Illinois cities prepare for pension diversion law - News - Rockford Register Star - Rockford, IL

 

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.

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Governor’s agenda goes local; Rauner’s plan wins one, loses one – Illinois News Network

 

SPRINGFIELD — The latest battleground for Gov. Bruce Rauner’s agenda is turning out to be city council chambers.

The Rauner administration, by way of organizations including the Illinois Municipal League, is providing city councils and other bodies with a draft resolution in support of its “Turnaround Illinois” plan.

That resolution voices support for many of the governor’s favorite themes, including those that have put him squarely at odds with unions: right-to-work zones, repeal of prevailing wage law and the elimination of project labor agreements for construction projects.

On Monday, the governor scored a win in East Dundee, where the village board adopted the resolution in its entirety by a 6-0 vote without contention, public comment, media coverage or backlash.

Village Administrator Robert Skurla noted the resolution only expresses support for the governor’s agenda and has no force in law.

Still, Skurla said, had East Dundee trustees the option to opt out of prevailing wage requirements, for example, they’d probably put that on their agenda for a vote as fast as they legally could.

The village has or is spending millions on public development works, including upgraded police and fire stations, and it could have saved about 20 percent if not for prevailing wage requirements, Skurla said.

“It’s been a very frustrating experience in trying to balance a budget and yet having to pay prevailing wage rates, especially to contractors who are probably not union shops to begin with,” Skurla said.

“We definitely know our tax dollars could go further on projects we’ve been building here,” he said.

On Tuesday, the story was markedly different in Oswego, where the resolution’s presence on the agenda for discussion, but not a vote, drew a packed house.

The audience, composed largely of union men and women, was firmly in opposition.

“Right to work is not an economic development; it’s an economic regression,” said Scott Roscoe, president of the Fox Valley Building Trades Council. “The middle class doesn’t need another obstacle.”

“I ask you to carefully review this resolution and reject it and the attacks on workers in your community,” he told village trustees.

Roscoe and the speakers who followed him and supported his remarks — including U.S. Rep. Bill Foster, D-Naperville — were met with applause.

Trustee Pam Parr asked why the resolution was before the council “since we should not and cannot legally deal with it on a local level.”

Village President Brian LeClercq said he wanted the draft resolution in front of all trustees and publicly discussed as a matter of openness.

And he said, since the items in the resolution could affect the community of about 30,000, he wanted to reply to the state’s request for information with accurate input from the community.

Parr, to applause, responded, “I was just asking because I’ve been telling the state my opinion for 12 years and they haven’t changed anything.”

Asked about the Oswego meeting, Rauner’s staff issued a statement:

“Employee empowerment zones are designed to let local communities decide if they want union representation or not. If Oswego decides to maintain union workforces, that will be their decision, and not a decision Springfield made for them. … empowerment zones will allow communities to better compete with surrounding states when attracting new businesses, which will help strengthen the middle class by providing more opportunities for jobs,” the statement said.

Brad Cole, executive director of the Illinois Municipal League said the organization distributed the draft resolution because many of the subjects it contains are core issues for its members.

But Cole, a former Carbondale mayor, said the league knows it serves cities and villages of every possible political makeup and just wants to see the issues in the resolution discussed.

“We haven’t taken any action for or against, we just want the discussion to take place,” he said.

Cole said municipalities are free to do as they see fit with the proposed resolution and they have the option of adopting all of it, parts of it or none of it.

In Springfield, the first-term Republican governor appears to face an uphill fight.

Traditionally labor-friendly Democrats hold overwhelming majorities in both chambers of the General Assembly.

Additionally, Illinois Attorney General Lisa Madigan, a fourth-term Democrat from Chicago, has issued two opinions saying right-to-work zones and the prevailing wage laws are — without enabling legislation from the General Assembly — off limits to local government.

Governor’s agenda goes local; Rauner’s plan wins one, loses one – Illinois News Network

Bill pushes for possible municipal bankruptcies in Illinois - News - Rockford Register Star - Rockford, IL

 

SPRINGFIELD — Stressed by pension debt, other financial issues and the possibility of losing a chunk of their state aid, some Illinois cities want the option to file for bankruptcy.

They’ve found an ally in a Republican, who’s proposed legislation to allow municipalities to follow in the footsteps of Detroit and other cities in restructuring debt and paying back creditors. Opponents, however, say there are less drastic, intermediate steps.

One thing is clear, Rockford Mayor Larry Morrissey told senators this month: “If history has proven anything in this state, delay, deferral and denial are not solutions.”

Twelve states authorize cities to file Chapter 9 bankruptcy filings, according to the National Conference of State Legislatures, and another 12 grant conditional ability to file. Twenty-six states either don’t have Chapter 9 authorization or prohibit it.

Rep. Ron Sandack of Downers Grove is sponsoring legislation that would grant authority for communities to file for bankruptcy under Chapter 9 of the federal code. He says House Bill 298 is a “measure of last resort,” especially with Gov. Bruce Rauner’s proposal in next year’s budget to cut in half the local governments’ share of state income taxes by 50 percent.

“It’s just giving time and space to do things right.”

But not even wealthy towns are immune to costs associated with unsustainable pensions and personal and long-term debt, which can make bankruptcy seem like a viable option. Laurence Msall, president of the Civic Federation, a Chicago-based, nonpartisan government research organization, and other critics recommend establishing an authority that can work with the local government before a bankruptcy judge would consider approving a filing.

“Bankruptcy is a very dangerous place for us to be heading,” he said.

Municipal bankruptcies are rare, NCSL data shows. Of 37 local government filings since 2010, eight are cities; the majority were filed by utilities and special districts.

Detroit filed for the nation’s largest municipal bankruptcy in July 2013, looking to restructure $12 billion of debt. Michigan allows Chapter 9 filing when certain conditions are met, and Gov. Rick Synder appointed an emergency manager to handle Detroit’s finances and negotiations with creditors. Late last year, a federal judge approved a plan in which Detroit was able to erase or restructure $7 billion of its debt.

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Mayors hit cuts in Rauner plan

 

By Bob Rakow and Jack Murray

Orland Park would see a loss of $3 million in state funds under Gov. Rauner’s proposed budget, a group of Chicago area mayors said last week.

Local mayors oppose Gov. Rauner’s first budget plan unveiled last Wednesday as they contemplate the cuts it proposes in the share of state income tax funds Illinois disburses to cities and villages.

               The governor’s call to reduce those funds by 50 percent would cost localities nearly $50 per resident, according to the Metropolitan Mayors Caucus, which is chaired by Orland Park Mayor Daniel McLaughlin. Thus, Orland Park with a population of 60,000 would see its annual local share cut by about $3 million, the mayors group said in a statement on its website.

“The Caucus’ member mayors from 273 municipalities in the Chicago metropolitan area are very concerned about how this $600 million cut will affect their abilities to provide essential services to their residents,” the statement added.

“I’m not sure Governor Rauner understands the effect this proposal will have on local governments,” Mayor McLaughlin said in the group’s statement. “Our annual budgets have already been adopted. Communities are counting on their share of the income tax to pay for local services. Reducing revenues will force communities to have to make further decisions to lay off police officers and firefighters, end repairs to critical infrastructure and cut other key services. These are real decisions that will impact the everyday lives of our citizens.”

To the north of Palos-Orland, the six communities of Worth, Palos Hills, Chicago Ridge, Oak Lawn, Hickory Hills and Evergreen Park could combine to lose $6 million a year if Rauner’s proposal becomes reality and that has some of their mayors fuming.

In Oak Lawn, Mayor Sandra Bury is concerned but added she would welcome an opportunity to show what the cuts could do to her community and towns all across the state.

“I would like to invite him to Oak Lawn anytime,” Bury said last week in reaction to Rauner’s proposed 50 percent cutback in towns’ annual share of state income tax revenue.

She thinks he should see her town as it would serve as a model for him to check out.

Bury would like to open the village’s books to the newly-elected governor and explain that Oak Lawn and other communities throughout the southwest suburbs cannot afford such a significant revenue hit.

She’d also like to point out that Oak Lawn—like most other towns—does not have cash reserves on hand for a rainy day.

If approved, Rauner’s cuts would mean an estimated $2.7 million annual revenue loss for Oak Lawn, Bury said. It’s a figure the mayor has a tough time grasping. Indeed, the village would have few options to make up the loss.

“You either layoff or raise taxes. It’s wrong,” Bury said.

At a time when Oak Lawn and other communities are already making budget cuts to fully fund employee pensions, a significant revenue reduction from the state is the last thing they need, Bury said.

McLaughlin and Bury are not alone in their displeasure with Rauner’s plan.

Palos Hills Mayor Gerald R. Bennett said the proposal is unnecessary.

“All they’re doing is putting (the burden) on the backs of local residents,” said Bennett, president of the Southwest Conference of Mayors. “They’re going to bankrupt local governments.”

Palos Hills and other communities such as neighboring Hickory Hills already operate with fewer employees in key departments such as public works than they did just a few years ago, Bennett said.

Additional reductions in manpower would make it extremely difficult to provide basic services to residents. Additionally, towns would have a tough time avoiding cuts to the public safety, he said.

“It will bankrupt us. The fight is on, I guess,” Bennett said.

Evergreen Park could lose approximately $500,000 annually if Rauner’s proposal becomes a reality. “I hope he doesn’t fix (the state’s financial problems) on the back of local governments,” said Evergreen Park Mayor Jim Sexton. “We can’t afford to pay other people’s bills.”

Worth Mayor Mary Werner said she’s uncertain how her community would absorb additional revenue losses, which would also equate to about $500,000 under Rauner’s plan.“That would be a huge loss. We’ve already made major cuts,” Werner said, referring to numerous staff reductions made within the past five years.

“I understand the state of Illinois is a horrible, horrible financial state,” Werner said. She added that municipalities are required by law to approve a balanced budget while the state is remedy its budget woes on the backs of municipalities.

“We’ve been making sacrifices for years,” Werner said. “At the local level, we’re all doing a good job living within our means.”

Hickory Hills Mayor Mike Howley agreed. He said his city relies on the utility tax to help balance the annual budget. The city has put off capital improvement projects such as street and sewer work to help make ends meet.

Chicago Ridge Mayor Chuck Tokar echoed the feelings of his mayoral colleagues.“That’s a big chunk of change,” Tokar said. “I wasn’t expecting [Rauner] to say that. I can’t replace $600,000, $700,000.” Tokar admitted that that his town is fortunate to draw sales taxes from a regional shopping mall, but that revenue stream would never replace the state’s money, he said.

At least one local elected official said he agreed with Rauner’s plan.

“I would say there’s always room for cuts,” said Palos Hills Alderman Al Pasek. He added that smaller communities should consider merging if they can no longer go it alone. But mayor and many aldermen

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