Oak Leaves

Oak Park's budget 'gorilla': pensions: Keeping pensions funded is challenge of 2011 budget makers

Thursday, October 14, 2010

Entering its third year in a recession economy, Oak Park village government released the 2011 tentative budget Monday, showing balanced spending, but one ominous expenditure to come -- police and fire pensions.

The $125 million budget did not call for increased property taxes for operating expenses, and neither employee layoffs nor cuts to partner agencies were recommended to trustees.

Over the past three years to save money, said Village Manager Tom Barwin, the workforce was reduced by 70 employees, or 20 percent.

Non-union pay increases were not budgeted for 2011, but some multiyear negotiated contracts such as police and fire were "locked in" at 2 percent, Barwin said.

Barwin described the 2011 budget that bridged a $1.7 million deficit as a village "continuing to navigate carefully through the great recession, while not resting on its laurels."

Still, Barwin and elected officials foresaw bad news on the fiscal horizon.

"The gorilla in the budget is the reality of the mandated Illinois police and fire pension system," Barwin said.

In Oak Park, funding both pensions will be $860,000 more in 2011, up from $6.2 million in 2010 to more than $7 million in the upcoming fiscal year, he reported.

The 3 percent proposed property tax levy jump will pay for $779,000 of the $860,000 needed to cover the retirement package.

Oak Park's pension funding has continued to decline. In 2009, police pensions had a funded ratio of 55.9 percent, down from 70.4 percent in 2008. The fire pension fund was also down, at a funded ratio of 46.3 percent in 2009, from 57.6 percent in 2008.

While benefit levels are rising faster than inflation, the village is finding it hard to keep up.

Currently, firefighter pensions amounted to 50 percent of the department's payroll, of which Barwin said was "simply not sustainable."

He also said should state government continue to set pension rates, Illinois villages will be forced to reduce police and fire services or drastically raise local property taxes.

Barwin told trustees that he often talked with local officials on the pension matter and that discussions were under way to form a liaison committee to meet with state officials in seeking solutions.

Yet, Trustee Colette Lueck suggested going beyond mere meetings with surrounding villages to instead developing a firm strategy.

"This is an incredibly significant issue for voters. I don't think people understand how taxes pay for pensions. This will bankrupt our village," she said.

Trustee Jon Hale said funding pensions could be recovered by laying off five to six police officers, but Barwin said seven would have to be let go before making a fiscal difference.

"If we can't afford the increase, it will bleed over into the operating budget where services could be cut. Something desperately needs to be done on the pension-reform front," Hale said.

Under capital improvements, $200,000 was budgeted for in tax increment financing for engineering and design costs for upgrading Madison Street from Oak Park to Harlem avenues.

An estimated $6 million in TIFs was set aside when it expires for right-of-way infrastructure and streetscape improvements on Madison Street.

Barwin said before Monday's budget overview the Madison Street project could include a protected bicycle lane separate from the street.

For South Marion Street, village officials were hoping to receive a $26 million grant from the U.S. Department of Transportation for constructing bicycle and pedestrian amenities that would unify all three business districts -- Downtown Oak Park, The Avenue and South Marion Street around the Green Line commuter station on South Boulevard.

"We want to integrate these districts. We're up against incredible competition for this federal grant. Nothing ventured, nothing gained, but I think we have a unique concept by utilizing the Green Line, which is a real asset when trying to develop a village around a transit center," Barwin said.

Several budget reviews will be scheduled before the Village Board can adopt the 2010 budget possibly on Nov. 15.
The complete tentative budget and a suggestion box is at www.oak-park.us/finance.