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 Rock Island property taxpayers paid $8.6 million in 2019, and
just over $8 million – 94% of the taxes – went to pay public pensions.
Those taxpayers still owe more: $39,743 per household. That is how much they
eventually must pay to satisfy the ballooning pension obligations politicians
promised public workers in local and state pension systems.
“We’re just trying to keep our heads above water,” Rock Island City Manager
Randall Tweet said. “I imagine it’s the same story in every town across
Illinois.”
Local leaders and taxpayers 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 Rock Island home valued around the area
average of $104,600 equal about $3,700, or 3.53% per year of the home’s value.
That’s much higher than the Illinois average of 2.27%, which itself is more than
double the national average.
A 2015 report by Taxpayers United of America found all of Rock Island County to
have serious spending and pension problems at every level of government. The
report called on unions to discuss with their member the unsustainability of
such over-promised and under-funded pensions, which ultimately threatens the
retirement security for public workers themselves.
Rising pension costs directly hurt taxpayers. In late 2019, Rock Island County
Board Members approved an 8.9% property tax increase across the entire county,
causing outrage among residents. KWQC caught one resident’s dismay: “We just
can’t afford this type of taxation.”
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 Illinois 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 such as Rock Island, 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 Rock Island, the average household owns nearly $40,000 in
state and local pension debt, with roughly $10,000 of that debt stemming from
local systems for police, firefighters and municipal workers. If that pension
debt became payable upon demand, each Rock Island household would see more than
80% of their $48,680 median annual income taken.
The city of Rock Island has almost $155 million in local pension debt, according
to the most recent data provided to the state comptroller for fiscal year 2020.
That debt includes nearly $73 million for fire pensions and $87.4 million for
police pensions while subtracting the $5.4 million surplus from municipal
pensions.
“We make our payments towards the pension obligations, but any increase [in
pension obligation] means the general fund takes a hit,” City Manager Tweet
said.
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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 Rock Island firefighters
fund is only 28% funded, while the police pension fund has only 36
cents saved for each $1 in future promises.
In many cities such as Rock Island, 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.
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.
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 Rock Island, 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. |
