DEANA STROISCH
The State Journal-Register
Dec 16, 2012
Springfield will be required to pay an additional $1 million next year toward police and fire pensions, bringing the city’s total payment for fiscal 2014 to more than $18 million, according to budget director Bill McCarty. The $1 million increase comes as a surprise, McCarty said, and probably will force the administration to delay equipment-purchase requests from the police and fire departments, among others.
Mayor Mike Houston wants the city to pay even more toward police and fire pensions next year. He told aldermen recently that the city plans to continue to assume an investment rate of return of 7.5 percent, but base its payments on a rate of 7.25 percent. By doing that, the city will pay an additional $900,000 to $1 million, McCarty said.
Ward 7 Ald. Joe McMenamin contends that’s not enough. For months, he has urged the administration to estimate a more realistic rate of return of 5.5 percent. That would cost an additional $4 million next year, the city estimates.
“As a city, we need to base long-term financial planning on realistic premises,” McMenamin said. “It is unwise to finance the city’s current operations by shortchanging our pensions. It creates and compounds a future financial crisis. This is precisely what is happening now to the state of Illinois government.”
Springfield’s unfunded police and fire pension liability increased nearly $11 million in the last year alone, a recent actuarial study ordered by the city found. The unfunded liability for the firefighter pension fund totaled $116.7 million as of Feb. 29, according to the study done by Chicago-based actuaries and consultants Goldstein & Associates. The unfunded liability for the police pension fund totaled $99.8 million.
Growing problem
For years, the city has largely blamed police and fire pensions for its financial troubles. State-required pension sweeteners and out-of-whack actuarial estimates contributed to the city’s increasing unpaid liability.
Back in fiscal 2000, the city paid a total of $4.5 million toward police and fire pensions. Today, nearly all of the city’s portion of property taxes pays for $17 million-plus that’s devoted to police and firefighter pensions.
Insufficient resources
McCarty said the rate of investment return is only one of many factors that have contributed to the growing unfunded liability. “We would love to contribute more,” McCarty said. “The problem is we don’t have the resources to do it.” Since the city hasn’t increased revenue, he said, pension obligations have been taking away from other city services.
McMenamin said increased pension payments shouldn’t be solely through increased revenue. He said the city should freeze employee salaries, and he has consistently voted against union contracts — like the ones just approved — that call for pay raises.
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City pension fund contributions
Fiscal year Fire pension Police pension Total
FY00 $2,054,221 $2,452,333 $4,506,554
FY01 $2,076,874 $2,677,202 $4,754,076
FY02 $2,869,394 $2,946,483 $5,815,877
FY03 $3,040,200 $3,316,315 $6,356,515
FY04 $3,414,096 $3,531,702 $6,945,798
FY05 $3,898,795 $3,953,059 $7,851,854
FY06 $4,405,554 $4,460,984 $8,866,538
FY07 $5,349,896 $4,801,235 $10,151,131
FY08 $6,131,904 $5,382,890 $11,514,794
FY09 $6,584,176 $5,714,717 $12,298,893
FY10 $8,877,096 $8,008,143 $16,885,239
FY11 $8,351,704 $7,897,449 $16,249,153
FY12 $9,231,395 $8,550,052 $17,781,447
FY13 $9,206,265 $7,844,957 $17,051,222
Joe McMenamin for Ward 7 