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.

In Danville, the average household owns nearly $40,000 in state and local pension debt, with over $10,000 of that debt stemming from local systems for police, firefighters and municipal workers. To pay off that pension debt, a Danville household would have to give up 110% of an entire year’s $36,172 median annual income.

Danville has more than $123 million in local pension debt, according to the most recent data provided to the state comptroller from fiscal years 2019 for municipal workers and 2020 for fire and police pensions. That debt includes $61.3 million for fire pensions, $61.2 million for police pensions and $660,000 for municipal workers.

Pension experts consider a funding ratio of less than 60% to be “deeply troubled.” 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 Danville firefighters fund is only 17% funded, while the police pension fund has only 28 cents saved for each $1 in future promises.

Pension contributions cost Danville $8.3 million in fiscal year 2019, equal to 102% of the $8.1 million in total property taxes collected that year.

The local pension crisis drives both property tax hikes as mayors and other local leaders 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. According to information available from the county assessor, property taxes on a home valued around the area average $66,700 equal roughly $2,330, or 3.5%, in Danville.

In 2017, Danville hiked its special public safety pension fee levied on homeowners by 178% to $267 per year. That’s on top of ordinary property tax payments.

In Danville and many other cities, taxpayers 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:

• Jerome, Geneseo, and Norridge raised property taxes to pay for pension costs in 2018.

• 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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