Northwestern University and Evanston's Only Daily News Source Since 1881

The Daily Northwestern

Northwestern University and Evanston's Only Daily News Source Since 1881

The Daily Northwestern

Northwestern University and Evanston's Only Daily News Source Since 1881

The Daily Northwestern


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Council Hears Plans To Close Future Gap In Pension Funds

By Megan CrepeauThe Daily Northwestern

City staff presented proposals at a special City Council meeting Monday night that would ensure that future fire and police department retirees get their full pension benefits.

“I believe we’re here at an historic meeting,” City Manager Julia Carroll said.

Evanston uses city funds to fill the gap between total pension costs – which are determined by the state – and revenues from employee and employer contributions and investment earnings. The city meets about half of this unfunded liability at the present time.

The average for municipalities across the state is 62.4 percent, according to city data. Illinois recommends that cities cover at least 90 percent of the gap, but city officials said even the state does not follow this rule.

Although the city is paying all of its pension obligations to current retirees, Evanston will run out of pension funds in about 26 years unless action is taken, city officials said.

Carroll said the gap was caused by “a combination of a lot of factors,” including retirees living longer, a three-year economic slump following the terrorist attacks of Sept. 11, 2001, and increases in city benefits.

“I don’t think that anybody necessarily did anything wrong,” Carroll said.

Carroll said the most realistic option to close the gap is to issue Pension Obligation Bonds. The proceeds from these bonds would contribute to the pension fund. The city would not lose money on the bonds because their rate of return would presumably exceed the interest rate the city would have to pay to bondholders.

The city staff also discussed making an extra contribution to the pension fund using Evanston tax dollars, but Carroll said this option would not be as effective as the bonds.

Carroll said her office would work on the issue this summer and present a final plan to the council in September.

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Council Hears Plans To Close Future Gap In Pension Funds