By: Ted Dabrowski and John Klingner
The small Illinois village of Norridge just announced a municipal tax hike of 35 percent so it can make its required police pension payment. At just 59 percent funded, the city felt it had no other option but to raise taxes. For residents, it’s another hit to their home values.
It’s the same hit that’s befallen the residents of Danville and Carterville and Rockford and Mundelein. All have significantly raised property taxes and/or other fees to pay for their police and fire pensions. And all those hikes come on top of the highest average property tax rates in the nation.
Norridge’s pension problem is unfortunately the norm in Illinois. 335 of Illinois’ 650 public safety funds are less funded than Norridge’s police fund.
That’s half of all downstate police and fire funds. Downstate pensions are a mess that’s only going to get messier.
Norridge is just the next city to realize that something must give. Unfortunately, officials have decided what will “give” is taxpayer’s wallets. Other cities like Rockford and Peoria have resorted to cuts police and fire services to make their pension payments.
Cities are raising more money and cutting active workers because the state now requires all public safety pension funds to be 90 percent funded by 2040. And if cities don’t put in the required money, their pension funds can demand that the state intercept the city’s revenues and give them to the pension funds.
To read more about the pension intercept in Illinois, read:
- Harvey, the first domino in Illinois: Data shows 400 other pension funds could trigger garnishment
- Beyond Harvey: Many Illinois municipalities running out of options
- Second domino falls in Illinois: North Chicago revenues garnished for pensions
Pouring more money into pensions isn’t going to solve many cities’ funding problems. Taxpayers in have been putting more and more money into pensions over the past decade, only to watch the pension crisis get worse.
Taxpayer contributions to public safety pensions have doubled since 2005, yet police and fire pension debts have also doubled – to $10 billion – instead of shrinking. Collectively, public safety pensions are just 57 percent funded.
Don’t be too quick to blame the growing contributions and the tax hikes that go with them on underfunding. The reality is that total pension benefits (accrued liabilities) have been growing far faster than cities or local residents can afford.
In 1987, municipalities owed a total of $2.6 billion in benefits to public safety workers and retirees across the state. Today, that number has jumped to $23.4 billion. That’s nearly an 800 percent increase.
Taxpayers payments can’t catch up with the state’s out-of-control benefits. And cities have few ways of cutting their benefit burdens.
The state not only decides the pension benefits that cities have to provide, but it controls the rules for collective bargaining as well – leaving the rules heavily biased in favor of local unions. That means cities have little control over the salary and benefits that help drive up pension benefits.
Salaries are one of the pension crises’ big cost-drivers. Between 2005 and 2016, public safety salaries collectively rose more than 50 percent. Today, the average downstate public safety worker makes more than $85,000 a year.
That salary growth is all the more unaffordable considering private sector worker earnings in Illinois have only grown 17 percent over the same time period.
The tax hike in Norridge is a preview of what’s to come for hundreds of communities across Illinois. Higher taxes and fewer services will be the norm as pension costs swallow more localities’ budgets.
The equity in people’s homes will be further destroyed by Illinois’ impossibly high property taxes, forcing a growing number of residents to flee.
Until workers’ overgrown benefits are rolled back, Illinois’ excessive units of local government are cut, local governments are given full control over the contracts they sign, and municipal bankruptcy becomes an option for insolvent communities to manage their debts, the pension crisis for our towns and cities, as well as the state, is only going to worsen.