Jamie Munks
The State Journal-Register
Stakeholders gathered Monday for Springfield’s first pension summit, to start discussing how to chip away at the city’s pension debt predicament.
City Budget Director Bill McCarty called the pension issue “somewhat of a conundrum,” as the city’s employee head count has declined over the past few years and the city has put more money toward police and fire pensions, but its multimillion-dollar unfunded liabilities continue to grow. Meanwhile, he said, the city’s pension obligations diminish its ability to offer services to Springfield’s roughly 117,000 residents.
“We are now getting to the point where the cost of those benefits is starting to jeopardize those very services we’re providing,” McCarty said. “… If nothing is done, we’re going to be at a point where we’re cutting more and more because we can’t do anything else.”
In fiscal 2006, the city’s contributions to the police and fire pension funds were each about $4.4 million, combining to make up about 10 percent of the city’s roughly $85 million in corporate fund expenditures that year. The contributions have inched up in the past decade, and in fiscal 2015 made up roughly 16 percent of corporate fund expenditures.
The city’s police pension fund is nearly 56 percent funded, while the fire pension fund is nearly 48 percent funded. A state law that went into effect in 2011 requires that pensions must be 90 percent funded by 2040.
Ward 7 Ald. Joe McMenamin has been adamant in pushing for the city to do more to draw down its unfunded pension liabilities. McMenamin contends the city’s estimated rate of return on pension fund investments is too high and has caused the city’s pension debt to balloon.
Mayor Jim Langfelder called Monday’s pension summit, which featured a variety of speakers, to bring together city officials, the city’s consulting actuary and representatives from the Illinois Municipal League and the Illinois Municipal Retirement Fund.
The fact that there are unfunded liabilities doesn’t mean an employer hasn’t been making the required annual pension contributions. The deficit can be attributed to benefit increases and market declines that mean the funds are earning less than what was assumed, Springfield’s consulting actuary, Sander Goldstein, said.
City workers pay into one of three pension funds: the Springfield police or fire pension fund, which are governed by their own boards, or the Illinois Municipal Retirement Fund.
With IMRF, employers only pay fund benefits for their own employees. In 2015, the average employer contribution has been 11.7 percent. The city’s rate is “trending up,” and was 15.4 percent in 2015 and will be 16.2 percent in 2016, said IMRF Executive Director Louis Kosiba.
McMenamin called it a “mystery” that the city is devoting a growing percentage of its budget to IMRF, and there have been favorable rates of investment return, but “we’re farther behind than it’s ever been.” “We want to make sure it’s a realistic perspective, not falling farther behind,” McMenamin said.
Estimates have pegged 2023 and 2024 as the years when the number of Tier 2 employees will equal the number of Tier 1 employees in the Springfield police and fire departments, said Illinois Municipal League Legislative Director Joe McCoy. Tier 2 members are those hired after Dec. 31, 2010, and get a lesser benefit from the retirement system than Tier 1 members.
That’s a point where the city will begin to see some significant cost savings. McCoy suggested municipalities could see savings by consolidating police and fire pension funds, either fully or partially, creating more of an IMRF-like system.
Joe McMenamin for Ward 7 