Winnetka urges broader pension reforms

Updated: July 13, 2012 7:47AM

Ten years ago, the Village of Winnetka’s pension funds for public safety workers appeared to be in solid shape.

Back then, Winnetka’s police fund had nearly enough assets on hand to pay the benefits earned by current police officers and those already retired. The fire fund was almost 90 percent funded.

But then came a disastrous decade for defined benefit pension plans, which pay a monthly income throughout retirement.

The Illinois General Assembly approved some costly benefit sweeteners, allowing police and fire personnel to retire earlier with maximum benefits and draw pensions for a longer period of time.

Investments suffered during the severe market downturn. Revised forecasts exposed a deepening hole.

This spring, Winnetka’s finance chief pegged the shortfalls in the police and fire funds at more than $19 million, even though taxpayer contributions have nearly tripled over the past decade.

Add in the shortage in the municipal retirement fund for non-safety personnel, and the village’s pension shortfall has swelled to $31 million, up from $7 million ten years ago. The village’s once-robust funding levels have fallen to 66 percent for the three funds combined.

Last week, Winnetka trustees approved a resolution urging Illinois Gov. Patrick Quinn and state lawmakers to enact further pension reforms for municipal workers and retirees, rather than just focusing on the state’s own pension woes.

“These escalating pension costs have created an overwhelming fiscal burden that continues to consume an ever-increasing portion of the Winnetka municipal budget and threatens the long-term sustainability of the pension funds,” noted the statement approved by the Winnetka Village Council on June 19. Without relief, Winnetka and other communities will be faced with “terrible choices, including budget cuts that reduce vital services; compromised public safety service levels; deferred critical infrastructure maintenance and repairs; layoffs” or raising property taxes, noted the statement.

Winnetka officials want public safety workers to contribute more to their own pensions. (Employee payroll deductions currently account for about one-third of the needed funds.)

Moreover, the resolution asks the state to raise the retirement age for current employees, not just new hires.

“Public safety employees …. can now retire with full benefits at the age of 50 and, in many cases, receive benefits for longer than they worked for the municipality,” noted the statement.

The village also is urging an end to the compounded, 3 percent pay raises that police and fire retirees receive annually. For new hires, the state has cut those raises to one-half of the Consumer Price Index or three percent, whichever is less, and changed the method of computation. The state also has put caps on the amount of salary used in the pension calculation.

The village also is asking the state to consolidate all 638 separate police and fire pension plans into a pool similar to the Illinois Municipal Retirement System in order to increase investment returns and lower operating costs.

Of course, Winnetka isn’t alone in its pension woes. Suburbs across the region have seen their pension forecasts deteriorate, aided only slightly by the pension reforms lawmakers enacted in 2010 for workers who won’t be retiring for decades.

Police and fire pension officials point out that taxpayer contributions were destined to rise sharply this decade, under a payment schedule that municipalities sought from Springfield in 1993 to relieve some of the pressure at the time. The new schedule was designed with lower payments in the early years and larger increases over time.

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