By state law, the city of Evanston has about 24 years to pay $159 million to police and firefighters’ pension funds, according to a report released by the actuary Gabriel Roeder Smith & Company.
However, a new bill in the Illinois state legislature would amend the code to allow cities until 2049 to pay for pension liabilities.
The bill was a focus of Mayor Elizabeth Tisdahl and City Manager Wally Bobkiewicz’s trip to Springfield on Wednesday. In a blog entry Thursday, Bobkiewicz wrote about meeting with a lobbying group that advocated pension reform.
“We learned for the first time that day that there was likely going to be no pension bill this week,” wrote Bobkiewicz in his blog, later referring to the announcement as “unfortunate news.”
Regardless of whether pension reforms pass in Springfield, the City Council must approve a budget by the end of the fiscal year on Feb. 28 to address the deficit in pension funding, which increased by $14 million since last year.
The sharp increase in unfunded liability, which is the money owed to the pension funds, is largely due to the stock market’s poor performance, said Ron Brumbach, president of the Firefighters’ Pension Board. Current pension funds assets cover only 42 percent of the benefits owed to the police and firefighters.
“The obligation is bigger because investment portfolios lost money over the last fiscal year,” Brumbach said.
The Finance Department is drafting an official report that includes the GRS findings in future budget decisions. By law, both police and firefighters’ pension boards must approve the report, but critics of the report said the assumed 7.25 percent interest rate of return was too high considering the current state of the economy.
However, both the police and firefighters’ pension boards are expected to approve the findings.
“Everyone knows stocks had a horrible year, but the reasonableness of assumptions is proven over a prolonged period of time,” said Assistant Finance Director Steve Drazner.
In addition to poor stock performance, Police Pension Board President Timothy Schoolmaster cited the City Council’s funding policies as a reason for the current deficits.
Schoolmaster said taxpayers will pay a disproportionately high part of the pension dues because the City Council neglected to set aside enough funds for pension plans in the past. While pension plans are usually funded by investment returns, the council’s failure to set aside adequate funds placed more responsibility on taxpayers, he said.
“They’ve chosen to tinker with the funding system, and it’s costing the taxpayer,” Schoolmaster said.
Schoolmaster noted the creation of a pension obligation bond as a way to pay for unfunded liabilities in the next 24 years and reduce the burden on taxpayers.
Although the new bill gives Evanston 16 more years to meet unfunded liabilities, Schoolmaster does not see the bill benefiting taxpayers.
“It’s just refinancing the mortgage,” he said. “It will make annual payments go down, but the total amount taxpayers have to pay will be larger.”[email protected]
