ROCKFORD — Cities across the state with underfunded police and firefighter retirement systems must get payments back on track or risk losing a slice of state tax dollars.
Municipal governments are preparing to meet the demands of a 2011 pension law that requires them to fund employee pensions to required levels in 2016 or risk having state grants diverted from their intended purpose into the pension fund. The law is designed to bring pension funds up to 90 percent funded by 2040, and local governments must make payments that will put them on track to do so. The law is not affected by the Illinois Supreme Court's decision Friday to strike down a piece of 2013 pension legislation.
The law is a concern for many municipalities that have a lot of ground to make up, said Joe McCoy, legislative director for the Illinois Municipal League. "The difficulty and the reason we have so many concerns is, for many communities ,that's a pretty steep ramp."
The law says that in 2016, one-third of state grants could be diverted to the pension fund if the required payment isn't met. That increases to two-thirds in 2017 and all of the grants by 2018.
"That's a lot of money for cities to lose out of their operating budgets," McCoy said. The consequence could be cuts in services or property tax increases to meet the pension demands. Gov. Bruce Rauner proposed a property tax freeze during his State of the State speech in February, which puts a further squeeze on municipal budgets, McCoy said.
"We're actually, through a myriad of different policies, encouraging municipal budget problems."
McCoy said pension reform is needed to help municipal and state budgets.
The Great Recession of 2008 was the start of many municipalities' pension funding problems, Loves Park Mayor Darryl Lindberg said. His city does not levy a property tax, which is how most governments fund their pension systems. The city relies heavily on sales tax, so it suffered major losses during the recession when shoppers were buying less.
"When we hit the recession, most communities, including Loves Park, reduced (pension contributions) because we just couldn't afford to put it in," he said.
The city's police pension was 48 percent funded as of April 2013, the city's most recent audit. It's risen since then because the city has met its required contributions for the past two years in a row, contributing $774,000 last year, Treasurer John Danielson said. He and Lindberg said the city will be able to meet its requirements in 2016.
The village of Rockton's police pension fund is about 76 percent funded, Mayor Dale Adams said. The village pays $250,000, about 5 percent of its general fund budget, to finance its pension contribution. Adams said the village will be able to meet the required payments next year.
Read more by clicking on the following: Illinois cities prepare for pension diversion law - News - Rockford Register Star - Rockford, IL
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