MT. VERNON — The city council discussed the unfunded pension liabilities in the Police and Firefighters Pension funds, agreeing reform must come from Springfield to fix the problems.
“We have very little control of these pensions at the local level,” said City Manager Ron Neibert. “What we can do is to first make sure we have good, diligent people on the boards who are fairly applying the laws, and two, we need to make sure they are making the best investments possible.”
Neibert and City Finance Director Merle Hollmann told the council about state legislation that affected the average age of pensioners — with younger pensioners leading to more years of collecting a pension — and the percentage of pension surviving spouses now receive.
“We’re not discussing whether these laws are good or bad, we’re just looking at the math,” said Councilman David Wood, acting as Mayor Pro Tem due to the absence of Mayor Mary Jane Chesley. “This is not about whether we believe the legislation is right, we just need to look at the numbers so we can plan accordingly.”
According to information from the city, the average age of retirement pensioners is 52 on the two pension plans; the average age of those on the disability pension is at 45 years.
The second change which affects the two pensions — not those employees on the Illinois Municipal Retirement Fund — is the surviving spouse benefits.
“Before the law changed, surviving spouses received 50 percent of the pension amount,” Neibert explained. “But in 2004, when the statute was passed, affecting the firefighter pension fund, the surviving spouses get 100 percent of the pension plus a cost of living increase every year. The law was already in effect for the police pension fund.”
Since 2012, the city has funded 100 percent of its annual obligation to the fund, and funds at a 22 year amortization level, even though it is authorized to use a 30 year amortization period.
In the 2015-16 fiscal year, new laws go into effect that unfunded pension liability will be on the general ledger for municipalities across the United States.
“It will be a better reflection of our financial position,” Wood said. “The concept is that if the information is right there, you will pay attention to it. The liability is in the finances, it’s just brought to the forefront more in the general ledger.”
Wood said he is in favor of paying more of the unfunded liability each year, which would increase the property taxes, but not have a spike in taxes. Councilman Dennis McEnaney disagreed.
“I’m so disappointed with the state for not taking care of this problem,” McEnaney said. “I’m not comfortable with being more aggressive in paying. I’m inclined to go with 28 percent, and keep our taxes as low as we possibly can. I’m against raising taxes — make the state fix the problem. ... I don’t think we should take it on the chin by charging more property taxes to pay for unfunded pension liability. I’d rather follow (the state) guidelines and educate people so they can contact Springfield. This isn’t going to go away. Where we should be aggressive is in educating the public.”
All councilmen agreed in holding Truth in Taxation Hearings — even when not required by law.
“Every taxpayer should know the increases go to the pensions,” Councilman Todd Piper said. “I think we should always have the hearing.”
“I don’t think we should avoid them either,” Wood said. “We always have, and I know they can be uncomfortable.”
“I think we need to let the public know we’re increasing levies and why we’re doing it. Not because we just want to, but because it has to be done.”
Piper predicted the issue of unfunded pension liability for police and firefighter pensions will be brought to Springfield by the officers themselves.
“It’s going to become a self-preservation issue for pension boards,” Piper said.
“It’s hurting the future of our firefighters and policemen,” McEnaney added.
The council asked Neibert to prepare a formal policy regarding holding Truth in Taxation Hearings for every levy.