In the News

Pioneer Press, January 14, 2010

Nearly 70 residents and city employees attended a Public Pension Forum Monday night at the Gorton Community Center in Lake Forest, learning how the pension funds work, what Lake Forest is required to contribute, where the state legislature stands on the issue and what the police and fire Pension Boards are saying.

The 90-minute panel was arranged by the city. On Feb. 2 Lake Forest voters will be asked to vote on an advisory referendum: "Shall the Illinois General Assembly and the Governor take immediate steps to implement meaningful pension reform which will relieve the unsustainable burden on local taxpayers?" Barrington is the only other community in the general area that is asking its residents to vote on this issue.

Panel members were Alderman David Grumhaus, State Sen. Susan Garrett (D-29th) of Lake Forest, Mike Havey of the local Police Pension Board and Mary Tomanek, financial advisor to the local Fire Pension Board.

Lake Forest Mayor Jim Cowhey opened the session explaining that while Lake Forest has met its obligation every year to fund pension benefits as mandated by law, "steadily increasing pension costs have created fiscal challenges that are consuming an ever-increasing portion of the city's budget during already challenging economic times."
'Complex choices'

Without action by the state legislature, "Lake Forest and many other Illinois communities are faced with complex choices, including budget cuts, deferred infrastructure improvements or an increased burden on taxpayers to fund these pension benefits," Cowhey said.

Grumhaus said that while revenues are estimated to decrease for the city in the 2011 fiscal year, fire and police pension costs are expected to increase $470,570 or 25 percent. Pension costs comprise 12 percent of the city's expenses, he said. In the 2010 fiscal year, the city expects to spend $3,869,103 on pension costs.

Without legislative reform, Lake Forest "will have to cut $500,000 from the fiscal year 2011 budget" to meet its pension payments, Grumhaus said.

The city has 283 active employees who are served by a pension fund. There are 41 active police officers and 36 active firefighters, who have their own pension funds. The remaining 206 active city employees are covered by IMRF -- the Illinois Municipal Retirement Fund.
Borrowed money

Garrett said that the state's pension cost this year was $4 billion. "We have to borrow money to make that payment," she said.

In Springfield, the General Assembly is talking about a "two-tiered" program, with current employees already in the system retaining their current benefits while new hires would make higher contributions themselves or have reduced benefits. Pension reform has been an issue in Springfield for at least a decade, Garrett said. She expects a major pension reform bill will be worked on this session.

"Illinois may not have a choice," Garrett said. "We can't keep putting it off."

Havey said that the "pension system is broken. There is not one single factor that has contributed to this and there's no magic bullet for repair. It will take time to correct."

Currently, police officers and firefighters in Lake Forest can receive their full pension (which is 75 percent of their final day's pay) after age 50 with 30 years of service. Also, retired officers must pay out-of-pocket for their health insurance, which totals $23,000 annually on average, Havey said.

In addition, police, fire and other city employees are not eligible for Social Security benefits, nor do they pay into the Social Security system.

Havey said that retirement benefits are based on 1971 circumstances when it was difficult to attract candidates for jobs. Now, he said, young men and women are eager to work for police and fire and are taking better care of themselves which should be reflected in the pension age requirements, he said.

Tomanek said that there's been a lot of volatility in the market, which is "not a friend of pension funds."