By: Ted Dabrowski

After trustees of Illinois’ nearly 650 downstate police and fire pension funds learned they could force cities to properly fund their pension obligations, you’d think they would be jumping to put the law to work in favor of the pensioners they represent. Just last month, Harvey, Illinois, was the first municipality to have its tax revenues garnished by the state comptroller for failing to fund its local pensions. North Chicago’s taxes were intercepted shortly after. The garnishments were the result of a law passed in 2011 but only recently implemented.

Illinois’ public safety trustees certainly appear to have plenty of reason to act with urgency – from their pensions’ perspective. Wirepoints research of Illinois Department of Insurance data found that nearly 400 public safety funds were shorted their required payments in 2016 alone. Collectively, Illinois’ 650 downstate public safety pension funds are underfunded by more than $10 billion and many are headed toward insolvency. Nearly 30 percent of downstate public safety pension funds have less than half the money they need on hand today to pay out future benefits.

But after trustees from the Harvey police pension fund paved the way on how to use the law – and trustees from the city of North Chicago followed suit – it’s been virtual crickets. State comptroller spokesman Abdon Pallasch confirmed to me yesterday that no trustees from any other pension fund have stepped forward to ask for enforcement of the new law.

Why aren’t the pension trustees busting down the comptroller’s doors? Why aren’t public safety pensioners demanding action from their trustees? And where are the unions, the media and the politicians? Why aren’t they pushing its implementation?

Proponents of the current pension scheme have been fighting for decades to ensure some form of guaranteed funding, and now that they have it, nobody is acting on it.

That’s amazing given the fact that 202 municipalities shorted their police funds in 2016, the latest, statewide, full-year data on how much downstate pension funds were owed and what they actually received. The list of the police pension funds and how much they were shorted is provided below.

Take Granite City, for example. There the police pension fund was just 33 percent funded in 2016. It’s effectively bankrupt. In any private sector setting, that fund would have been closed and dissolved long ago. In 2016, Granite City shorted its police pension fund by nearly $1.2 million, or nearly 50 percent of what it should have paid that year.

Or Skokie, Illinois, where the police pension plan was just 62 percent funded in 2016. The city was supposed to contribute $4.0 million to the plan in 2016. Instead, the pension fund received just $2.2 million, or 55 percent of the total.

Or East St. Louis. That city and its pension plans are running out of options to stay afloat. It too, underfunded its police pension by 66 percent. Of the $2 million the fund was supposed to receive, it got just $700,000.

So where are the trustees and all the other supporters of guaranteed funding for pensions?

As usual, you’ll find the answer in math.

Many of these cities are running out of money and their ability to tax their residents has reached its limit. Illinoisans already pay the highest property taxes in the nation and those taxes continue to go up. Cities simply can’t fund both their operating costs and the pension promises that have been made.

And if cities are forced to pay their statutorily required amounts to the local pension funds, they’ll cut into spending for core items like roads, public health or government worker jobs. Like firefighters or police officers.

That became obvious when the state comptroller garnished Harvey’s tax revenues for the city’s failure to fund its police pensions. As a result of the garnishment, the city was forced to layoff more than 40 public safety workers.

The new law has exposed the ugly reality in Illinois. These pension plans are simply too expensive and too onerous for the cities that have to pay them and the residents that are forced to fund them.

That fact is not being lost on Illinois politicians. They are worried by the mess the new law has exposed and are already looking to roll it back. Politicians can’t afford to have hundreds of pension funds asking for state intervention. Nor can they politically afford police and firemen layoffs in cities like East St. Louis, Kankakee or Chicago Heights. So they are reportedly looking at a new bill to scale back those intercepts.

Rather than reform the underlying problems, politicians will just look to paper over them. That’s nothing new.

And they’ll continue to look for silver bullets that will do even more harm – like a $100 billion pension bond or a statewide property tax.

Expect things to get worse. We recently reported – and testified to the Cities and Villages Committee of the House – how much city and resident finances have deteriorated in the past 15 years because of booming pension costs and unaffordable benefits. The trend will continue and at the testimony we called for a bankruptcy option for Illinois’ worst off communities.

It’s a sad mess politicians have made of Illinois. What will become of Illinois communities when they have to fire active public safety workers so they can pay for retired ones?

Appendix
The list below shows the 202 Illinois cities that could face garnishment by the state comptroller for failing to properly pay their statutorily required amounts to their respective police pension funds in 2016.

 

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John Tatar
2 years ago

The best way to describe this is with the old Cold War term “Mutually assured destruction”. The Pension fiduciaries hold the weapon of intercept and the Villages hold the weapon of public safety personnel dismissals.

Ed S
2 years ago

BY not taking action the pension cash registers keep on running with the unions feeling secure with the “shall not be impaired” clause guaranteeing that private property will be seized to pay the public pensions. Kick the can down the road as far as possible so as to prevent the people in Illinois from waking up.

Tough Love
2 years ago

The promised Public Sector pensions (with very high per-year-of-service formula factors, VERY young ages at which UNREDUCED pensions can begin, and COLA increases … unheard of in Corporate-Sponsored Private Sector Plans) are ROUTINELY 3 to 6 TIMES greater in value upon retirement than those of comparable (in experience, education, skills, and knowledge) Private Sector workers who retire at the SAME age, wit the SAME wages, and the SAME years of service. And ON TOP OF those MULTIPLES more generous pensions, they typically get free or heavily subsidized retire healthcare benefits that are all but GONE in the Private Sector. Yes,… Read more »

Kvetch 22
2 years ago
Reply to  Tough Love

it’s difficult for taxpayers to renege but they should cooperate to elect legislators who have the power to repeal continuing appropriations and reduce taxes. An alternative would be to make all public obligations into contract rights of equal standing so the legislator (with governor’s approval) may decide which bills to pay and not have some bills with greater priority than other bills. Meanwhile, active employees in the union should seek an injunction against further payment of pensions until the insufficient assets of the pension funds could be fairly allocated among active and retired workers. (Much of this could be avoided… Read more »

S and P 500
2 years ago

Something similar is happening to schools in Calif. There have been planet-eater budget cuts to school districts in Pasadena, Montebello, and Oakland. These districts had to make cuts (partly because of pensions) or face a state takeover. Philly School District has returned to local control but they still have $3 billion in unfunded pension liabilities on their balance sheet. As an accountant once told me, when an establishment has cash flow problems, it tends to dominate all spending decisions.

Mike xyz
2 years ago

There was a committee hearing on SB 370 (comptroller pension intercept reform for distressed communities participating in Downstate Police and Downstate Fire) today in the Senate Licensed Activities and Pensions Committee. The taxpayers could only hear what happened today if they pay BlueStreamRoom or actually went to the committee hearing. We can read about it when the transcripts are made available in the future. Right now the bill kicks the battered pension funding can into the future. The bill of course does not scale back hiked benefits to underfunded pensions for existing employees, because those benefits cannot be diminished or… Read more »

Admin
2 years ago
Reply to  Mike xyz

Thanks. For those interested in the bill status and most recent amendments, here is the link: http://www.ilga.gov/legislation/BillStatus.asp?DocNum=0370&GAID=14&DocTypeID=SB&LegID=100311&SessionID=91&SpecSess=&Session=&GA=100#actions

Mark M
2 years ago
Reply to  Mike xyz

Am I reading this correctly? The proposed intercept law only applies to distressed entities, which practically speaking means many poor and minority communities will be the subject of state garnishments, breaking them. I am not so sympathetic to the decades of mismanagement in these cities, but it confounds me as to why the people in these communities continue to vote for Democrats. The public union interests prevail over the interests of the people in the afflicted municipalities. Unions in the 50’s and 60’s and into the 70’s had a terrifically poor history of racial discrimination. I guess nothing really changes.

Mike
2 years ago

The law puts unions in a tough spot. It pits current, employed union members against retired union members. After the town of Harvey decided to sacrifice employed union members for the retired union members pension trustees are realizing that these decisions could create a division within the union itself. Certainly current workers aren’t going to want to sacrifice their jobs for the benefit of retirees. It’s been said that people aren’t willing to pay for the government they want. I believe this to be true. This law helps taxpayers realize the true cost of their government and hopefully will lead… Read more »

Chet
2 years ago
Reply to  Mike

Many of us would like much less government, but need to leave Illinois to achieve this desire.

Tough Love
2 years ago
Reply to  Mike

Quoting ………….

“It’s been said that people aren’t willing to pay for the government they want. I believe this to be true. ”

I disagree. Most people ARE willing to pay a FAIR (meaning “market rate” …. as determined by what such functions would cost if provided by the PRIVATE Sector) price for the services they need. What they don’t want (nor can afford) to do, is pay the HUGE cost of the ludicrously excessive, unnecessary, and clearly unaffordable pensions & benefits that have been promised Public Sector workers.

Mike
2 years ago
Reply to  Tough Love

Tough Love – Apparently the voters in the State of Illinois, County of Cook, and City of Chicago disagree with you because that is not the government they are electing.

Mike xyz
2 years ago
Reply to  Mike

No one explained the Downstate Police and Fire pension costs to the voters, so their votes were not based on an understanding of the costs. The voters were not notified by state legislators and governors as the Downstate Police and Downstate Fire benefits were over the last 4+ decades. The pension benefits of a Downstate Police or Downstate Fire employee retiring now are dramatically hiked from when those employees began their career. That was buried in legislation, which is just about impossible to follow unless one has a lobbyist, as the entire contents of a bill can be wiped out… Read more »

Mike
2 years ago
Reply to  Mike xyz

Did you not learn anything from Nancy Pelosi? We need to pass legislation so we can find out what’s in it. Not the other way around.

Tough Love
2 years ago
Reply to  Mike

I believe “disagree” (with me) is not properly descriptive of the voters’ thinking. I believe that they are simply VERY VERY uninformed as to the VERY VERY HIGH “generosity” of their Public Sector Pension promises ………… and hence the COST thereof.

Admin
2 years ago
Reply to  Tough Love

Agree as to most of them.

Mike
2 years ago
Reply to  Tough Love

I disagree. Take teachers for example. The fair or market rate of compensation for teachers would be closer to what private school teachers make than what public school teachers make. Private school teachers are compensated at a much lower level but polls show repeatedly that voters/taxpayers think teachers are underpaid. Since 90% of K thru 12 teachers are public school teachers these voters/taxpayers do not agree with you. Fair to one person is not the same as it is to another person.

Mike
2 years ago
Reply to  Tough Love

I disagree. Take teachers for example. The fair or market rate of compensation for teachers would be closer to what private school teachers make than what public school teachers make. Private school teachers are compensated at a much lower level but polls show repeatedly that voters/taxpayers think teachers are underpaid. Since 90% of K thru 12 teachers are public school teachers these voters/taxpayers do not agree with you. Fair to one person is not the same as it is to another person.

James
2 years ago
Reply to  Mike

“Fair market value” is what IS—not what you think it should be. There are always some people willing to do things for less, depening upon their value system and other income sources. But, that’s never the norm.

Mike
2 years ago
Reply to  James

The market value of a good or service is what the buyer and seller agree to. The market value of public education is tougher to figure out. The buyer of education (school district) and the seller (teacher’s unions) agree on the price. A third party (taxpayers) pay for the service. The payer has no say in the price, in this case teacher compensation. With a private school the buyer (the school) and the seller (teacher) agree on the price of the teacher’s compensation. The school is governed by the laws of economics and can’t spend more than they take in… Read more »

Rick
2 years ago

They don’t file simply because this instrument is a form of cannibalism. It robs one administrative body of government and pays that booty to another. No govt cost is reduced, no additional revenue collected, no value created for the residents. It’s the little ponzi scheme running within the big ponzi scheme.