 14 @ 2:42 pm:

    “Judgment Day - Rockford is non-home rule. The voters rescinded home rule powers by referendum years ago.”

    Joe, that’s even WORSE news for Rockford. That means they are really screwed, because then they have to work their ‘adjustments’ within their total overall tax rate as extended for their tax year. Tax Cap (Property Tax Limitation) stuff.

    Short story: IF their tax rate for all their different funds is at, let’s say $1.50 per $100 taxable value, they could in theory move all that $1.50 into only 2 funds (police/fire pensions) - of course, there’s nothing else left for anybody or anything. That’s worse, most extreme case, and probably (hopefully) not happening.

    But the real key is what is happening to those 2 RE tax funds (police/fire pensions) compared to all the other funds. If they keep increasing, and other funds are staying the same or decreasing, well, eventually you will end up with a hollowed out government.

    Actually, you also need to watch the basic IMRF fund for the rest of the City. That’s Fund 005.


  7. - Ahoy! - Monday, May 26, 14 @ 2:56 pm:

    IMRF is also around 90% funded and the GA is not constantly passing pension sweeteners for it. Also, the firefighters only gave 3 examples and one of them the city pays 50% less to IMRF than for police and fire pensions.

    Also, Joe McCoy makes a good point about percentages vs actual dollar amounts. The IMRF payout is also not the last day of service like the police and firefighters, that is a huge cost driver.


  8. - Joe McCoy - Monday, May 26, 14 @ 3:42 pm:

    Follow the link for a chart that uses DOI data to illustrate the growth in employer pension contributions from 2004-2012. The data shows the total dollar amounts paid by employers for fire, police, and IMRF pension participation. Note the substantially higher costs necessary to fund police and fire participants compared to those that participate in IMRF. This is why the mayors are so concerned. IMRF is much more affordable per person than the police and fire systems and the cost growth per employee isn’t nearly as substantial. http://www.iml.org/file.cfm?key=8359


  9. - Anon - Monday, May 26, 14 @ 4:27 pm:

    == IMRF participation costs much less per employee ==

    Few staffers in municipal offices risk their lives on a daily basis. Consequently, they earn lesser benefits than those who do risk their lives, and who also work shifts that keep them away from family time, and face stress more acute than in the typical village manager’s office.


  10. - Anon - Monday, May 26, 14 @ 4:33 pm:

    == no pension sweeteners for IMRF ==

    How about that annual thirteenth pension check?


  11. - wordslinger - Monday, May 26, 14 @ 5:23 pm:

    Cities filing bankruptcy to slink away from pension obligations would certainly be government “run like a business.”

    Some of the biggest businesses in the country have pulled that stunt, to their shame.


  12. - Joe McCoy - Monday, May 26, 14 @ 5:37 pm:

    ==Few staffers in municipal offices risk their lives on a daily basis. Consequently, they earn lesser benefits than those who do risk their lives, and who also work shifts that keep them away from family time, and face stress more acute than in the typical village manager’s office.== I don’t think anyone is suggesting that benefits should be reduced to IMRF levels. It’s fair to ask, however, where the revenue will come from to fund the current benefit levels into the future? There’s certainly not much support for increasing property taxes. So who pays for it? If cuts are suggested, precisely where should they be made so as to fully-fund the pension obligations?


  13. - Pacman - Monday, May 26, 14 @ 7:01 pm:

    Despite what organizations like GASB say pension systems don’t need to be fully funded immediately. Reamortize the pension repayment schedules to give cities relief. Many pension systems have been operating for years with less than 80 percent funding. Not everyone is going to retire tomorrow. The cities and state want instant relief to a problem they created over decades of under funding. This problem will take decades to correct.


  14. - Anon - Monday, May 26, 14 @ 8:56 pm:

    Joe McCoy hit it squarely on the head. At some point, the police and firefighters need to face economic reality and be a part of the solution. For several sessions, the state unions and teachers said no to reasonable benefit reductions. Look what happened to them. The train is leaving…get on board.


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