An editorial piece from PoliticsEarly&Often explores the growing crisis facing municipal pension funds across Cook County:
There are 217 police and fire pension funds in suburban Cook County. These taxpayer-funded systems, holding nearly $5 billion in assets, were designed to ensure stable retirement incomes for public safety workers and their families. However, a report by the Better Government Association (BGA) reveals that many of these funds are in serious financial trouble, putting both retiree benefits and local budgets at risk.
Experts warn that rescuing these underfunded systems could require tax increases, service cuts, or a combination of both. Some agencies are already considering privatization or merging with neighboring departments to reduce costs and manage future pension obligations. As a result, taxpayers are likely to face higher burdens due to the significant shortfall in local pensions. According to BGA’s analysis, the total unfunded liabilities for police and fire pension funds in suburban Cook County amount to $3.3 billion.
Fifty-eight of the systems—roughly a quarter—are less than half-funded, meaning there's less than 50 cents for every dollar owed in long-term benefits. A healthy funding level is generally considered to be 80%, and a 2010 state law requires these plans to reach 90% funding by 2040.
With such low funding levels, these systems are vulnerable to investment losses and may have to sell off assets to cover benefits, increasing the risk of insolvency. In such a case, taxpayers could be left to cover any shortfalls. The legal question of whether municipalities or pension funds can declare bankruptcy remains unclear and untested.
This issue is not isolated. Similar problems plague pension funds for state employees, city workers in Chicago, and county staff. Each of these entities is currently working on legislative solutions. While the total unfunded liabilities in these larger systems exceed $100 billion, the impact on smaller municipalities is more severe due to limited options for raising revenue or cutting costs.
The causes of this crisis are hotly debated. Some point to chronic underfunding, poor investment returns, overly generous benefits, and in some cases, questionable practices like "pension sweeteners." State law requires towns with at least 5,000 residents and one full-time police or firefighter to establish pension systems. Fire protection districts must also create funds if they employ a full-time firefighter.
In suburban Cook County, there are 121 police and 80 fire pension funds, along with 16 fire protection district funds. There are currently 5,900 annuitants, with an additional 8,500 officers expected to qualify for pensions in the future.
The BGA reviewed all 217 systems and found that 94% were below the 80% funding threshold. Some of the worst performers include Blue Island, Cicero, and Melrose Park, where fire funds have just 32 cents for every dollar owed. On the police side, Blue Island, Burnham, Summit, and Willow Springs each have less than 30 cents per dollar.
Stone Park’s police fund was once at just seven cents per dollar, but after issuing a $2 million bond, its ratio improved to 23%. The BGA also uncovered examples of alleged pension sweetening in Alsip, Blue Island, and Pleasantview. In Alsip, two officers received large longevity bonuses before retiring, potentially adding $1.8 million in extra pension payments over their lifetimes.
Harvey, a south suburb, paid only $140 in required contributions for its police and fire funds between 2010 and 2013, despite needing to contribute $10.1 million annually.
The Illinois Department of Insurance oversees these funds but has historically had limited power to intervene. While it can impose fines, enforcement has been rare. However, a 2010 state law now allows pension funds to intercept sales taxes and other state revenues if municipalities fail to meet their obligations. This provision takes effect in 2016, but its influence is already being felt.
North Riverside is considering privatizing its fire department due to concerns about pension obligations and potential revenue garnishment. Other suburbs, including Chicago Ridge, Forest View, and McCook, are exploring similar options. McCook has already decided to outsource its fire services to a private company, expecting annual savings of $600,000.
Thanks, Dan
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