* The pension reform fight between mayors and unions representing firefighters and police officers has been raging for months. The mayors claim that dozens of pension sweeteners passed by the General Assembly over the years has made the pensions unaffordable. Unions rightly point out that pretty much all of those increases were negotiated with the municipalities, and those agreements included union concessions as well. The unions, in turn, point the finger of blame at the municipalities for deliberately underfunding their systems. But WBEZ’s Alex Keefe manages to sort through the claims and counter claims…
Rather than “pension sweeteners,” longtime Illinois police and fire pension actuary Art Tepfer said the rapidly rising pension costs that towns are struggling with came about by design.
“This is the way that Illinois retains it’s No. 1 ranking as having the worst-funded pension funds in the country,” said Tepfer, who serves as an actuary to more than 100 downstate and suburban public safety funds in Illinois.
Tepfer points to a 1993 change in state law, when legislators approved a pension funding scheme that functioned similar to an adjustable-rate mortgage: low payments at first, but rapidly rising payments in the future.
“Well, we’re in the future now,” Tepfer said. “This is what’s happened. And that’s why we have a pension crisis. We saw it coming.”
Tepfer said smaller funds are also limited in how much money they can invest in stocks, which limits the amount of money they can make on their investments.