Illinois’ pension crisis: Danville’s candid approach
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.