Bankruptcy May Be Only Option For Many Illinois Municipalities Facing Pension Crisis

Illinois — Insights into a new report soon to be released in full by Wirepoints says that Illinois’ pension crisis is overwhelming Illinois cities and taxpayers, and that many municipalities are running out of options.

In an article released May 8th, Wirepoints says they performed an analysis of Department of Insurance data and found that nearly 400 of Illinois’ 650 downstate public safety pension funds did not receive their fully required pension contributions in 2016, meaning more than 200 municipalities failed to meet their obligations. A problem that could bring even more chaos to Illinois’ dire fiscal situation.

“In too many communities, pensioners’ retirement security is being wiped out. Homeowners’ equity is being destroyed. Businesses are being driven out by taxes. And cities are cutting back on services. Nobody is winning; everybody is losing. The negative impact of the broader downstate pension crisis can’t be overstated.”

Wirepoints performed an analysis of 180 Illinois cities with both a dedicated police and fire pension fund, examining their finances and their pensions. Over the past 13 years – the time period for which individual pension fund data is available – finances have worsened dramatically in cities across Illinois. The findings will be released in a forthcoming paper, according to the article.

Wirepoints does list a sample of 20 cities with populations above 25,000 where pensions are wreaking havoc and putting pressure on city budgets. Overall, the report says, their funding ratios have either collapsed or remained near-insolvent. “Many cities will see 20 to 25 percent of their general budgets consumed by pension costs next year. And taxpayers are putting in far more toward pensions only to watch their systems’ funding ratios fall.”


“Little to nothing is being done to fix the crises. Local officials lack the power they need to make the effective changes that could help turn their communities around. And the state, which sets all the mandates that handcuff communities, refuses to hand over control to localities.”

The dire situation of Illinois’ cities was made more real when the state comptroller intercepted Harvey and North Chicago revenues on behalf of their local pension funds. It demonstrated a simple fact that’s gone unacknowledged: Illinois cities are reaching a breaking point.

The article goes on the say that in most cases, the promises granted to workers have grown so much that cities have been forced to choose between funding pensions and funding basic operations. Or between funding pensions and paying for their workers. Or between funding pensions and taking care of their roads.

Harvey fired 40 public safety workers in response to the comptroller’s intercept. But plenty of other cities have had to make hard choices. Granite City has taken out loans to pay for pensions and has laid off four police officers and seven firefighters. Springfield previously laid off police and fire workers, closed public libraries and cut public works employees. Some communities have gone so far as to start selling assets to make their pension payments. Alton is selling its water treatment plant in order to afford its pension payment this year.

And in Danville, city officials have enacted a “public safety pension fee” that could amount to economic suicide. Simply hiking taxes without changing any of the systems that drive up the cost of pensions won’t fix the problem. It will only drive more people away.

In 1987, municipalities owed a total of $2.6 billion in benefits to public safety workers and retirees across the state. Today, that number has jumped to $23.4 billion. That’s nearly an 800 percent increase.

In an article in the Chicago Tribune, it says that every person in Illinois owes $11,000 for pensions, with no fix in sight.

“Three years ago Tuesday, the Illinois Supreme Court struck down the state’s attempt to cut its employees’ pension benefits to chip away at a retirement-system debt that’s swelled to almost $11,000 for every man, woman and child”

Those total owed pension promises have grown at a pace that’s swamped local economies, inflation and household incomes. Inflation has risen by just 111 percent and household incomes by 127 percent over the past 30 years.

In an article from NW Illinois News, it states that analysis of the Freeport Police Pension Fund shows it would go bankrupt in seven years without taxpayer subsidy.

“Without members and taxpayers subsidizing its revenue, Freeport Police Pension Fund lost $3,058,446 in 2016, according to a NW Illinois News analysis of the latest data reported to the Illinois Department of Insurance Pension Division.

The fund has $21,160,198 in total assets. If the funds annual losses were the same, it would run out of money in seven years without these subsidies.”

With the amount it’s obligated to pay pensioners outpacing the funds it has on hand, 74.4 percent of the Freeport Firefighters Pension Fund fund is funded, according to the latest data reported to the Illinois Department of Insurance Pension Division. The fund’s actuarial funding position has gotten worse over the past five years. In 2016, 74.4 percent of the fund was funded. Five years ago, 74.4 percent was funded.

For many cities, the time for structural reforms have probably passed. For those communities, bankruptcy, if their particular circumstances are right and if it’s not already too late, is the only option that can protect retirees, restore financial stability and assure basic services.

To get a full picture of how dire the situation has become, you can read the full Wirepoints article here.


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