CHICAGO – Illinois mayors from Rockford to Peoria reiterated their call Monday for lawmakers to overhaul local police and fire pension systems to avoid strains on municipal budgets, but there were few signs the Legislature would take up the issue anytime soon.
No legislation has been drafted, talks are still in preliminary stages, and several mayors expressed skepticism they’d get a plan approved in an election year. The Legislature only recently approved a plan for two of Chicago’s systems after grappling for years with how to address the state’s nearly $100 billion in unfunded pension liability.
But during a news conference Monday, the mayors made it clear they wanted in on the discussions, especially after lawmakers approved legislation for Chicago’s municipal employees and laborers. The city has yet to address the $10 billion shortfall in police and fire retirement system funds.
Mayors from Chicago’s suburbs and elsewhere described a phenomenon familiar to Illinoisans: Rising pension costs are crowding out funding for other services and municipalities are dealing with major cutbacks.
“We’re on a clearly unsustainable path that continues to spiral out of control,” said Peoria Mayor Jim Ardis, who called it the city’s biggest financial issue.
Illinois has the worst-funded pension system nationwide, largely because lawmakers skipped or shorted payments for years. The shortfall has led to repeated downgrades from credit rating agencies and criticism from business groups. The issue dominated lawmakers’ agendas last year, and they approved a new law, which essentially cuts benefits for state workers and retirees. Unions fought the measure and have filed several lawsuits challenging its constitutionality.
Pension programs are created by state law, so only state legislators can make changes. The mayors said they’d like their plan to echo what the state did. Their suggestions included raising the retirement age and lowering annual cost-of-living adjustments.
However, approving a plan before lawmakers adjourn on May 31 will be difficult. Legislators have to approve a budget by then and face the question of what to do when a temporary income tax increase rolls back in January and leaves a roughly $1.6 billion revenue dip. Gov. Pat Quinn wants to extend the increase, which will be a hard sell ahead of November.
Several mayors acknowledged the difficulty.
“The math, in fact, is easy,” said Rockford Mayor Larry Morrissey. “The politics, unfortunately, is hard.”
State Rep. Elaine Nekritz, a Northbrook Democrat central in previous pension talks, said a municipal pension bill would be complex to draft and debate in a few weeks. Senate President John Cullerton’s spokeswoman Rikeesha Phelon said it was critical to “maintain momentum fueled by recent pension agreements.”
State Sen. Terry Link, a Waukegan Democrat who’s in on talks with mayors and unions, said negotiating specifics was a “long ways” away. But he said the goal was to get a deal before the end of the spring session.
Unions contend the plan the state approved is unconstitutional and mayors’ efforts are a way to avoid making required contributions to pension funds.
State law will require cities to make required contribution increases in 2016 or the state will do so by diverting state grant money to cities into pension funds. Mayors say they’ll have to make steep cuts to meet pension obligations.
State statistics show police and fire retirement funds have an average of 55 percent of the money needed, down 20 percent the past two decades. Mayors claim part of the problem has been legislator-approved “pension sweeteners” with no additional money to pay for them.
Illinois Police Benevolent and Protective Association director Sean Smoot said public safety officials face risks each day and should receive their constitutionally-protected benefits. He said cities haven’t kept up with required payments and are now facing tough decisions because of it.
“They’ve created a crisis,” he said.
He said 2011 statewide changes that reduced benefits for new employees are helping the situation. Smoot and the head of the Associated Firefighters of Illinois have also pointed to improving investment returns in recent years.