Public pension reform is now a front-and-center issue in Illinois politics

Sunday, March 28, 2010

In little Cary, Ill. — home to 18,000 fine folks in eastern McHenry County — $90,000 is big money. So when the cost of pensions for the village police department leapt that much in just one year, the village decided to do something about it. It joined a coalition seeking change in Springfield, where the rules about who pays and who gets municipal pensions are made.

Call it a sign of the times.

After decades in which pension news was covered only by the likes of the Actuarial Times, pensions and their costs have exploded as an issue in Washington, Springfield and every state capital in between.

Only a few days ago, the Washington, D.C.-based Pew Center on the States reported that Illinois ranks dead last of the 50 states in setting aside funds to pay state workers and teachers when they retire, with just 54% of the money it will need. Next week, Illinois Senate President John Cullerton will introduce legislation that likely will raise the retirement age, which now ranges from 50 to 60 under various state plans.

It's far too soon to say how any of that will work out. But the depth of the problem — Illinois' unfunded pension liability tops $80 billion — finally is beginning to sink in.

The coalition Cary joined is called Pension Fairness for Illinois Communities. With members including the Northwest Municipal Conference and the DuPage Mayors and Managers Conference, it wants to reduce benefits for newly hired police officers and firefighters, up the share of the retirement bill that beneficiaries pay from about a third today to 50%, and stretch out the time it has to reach the goal of 100% funding.

It also wants to require a 60% supermajority for the General Assembly to sweeten any pension benefits.

The other side is represented by folks like Chuck Sullivan, a firefighter in Downstate Champaign who lobbies for the Associated Firefighters of Illinois.

Mr. Sullivan won't comment directly on the coalition's plan — "We're open to negotiation," he says — but doesn't waste any time playing his own emotional card.

"This is a young person's job," he says. "Our members don't take this job to get rich by moving around disentangled bodies . . . or running into a burning building to rescue a child. We understand the communities' plight. Every single firefighter is a taxpayer as well."

It's hard to counter that with arguments about mere cold, hard cash. That may explain why the lawmaker who's carrying the coalition's bill this session, Rep. Karen May, D-Highland Park, keeps saying, "I love my police and firefighters."

The depth of the problem finally is beginning to sink in.
At the moment, Ms. May's measure, House Bill 5297, would do only one thing: cap local property tax increases for pensions at a maximum of 10% a year. But that's just kicking unfunded liabilities down the road, and Ms. May clearly is looking for something more in upcoming negotiations.
"My goal is to have a pension level that is sustainable so communities don't have to raise their taxes or cut back their public-safety staff," she says.

A competing bill, by firefighter ally Rep. Dan Burke, D-Chicago, also would extend the time towns have to come up with their pension money. And, believe it or not, it would make it illegal for a community to hire its own actuary. They'd have to rely on figures provided by pension boards.

But even Mr. Burke concedes that change is coming. "We don't have the resources to do what we've done before," he says. "A whole new pension formula is going to have to be devised for the new hires."

Cary Mayor Tom Kierna says he's waiting. Only a few years ago, police pensions cost the village $140,000 or $150,000 a year. Now they're at the $400,000 level and projected to increase 10% to 20% a year indefinitely.

"The liabilities being placed on us have grown measurably," he says. "The time is way past due for meaningful public-pension reform."