A middle-class southwest Chicago suburb’s pension and debt burdens are signaling future financial trouble to investors, meaning borrowing is likely to be more difficult for the village and more expensive for taxpayers.

The narrative is becoming too common in Illinois, where pension debt is eating money that should be spent on police, fire and other community services.

The credit rating for the village of Oak Lawn sits just one notch above “junk” status after a downgrade on Oct. 10 from Moody’s Investors Service. Moody’s knocked the village’s rating down to Baa3 from Baa2, and indicated a bleak forecast by assigning the village a “negative outlook.”

Moody’s attributed Oak Lawn’s credit slide to a “heightened operating risk” posed by its “high and growing pension burden,” with bond debt standing at $75 million. Moody’s stated the village runs the risk of state interception of tax revenues because pension contributions are failing to keep pace with the minimum funding levels required by state law. Oak Lawn’s police and fire pensions posted unfunded liabilities of $154 million at the end of 2017.

Since the state’s pension intercept law took full effect this year, the state comptroller has garnished tax dollars from the nearby suburbs of Harvey and North Chicago, forcibly redirecting those revenues to the cities’ deficient police and fire pension funds. Crowding the city’s budget, pension growth forced Harvey into mass layoffs of police and firefighters. The city of Chicago, too, risks state intervention because of pension funding inadequacy: The city’s fire pension fund filed a claim with the comptroller for a $3.3 million shortage.

Oak Lawn could very well face the same fate as Harvey and North Chicago.

But Oak Lawn is significantly different from Harvey, where a history of corruption and poverty intensified its fiscal crisis. Instead, Oak Lawn’s current challenges warn that Illinois’ system of defined-benefit pensions for government workers is simply unsustainable, even for communities with a relatively healthy economic base.

What’s worse, the same pension issues facing Oak Lawn and other municipalities weigh on the state as a whole. In August, Illinois earned the distinction of worst debt-to-revenue ratio in the nation when Moody’s reported unfunded pension liabilities equaled 601 percent of state revenues – breaking a national record. A recent Mercatus Center study pegged Illinois’ budget health as worst in the nation, citing massive debts for government worker health insurance and pensions, among other problems. Both Oak Lawn and the state share the near-junk credit rating.

Mounting pension pressure has placed severe constraints on municipal budgets across the state, compromising the ability of local governments to improve public services – while subjecting residents to tax hikes. That’s an unfair arrangement for taxpayers: As pensions consume a larger share of the budget, forcing local governments to raise taxes or fees to keep pace, residents are effectively paying more in tax dollars to receive fewer services.