DeKalb among 38 towns, cities taking pension issue to voters

Wednesday, September 22, 2010

DeKALB – The DeKalb City Council recently listened to presentations from the presidents of two local pension boards on the current funding situation for pensions.

But the questions and discussion among aldermen were limited to facts, and not opinions, because the question of pension policy will be asked of voters in November.

An advisory referendum will appear on the ballot for city residents voting in the Nov. 2 election asking them if they would like to see pension reform for public safety employees.

Specifically, the question reads: “Shall the Illinois General Assembly and Governor take immediate steps to implement meaningful public safety pension reform which will relieve the extensive burden on local taxpayers now that the General Assembly and Governor have reformed the pension system for all other public employees?”

Retired DeKalb Police Lt. Jim Kayes, president of the police pension fund board, said during his presentation last Monday to the city council that he believes the language on the ballot makes it difficult to vote no.

Kayes acknowledged that proponents of the reform say it will better align the public employee pension system to that of the private sector. But this isn’t always a good thing, he said.

“I think you can pluck a lot of examples over the private sector and their business behaviors over the last few years that we don’t want to emulate,” Kayes said.

Kayes and Eric Hicks, president of the firefighter pension fund board, stressed that their respective boards’ responsibilities are mandated by state law, and it’s their job to enforce the laws in place.

“The fight is not with your local employees; the fight is in Springfield,” Hicks, a firefighter, told the council.

Proponents of reform contend the current laws guiding public pensions have meant a deepening hole for the municipalities cutting the checks.

Contributions to pensions have been one of the leading growth factors to municipalities in recent years, said Larry Bury, policy director for Northwest Municipal Conference.

The conference is an association of north and northwest suburbs that, along with the city of DeKalb and other municipalities, have joined the Pension Fairness for Illinois Communities coalition to work toward pension reform.

“It’s important for our citizens to understand how these pensions get funded and the cost they’re having on them,” Bury said.

In DeKalb, city contributions to the firefighter pension fund jumped from $1.5 million in 2007 to $2 million in 2009 – an increase of 32 percent, Assistant City Manager Rudy Espiritu said. Contributions to the police pension fund increased 56 percent over the same time period, or from $864,000 to $1.3 million.

The city pays its pension obligations by levying property taxes. The tax levy covers all police and firefighter pensions, plus a small portion of Illinois Municipal Retirement Fund and Social Security payments, Espiritu said.

Bury said that when most of a city’s property tax base is going to pay pension costs – and when those costs are doubling or tripling in recent years for some cities – “this is simply not a sustainable trend.”

In DeKalb, the firefighter pension fund is funded 40.4 percent, and the police pension fund is funded at 55.9 percent, according to the most recent data from the actuarial report.

The state has mandated that these pensions are fully funded by the year 2033. The city has a goal of having the pensions 75 percent funded by 2019, a benchmark that was recommended by the city’s financial advisers, Espiritu said.

And last year, the first time in almost 20 years, the DeKalb City Council raised taxes to help fill the gap created by the growing cost of pensions. The 2009 tax levy raised the tax rate from 60 cents per $100 of equalized assessed valuation to 65 cents per $100 EAV.

One point of contention that Kayes raised to city aldermen was that the city uses its own actuary to crunch numbers instead of numbers provided by the state’s actuary. Using the higher levy amount proposed by the state’s actuary could mean the funds are more fully funded, Kayes said.
The difference between the state’s actuarial numbers and the city’s actuarial numbers in 2009, for instance, was slightly over $200,000 for each fund.

“That adds up to a lot of years and a lot of percent and a lot of dollars,” Kayes said. “Had we gone to the state’s levy, would we be in better shape today? I think so.”

DeKalb is far from alone. Thirty-seven other municipalities will have advisory referendums on ballots come November, Bury said. During the February election, Barrington and Lake Forest posed the question to voters, and each received about 90 percent in support, he said.

Because it’s an advisory referendum, no action needs to be taken. But Bury believes the broad cross-section of cities and towns taking part in the referendum is a meaningful action calling for change in Springfield.

“We definitely think it’s going to get attention as we get closer to the November election,” Bury said.