Illi­nois’ pen­sion cri­sis: Danville’s can­did ap­proach

Chicago Tribune - - EDITORIALS -

Many peo­ple know Illi­nois has a pub­lic pen­sion cri­sis. The mayor of down­state Danville goes a step fur­ther: He shows res­i­dents the pa­per­work.

Danville in­sti­tuted a $267 an­nual fee to help shore up its de­pleted po­lice and fire pen­sion fund, which is $105 mil­lion in the hole. The city calls it a “pub­lic safety pen­sion fee,” but you may as well call it the “Illi­nois is a dump­ster fire” fee. Ap­pro­pri­ately, Danville col­lects this money as part of the monthly sewer and garbage charge.

There’s not a lot of good news about the state’s fis­cal shape, but we ap­pre­ci­ate Mayor Scott Eisen­hauer’s up­front ap­proach to deal­ing with a po­lice and fire pen­sion prob­lem. He’s not kick­ing the can down the road, nor is he bury­ing the pain by re­ly­ing on prop­erty tax rev­enue and other fees to cover the en­tire cost of plug­ging the pen­sion fund short­fall. If ev­ery com­mu­nity were sim­i­larly di­rect with res­i­dents about the pub­lic pen­sion dis­as­ter, maybe, just maybe, the lessons of ir­re­spon­si­ble gov­ern­ment prom­ises would sink in.

“We created the pub­lic safety pen­sion fee so that ev­ery­one shares the bur­den, and also so that peo­ple had a bet­ter un­der­stand­ing of what it costs,” Eisen­hauer told us.

There are mul­ti­ple lev­els to the state’s pen­sion cri­sis. The big at­ten­tion-get­ter is the es­ti­mated $130 bil­lion hole in the state re­tire­ment plans. That’s not the end of it, though. Chicago’s has ma­jor short­falls, as do mu­nic­i­pal­i­ties across the state, es­pe­cially for pub­lic safety pen­sions. Courts have ruled these gen­er­ous pen­sion ben­e­fits can’t be re­duced. The whole big mess is due in large mea­sure to Illi­nois politi­cians’ long his­tory of tak­ing pen­sion hol­i­days in­stead of con­tribut­ing reg­u­lar pay­ments to the funds.

Danville ap­pears to be the first com­mu­nity in Illi­nois to charge a sep­a­rately la­beled fee to re­plen­ish un­der­funded pen­sions. The typical ap­proach for a mu­nic­i­pal­ity is to raise prop­erty taxes and then kick in money from other fees and sales tax rev­enue. Chicago re­cently raised 911 fees while hik­ing prop­erty taxes by $543 mil­lion to cover po­lice and fire pen­sions costs. Pala­tine just raised prop­erty taxes. With that ap­proach, who can tell ex­actly where the dol­lars go?

In Danville, they see it. The city charged $96 an­nu­ally for pub­lic safety pen­sion pay­ments un­til the city coun­cil voted Tues­day night to in­crease the fee to $267 for most house­holds and busi­nesses. That’s part of a 20-year plan, which also in­cludes higher prop­erty taxes, to fill the $105 mil­lion pen­sion gap. Eisen­hauer says im­ple­ment­ing a pen­sion fee is fairer be­cause ev­ery­one re­lies on po­lice and fire ser­vices, while churches and other non­prof­its don’t pay prop­erty taxes. He was also wor­ried about Danville’s con­tin­ued abil­ity to con­tribute sales tax rev­enue to pen­sion fund pay­ments be­cause that source of dol­lars is in de­cline due to on­line shop­ping.

Eisen­hauer told us the pen­sion debt is the big­gest fi­nan­cial cri­sis fac­ing Danville. He’s frus­trated his city is on the hook for lav­ish obli­ga­tions to re­tirees that he can’t ne­go­ti­ate. “What in­fu­ri­ates me is that I have no op­por­tu­nity what­so­ever to try to change the ben­e­fit so that it’s more cost­ef­fec­tive for our city.”

His broader worry is the im­pact of the state’s prof­li­gate ways: The more des­per­ate Spring­field is for cash, the more it soaks Danville. The more Danville dings res­i­dents and busi­nesses, the greater the chances they’ll flee a few miles east to low-cost, fi­nan­cially sta­ble In­di­ana. “That’s my con­stant worry,” he said. Twice in the past decade, a ma­jor em­ployer con­sid­ered Danville and then lo­cated in In­di­ana. Eisen­hauer wants to in­vest in his town to make it more at­trac­tive, but he’s trapped in Spring­field’s spend­ing web.

Charg­ing a $267 fee is painful. It’s also an honest way to ad­dress a gi­gan­tic prob­lem — one that Illi­nois has found no way to re­solve.

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