An editorial piece from PoliticsEarly&Often explores the financial challenges facing municipal pension funds across Cook County:
Cook County is home to 217 police and fire pension funds, many of which are struggling under the weight of mounting debt. These taxpayer-funded systems, with nearly $5 billion in assets, were designed to ensure public safety workers and their families have a stable income after retirement. However, a recent analysis by the Better Government Association (BGA) reveals that dozens of these funds are in serious financial trouble, threatening both retirees' benefits and the long-term stability of local governments.
Experts warn that rescuing these underfunded systems may require tax increases, service cuts, or a combination of both. Some municipalities are already considering privatization or merging with neighboring departments to reduce costs and manage future pension obligations. Regardless of the approach, taxpayers will likely end up shouldering more of the burden due to the massive shortfall in pension funding. According to BGA data, the total unfunded liabilities for suburban Cook County's police and fire pension funds amount to $3.3 billion.
Fifty-eight of the systems—about a quarter—are less than half-funded, meaning they have less than 50 cents for every dollar owed in long-term benefits. Most financial experts consider a minimum 80% funding level as healthy, while a state law passed in 2010 requires all such pension plans to reach 90% funding by 2040. At current levels, these systems are highly vulnerable to investment losses and could be forced to sell off assets just to meet benefit payments, increasing the risk of insolvency.
If a pension fund runs out of money, taxpayers may ultimately be responsible for covering the gap. The legal framework for declaring bankruptcy or restructuring pensions is still unclear, leaving many municipalities in a precarious position. This crisis comes on top of broader pension shortfalls in the State of Illinois, the City of Chicago, and Cook County, where unfunded liabilities exceed $100 billion.
While the larger state-level pensions are far worse off, the local police and fire pension issues pose a unique threat to smaller communities with limited options to raise revenue or cut costs. Blame for the situation is hotly debated, with critics pointing to years of underfunding, poor investment returns, generous benefits, and in some cases, questionable pension deals.
There are 660 police and fire pension systems statewide outside of Chicago, with specific requirements for towns of at least 5,000 residents. In suburban Cook County alone, there are 121 police and 80 fire pension funds, plus 16 fire protection district funds. Altogether, over 5,900 people are currently receiving pensions, with another 8,500 expected to do so in the future.
The BGA reviewed each system’s finances, contacting agencies directly and analyzing documents. Their findings were alarming: 94% of the systems were below the 80% funding threshold. Some of the most underfunded include Blue Island, Cicero, and Melrose Park, which have only 32 cents for every dollar owed. On the police side, Blue Island, Burnham, Summit, and Willow Springs fared even worse, with less than 30 cents per dollar.
In Stone Park, the police fund had just seven cents for every dollar owed before issuing a $2 million bond to cover its obligations. While this improved the funding ratio to about 23%, it highlights the growing desperation among small municipalities. The BGA also uncovered examples of alleged "pension sweeteners" in places like Alsip and Pleasantview, where officers received large bonuses shortly before retiring, potentially increasing their lifetime benefits by millions.
The Illinois Department of Insurance has limited power to intervene, but a 2010 state law now allows pension funds to collect sales taxes and other state revenues if municipalities fail to make required contributions. Though this won’t take effect until 2016, the pressure is already being felt. North Riverside, for example, is considering privatizing its fire department to avoid potential financial collapse if state funds are withheld.
Other suburbs, like Chicago Ridge, Forest View, and McCook, are exploring similar options. McCook has already decided to contract with a private company, Kurtz Paramedic Service Inc., to run its fire department starting August 4. Mayor Jeff Tobolski says the move will save about $600,000 annually, offering a glimpse into how local governments are adapting to the pension crisis.
Thanks, Dan
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