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 Quincy’s average household owes $35,689 in state and local
pension debt, with roughly $6,000 of that from local systems for police,
firefighters and municipal workers.
If that pension debt had to be paid tomorrow, it would take 77.3% of the average
household’s $46,189 income for a year.
The city of Quincy has nearly $102 million in local pension debt, according to
the most recent data provided to the state comptroller for fiscal year 2019.
That debt includes $49.7 million for fire pensions, $51.9 million for police
pensions and $238,000 for municipal workers.
Pension experts consider a funding ratio of less than 60% to be “deeply
troubled,” while a 40% funding ratio may be a “point of no return,” meaning an
inability to make required contributions or maintain adequate funding levels –
without painful cuts or serious structural reforms. The Quincy firefighters fund
is only 41% funded, while the police pension fund has only 47 cents saved for
each $1 in future promises.
Pension contributions cost Quincy $7 million in fiscal year 2019, equal to 126%
of the $5.5 million in total property taxes collected.
The local pension crisis drives property tax hikes as mayors
and other local officials struggle to keep up with the growing financial burden.
Local leaders have been saddled with pension systems created by state law and
have virtually no options to reduce costs or improve sustainability on their
own.
Rock Island, Illinois, City Manager Randall Tweet summed it up: “We’re just
trying to keep our heads above water. I imagine it’s the same story in every
town across Illinois.”
Property taxes on a Quincy home valued at the area average $116,300 equal
$2,275, or 2% of that home’s value.
Illinois’ worst-in-the-nation pension debt has become a well-known problem. Over
$144 billion in pension debt for the five statewide retirement systems breaks
down to nearly $30,000 in debt for each household, which must be paid with
further tax hikes or further cuts to core government services.
Less well known is the nearly $75 billion of pension debt held by local
governments in Illinois, which is the primary reason for Illinois’
second-highest in the nation property taxes. Combined with the state’s pension
debt, politicians who mismanaged the pension system dug a $219 billion hole.
Like other Illinois municipalities, Quincy has seen its pension
costs continue to rise for years. Quincy has also experienced the problems
associated with lucrative pensions and public servants trying to maximize their
benefits.
 After the retirement of a top official in 2020, a lieutenant firefighter was
promoted to captain. After working one day as a captain, he chose to take part
in an early retirement program offered by the city. He then took unused vacation
days until he reached his official retirement date. His one day of work as a
captain meant his pension would pay him an additional $2,000 more each year than
if he had retired as a lieutenant.
That sort of manipulation has become far too commonplace for Illinois
municipalities already drowning in pension debt.
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Taxpayers in Quincy and many other cities are being
asked to pay more to get less. Rising annual pension costs are
crowding out local government spending on services that residents
want and need.
In recent years, Illinois cities have already been forced to either
lay off current workers, raise taxes or both to keep up with the
cost of these pension systems. For example:
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Jerome, Geneseo and Norridge raised property
taxes to pay for pension costs in 2018.
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The south Chicago suburb of Harvey in 2018 laid
off one-quarter of its police officers, more than half of its
other police department personnel and 40% of its firefighters
after the state intercepted money bound for the city under a
pension law intended to force cities to make required pension
contributions.
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In 2019, the pension intercept law was also
triggered in North Chicago and East St. Louis. The resulting
increase in pension costs for the cities’ budgets resulted in
$1.3 million of cuts in North Chicago, including layoffs for
three firefighters, and nine firefighter layoffs in East St.
Louis.
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Peoria, which in 2018 eliminated 38 first
responder jobs and 27 municipal jobs, has already been forced to
cut an additional 45 jobs in 2020 after COVID-19 exacerbated the
city’s pension-driven budget woes.
The combination of higher taxes and worsening
services is a major reason Illinoisans have increasingly fled to
other states. The 2020 Census marked the first time in 200 years
that Illinois lost population between decennial Census counts, which
was driven by migration of Illinois residents to other states.
Illinois’ state and local pension crisis is the most severe public
policy challenge facing the state. It contributes to nearly every
other fiscal and economic problem, including high property taxes,
cuts to government services, economic stagnation and the Illinois
exodus.
The only viable solution to Illinois’ pension crisis starts with a
constitutional amendment to allow for reductions in future benefit
growth for current workers and retirees. The current pension clause,
which prevents changes not only to earned benefits but also the
future growth rate of benefits for work not yet performed, is a pair
of fiscal handcuffs on mayors left with few options besides hiking
taxes and cutting services.
A “hold harmless” pension reform plan developed by the Illinois
Policy Institute for the state’s systems can save roughly $2.4
billion for the state budget the first year and more than $50
billion through 2045. The plan would also totally eliminate the
state’s pension debt during that time, rather than the 90% reduction
state leaders hope for. It accomplishes all of that while preserving
every dollar of pension benefits promised to public workers for work
already performed.
Similar reforms to local pension systems could offer significant
property tax relief to overburdened homeowners, free up resources
for spending on current services, or finance a combination of the
two. In Danville, such relief is sorely needed.
True pension reform, starting with a constitutional amendment, is
the only way to stop the Illinois exodus by finally giving taxpayers
value for their money. |
