https://www.americancityandcounty.com/wp-content/themes/acc_child/assets/images/logo/footer-logo.png
  • Home
  • Co-op Solutions
  • Hybrid Work
  • Commentaries
  • News
  • In-Depth
  • Multimedia
    • Back
    • Podcast
  • Resources & Events
    • Back
    • Resources
    • Webinars
    • White Papers
    • IWCE 2022
    • How to Contribute
    • Municipal Cost Index – Archive
    • Equipment Watch Page
    • American City & County Awards
  • About Us
    • Back
    • About Us
    • Contact Us
    • Advertise
    • Privacy Statement
    • Terms of Service
American City and County
  • NEWSLETTER
  • Home
  • Co-op Solutions
  • Hybrid Work
  • Commentaries
  • News
  • In-Depth
  • Multimedia
    • Back
    • Podcasts
  • Resources/Events
    • Back
    • Webinars
    • White Papers/eBooks
    • IWCE 2022
    • How to Contribute
    • American City & County Awards
    • Municipal Cost Index
    • Equipment Watch Page
  • About Us
    • Back
    • About Us
    • Contact Us
    • Advertise
    • Cookie Policy
    • Privacy Stament
    • Terms of Service
  • newsletter
  • Administration
  • Economy & Finance
  • Procurement
  • Public Safety
  • Public Works & Utilities
  • Smart Cities & Technology
  • Magazine
acc.com

Economy


Article

Illinois-wide pension law, pension debts cripple municipalities’ finances

Illinois-wide pension law, pension debts cripple municipalities’ finances

Long-growing state-wide pension funding shortfalls combined with a new state law that withholds funding from local governments that can’t pay for their pensions has led to a multi-faceted monetary crisis among municipalities throughout Illinois.
  • Written by Jason Axelrod
  • 15th May 2018

Long-growing state-wide pension funding shortfalls combined with a new state law that withholds funding from local governments that can’t pay for their pensions has led to a multi-faceted monetary crisis among municipalities throughout Illinois.

Illinois’s pensions have been underfunded for years, and the deficit is growing. The state’s pension funding shortfall increased by $17.8 billion between 2015 and June 2017 to total $137 billion in June 2017, the Chicago Tribune reports. Outside of Chicago, Illinois police and fire pensions are 58 percent funded, Illinois News Network reports.

The Tribune estimates that every person in Illinois would have to pay $11,000 to settle the state’s total pension debt. After the Illinois Supreme Court struck down state governments’ attempts to cut pension benefits in 2015, the state’s credit rating was downgraded to nearly junk. 

This year, Illinois Comptroller Susana Mendoza began enforcing a 2011 law that requires her to withhold tax revenue owed by the state to municipalities that cannot fully pay their pension obligations. The withheld funds would be redirected to the underfunded pensions, Illinois News Network reports.

"Illinois failure to address its pension crisis has resulted in further deterioration of the state and cities' financial condition, exorbitantly high borrowing costs, and an inability to address other critical needs at the state and local level," Laurence Msall, president of the Civic Federation, a Chicago nonprofit that tracks state and municipal finances, told the Tribune. "Time is not your friend when your liabilities are compounding and your revenues are not."

Additionally, Illinois prohibits municipal bankruptcies, Forbes reports. So underfunded municipalities and underfunded pensions are both major ongoing problems.

The effects are already being felt. Last year, an appellate court forced Harvey, Ill., officials to raise property taxes to help pay for its firefighters’ pension fund, the Telegraph reports. However, Harvey, Ill. had failed to make complete pension payments for years and its mayor is banned for life from the municipal bond market for misleading investors, according to Forbes.

Since the court ruling, Harvey has been forced to lay off almost all of its police force and firefighters to meet pension obligations, Forbes reports.

“They have no assets left to sell. They can’t raise money anymore,” Ted Dabrowski, president of Wirepoints.com, a government and financial watchdog, told the Telegraph. “The community is effectively bankrupt, if not legally bankrupt. When the money was taken away from them to fund pensions, they had little money left” to fund operations.

Other cities are struggling, as well. East St. Louis, Ill., officials are worried that a year’s worth of funds could be withheld under the pension law, Illinois News Network reports. Alton, Ill., recently sold off its water treatment plant for $54 million in April to help pay for the city’s $113 million in unfunded pension liabilities.

“I know the state of Illinois says you can’t go bankrupt, but if you don’t have any money, what do you call it?” Alton Mayor Brant Walker told Illinois News Network. “If we did not have the influx, almost $54 million, Alton would no doubt be Harvey.”

Some state lawmakers are exploring multiple solutions. State Rep. Ryan Spain proposed combining police and firefighter pensions into one fund in a bid to save local governments money, the Southern Illinoisan reports. 

Illinois Senate President John Fullerton proposed a “consideration model” that asks state employees to give up their compounded cost of living adjustment in order to guarantee that future raises count towards pensionable salaries, according to The Bond Buyer. Employees would also receive a lump sum payment and a reduction in future contributions. 

No strategy has yet been agreed upon. ”We're in some really, really difficult financial times here," Illinois Rep. Robert Martwick, chair of the personnel and pensions committee, told the Tribune. "We're still digging a hole for ourselves."

Wirepoints predicts that 200 cities could face issues similar to Harvey, East St. Louis and Alton, Illinois News Network reports.

_____________

To get connected and stay up-to-date with similar content from American City & County:
Like us on Facebook

Follow us on Twitter
Watch us on YouTube

Tags: Economy News Article

Most Recent


  • Changing recruitment practices can ease retention challenges
    Ahead of the historic investment in American infrastructure, government organizations are facing an unprecedented employment and retention squeeze. But while there’s a lot of economic drivers that are out of administrators’ control, there are certain hiring practices that can soften the blow.  “We’re already constrained in finding the talent we need,” said Elizabeth Kellar, director […]
  • Amid shifting workplace expectations, local government employers must adapt
    Constrained by inflexible budgets, local government employers can’t compete with the lucrative salaries offered in the private sector. And while recruitment has always been a challenge for public employers, the last two years have been especially difficult. From January 2020 to the same month this year, government organizations lost around 600,000 jobs—more than manufacturing, wholesale […]
  • Smart911 emergency profiles provide first responders with more information, faster
    Since the first full time fire department was established in Cincinnati in 1853, emergency responders have raced into unknown scenarios with limited advance information when the firehouse bell rings—until now. Among the many advancements of next-generation 911 dispatch systems, Smart911, an app developed by Rave Mobile Safety, automatically displays resident profiles during an emergency—including details […]
  • baseball
    Minor league baseball is helping cities hit a revitalization home run
    It’s that time of year again—the crack of the bat, the roar of the crowd when the home team hits a home run, not to mention the peanuts, Cracker Jacks and hot dogs! Nothing compares to the fun of gameday at the stadium, enjoying the national pastime of baseball. Some mid-sized cities have taken the […]

Leave a comment Cancel reply

-or-

Log in with your American City and County account

Alternatively, post a comment by completing the form below:

Your email address will not be published. Required fields are marked *

Related Content

  • Prioritizing rapid restore leads to stronger ransomware attack recovery
  • Rethinking the ways cities can invest in vital neighborhoods
  • How to innovate and invest on a budget in state and local IT services
  • Treasury Department launches Coronavirus State and Local Fiscal Recovery Funds to deliver $350 billion in funding

White papers


Hand Hygiene: Compliance Matters

23rd May 2022

What it Takes to Build a Winning Esports Program

23rd May 2022

Sixth-Largest US School District Saves Over $500,000 by Utilizing a Cooperative

23rd May 2022
view all

Events


PODCAST


Young Leaders Episode 4 – Cyril Jefferson – City Councilman, High Point, North Carolina

13th October 2020

Young Leaders Episode 3 – Shannon Hardin – City Council President, Columbus, Ohio

27th July 2020

Young Leaders Episode 2 – Christian Williams – Development Services Planner, Goodyear, Ariz.

1st July 2020
view all

Twitter


AmerCityCounty

Changing recruitment practices can ease retention challenges dlvr.it/SQzzPt

24th May 2022
AmerCityCounty

EVs are coming in a big way – Will charging infrastructure be ready? dlvr.it/SQzfL1

24th May 2022
AmerCityCounty

Optimizing the 3 stages of RFP creation for faster results | June 16, 2022 at 2 PM ET dlvr.it/SQzV7d

24th May 2022
AmerCityCounty

Amid digital evolution, equity in accessibility is of utmost importance dlvr.it/SQwZ3b

23rd May 2022
AmerCityCounty

Hand Hygiene: Compliance Matters dlvr.it/SQwL8f

23rd May 2022
AmerCityCounty

What it Takes to Build a Winning Esports Program dlvr.it/SQwJRj

23rd May 2022
AmerCityCounty

Sixth-Largest US School District Saves Over $500,000 by Utilizing a Cooperative dlvr.it/SQwHPv

23rd May 2022
AmerCityCounty

Amid shifting workplace expectations, local government employers must adapt dlvr.it/SQm2RT

20th May 2022

Newsletters

Sign up for American City & County’s newsletters to receive regular news and information updates about local governments.

Resale Insights Dashboard

The Resale Insights Dashboard provides model-level data for the entire used equipment market to help you save time and money.

Municipal Cost Index

Updated monthly since 1978, our exclusive Municipal Cost Index shows the effects of inflation on the cost of providing municipal services

Media Kit and Advertising

Want to reach our digital audience? Learn more here.

DISCOVER MORE FROM INFORMA TECH

  • IWCE’s Urgent Communications
  • IWCE Expo

WORKING WITH US

  • About Us
  • Contact Us

FOLLOW American City and County ON SOCIAL

  • Privacy
  • CCPA: “Do Not Sell My Data”
  • Cookies Policy
  • Terms
Copyright © 2022 Informa PLC. Informa PLC is registered in England and Wales with company number 8860726 whose registered and Head office is 5 Howick Place, London, SW1P 1WG.
This website uses cookies, including third party ones, to allow for analysis of how people use our website in order to improve your experience and our services. By continuing to use our website, you agree to the use of such cookies. Click here for more information on our Cookie Policy and Privacy Policy.
X