Blame state lawmakers’ inaction on pensions for Illinois police cuts – Wirepoints

By Ted Dabrowski and John Klingner

State politicians continue to ignore Illinois’ local pension crisis, forcing suburban and downstate cities to cut staff, including active police officers, to make room for skyrocketing pension costs.

A Wirepoints’ analysis of Illinois’ 175 largest municipalities* with dedicated police and fire pension funds found that since 2003, pension costs as a share of general city budgets have doubled to 17 percent. The pension crowd-out is a big reason why nearly 100 of those cities have cut their active police officer count, with 50 cities seeing reductions of 10 percent or more.

That has left crime-ridden cities like East St. Louis and Harvey with a fraction of their law enforcement. East St. Louis has cut its police force by 50 percent, or 34 active officers, since 2003, while Harvey has lost 41 percent of its force, leaving the city with 24 fewer active policemen. 

In all, the 98 cities have cut nearly 600 sworn officers since 2003, the earliest year data is available from the Illinois Department of Insurance. 

These findings were part of Wirepoints’ review of Illinois’ local pension crisis: Communities in crisis: More than half of Illinois cities get “F” grades for local pensions. The report, to maintain a like-for-like comparison among cities, was limited to the 175 Illinois cities with both a dedicated police and fire pension fund. For data on the 336 Illinois municipalities with a police department, see the Appendix below.

It’s important to note that these personnel losses only include sworn officers who are members of a city police pension fund. Wirepoints used local police pension data from the Illinois Department of Insurance because it is the only statewide, comprehensive source of police membership by city. The decline in many police departments across the state will be even worse when cuts to part-time and civilian positions, such as clerks, are also factored in.

Many communities have cut police

For some municipalities, the decline in police may be due to efficiencies, population decline, or even a drop in the need for policing. But rising pension costs are to blame for the loss of officers in many cities, according to the local officials Wirepoints has spoken to over the years.

Peoria city manager Patrick Urich recently explained to Wirepoints that retirement costs have forced the city to make difficult choices, including slashing personnel to make room for pension contributions:

“Since 2002, our headcount has gone from 892 employees to 615 employees. We’ve seen a 19% reduction in police employees, and 18% reduction in fire employees. We’ve had a 45% reduction in back office employees that work at city hall, a 39% reduction in our public works employees, and a 71% reduction in community development in the city.

“It’s tough on service delivery. Certainly tough on morale. And it’s tough to continue to explain that a lot of this is being driven by costs that we don’t control.”

Brad Cole, Executive Director of the Illinois Municipal League, further explained to Wirepoints why it’s public safety positions that are so often cut by struggling cities:

“When you look at rising crime or other issues, you don’t want to cut public safety personnel, but you’ve got to balance the budget.

“With pension expenses increasing so rapidly, many communities have been forced to reduce their biggest other expense, which is personnel. Two-thirds of a city’s budget is payroll, if not more, and two-thirds of payroll is usually for public safety. In many ways, the increased pension obligations do negatively impact the very people they’re supposed to benefit – police and fire workers – and that is where there have been cuts.”

The city of Peoria provides a good example. Personnel salary, benefit and pension costs consumed 75 percent of the city’s operating budget in 2021 despite all the headcount reductions the city has made over the years. When so much of the budget is consumed by employee compensation in general, officials have little choice but to cut other worker expenses, including firing people, to make room for rising pension costs.

Peoria is far from the only big city that is struggling. Springfield, the state’s capital, is also in trouble. From the State Journal-Register in 2019: “Springfield has also been caught in the pension squeeze. [City Budget Director] Bill McCarty said a ‘substantial component’ of the headcount reduction in the city workforce over the last decade is due to increasing pension costs. A dozen years ago, the police department had 281 sworn personnel, McCarty said. Now it is at 249.”

For sure, corruption and budget mismanagement have also played a role in police declines in some cities – most notably in Harvey and East St. Louis – but for many places, the crisis is due to costs that municipalities simply don’t control.

The problem of pension costs

To understand why officers are being cut, one has to understand how local pension costs have dwarfed city budgets over the past decade and a half.

Again from the SJ-R: “Police and fire pensions are the single biggest concern that I have when it comes to the expense side of our budget, bar none, without a doubt,” Bill McCarty said. “Part of it is the expected growth is much larger than what we expect our revenues to grow in order to keep up.”

Annual city pension contributions for the 175 cities analyzed – to police, fire, and municipal retirement funds – are up by nearly 300 percent compared to 2003, growing to nearly $1 billion by 2019. City budgets, in contrast, have grown by an average of just 80 percent over the entire period.

It’s also worth noting that many of the 77 cities that did grow their police forces over the 2003-2019 period paid a dear price to maintain their headcounts. They heavily hiked taxes, grew their debts, or simply made cuts to other programs or departments. See Communities in crisis for more details on Wirepoints’ findings.

What’s worse, city officials have no way of reducing their pension costs. They are handcuffed because retirement costs are largely imposed by the state – a consequence of Illinois’ top-down, one-size-fits-all mandates. 

Peoria’s Urich explained: “Who’s responsible? Whether it’s the benefits levels, the contribution levels for the employees, the investment mix limitations…that’s all set by the state. The pension board sets the targeted rate of return, they determine investments, they make duty-disability determinations. And the actuary sets our employer contribution level.” 

That leaves cities with just one responsibility: “And then, what do we get to do? We get to levy taxes on the citizens for the employer’s contribution.”

Illinois residents are feeling the pinch. They now pay the second highest property taxes in the nation, according to the latest analysis by the Tax Foundation.

The problem of “intercepts”

Illinois legislators made things worse for cities in 2011 when they passed a little-known law that forces cities to prioritize pension contributions over other core services.

Illinois’ “pension intercept” law, given legal teeth in 2015, requires municipalities to fully fund their local public safety pensions according to what fund actuaries require. If cities fail to contribute what they’re supposed to, the law gives pension trustees the power to demand the state comptroller garnish a municipality’s tax revenues so the funds can be handed over to the pension plan.

Patrick Urich told Wirepoints that the intercept has further tied city officials’ hands: “We have to fund pensions because if we don’t fund them, then there’s the intercept that’s put in place. We are left with the choices of cutting services or raising taxes. Both are really untenable.”

Since its implementation, the intercept law has been used to garnish funds from three of the most economically depressed cities in the state: Harvey, North Chicago and most recently, East St. Louis. Wirepoints covered the details of in our report: Will COVID-19 lead to “pension intercepts” and cuts to core city services across Illinois?

Illinois cities are in desperate need of a pension amendment to the Illinois Constitution and subsequent pension reforms. Other cities are in need of bankruptcy protection – or at least the option to pursue one. Unfortunately, given the current attitude in the state capitol, none of those reforms will happen anytime soon.

*Chicago is excluded from Wirepoints’ analysis of 175 cities. Chicago deserves a standalone analysis given its unique position in Illinois and its status as the third-largest city in the country. Chicago had 13,353 active police in 2019, down 393 officers, or 3 percent, compared to 2003. 

Appendix. Cities across Illinois have made significant cuts to their number of police officers since 2003

Read more from Wirepoints:

• Communities in crisis: More than half of Illinois cities get “F” grades for local pensions
• Will COVID-19 lead to “pension intercepts” and cuts to core city services across Illinois?
• Harvey, the first domino in Illinois: Data shows nearly 400 other pension funds could trigger garnishment
• COVID-19 pushes nation’s weakest public pension plans closer to the brink: A 50-state survey
• Wirepoints’ Pension Solutions page