Rising Municipal Contributions to Police and Firefighter Pensions
As Pension Costs Soar, Funding Ratios Continue to Fall
Impact of Pension Increases Passed by the General Assembly

Fiscal Impact of the Public Safety Pension Crisis

The growth in public safety pension costs is having a major budgetary impact on municipalities and taxpayers throughout the state. Unless action is taken to resolve this pension crisis, Illinois taxpayers will find themselves on the hook for ever increasing pension contributions.

The Commission on Government Forecasting and Accountability (COGFA), a commission under the bi-partisan direction of the Illinois General Assembly, issued a report in December 2009 analyzing the condition of ten police and fire pension funds and the impact of retirement benefit increases over a five year period.

Rising Municipal Contributions to Police and Firefighter Pensions

Local taxpayers have had to dig much deeper into their pockets to fund these pension funds over the five year period. Table 1 shows that in each case municipal contributions to their police and fire pension funds (combined) have increased by a minimum of 50%.

As Pension Costs Soar, Funding Ratios Continue to Fall

Despite these increased contributions, the funded ratios (or the dollars on hand to cover current and future pension benefits) have fallen. Tables 2 and 3 compare the increased contributions to the falling funded ratios.

Impact of Pension Increases Passed by the General Assembly

Two factors appear to be driving this pension crisis.

The first is that investment income earned on the already available funds have significantly underperformed the actuarially assumed rates of return.

The second is that, as we see in Table 4, just three pension benefit increases previously approved by the General Assembly have heaped on an additional $12.1 million in costs during the past five years.

Public Act 91-0939 became effective on February 1, 2001.
Contains the following changes to the Downstate Police Article of the Illinois Pension Code:

• Flat 2.5% Per Year Retirement Formula Allowing Maximum Pension of 75%
• Salary To Be Reached at 30 Years Instead of 35 Years
• Permit Receipt of Three Years of Creditable Service While on Disability
• Duty or Occupational Disease Disability Greater of 65% Salary or Pension
• Annuity of 100% Salary for Duty Death

Public Act 91-0466 became effective on August 6, 1999.
Contains the following changes to the Downstate Fire Article of the Illinois Pension Code:

• Flat 2.5% Per Year Retirement Formula Allowing Maximum Pension of 75%
• Salary to Be Reached at 30 Years Instead of 35 Years
• Permit Receipt of Three Years of Creditable Service While on Disability
• Duty or Occupational Disease Disability Greater of 65% Salary or Pension
• Annuity of 100% Salary for Duty Death
• Increased Minimum Pension for Survivors from $600 to $1,000 Over Three Years

Public Act 93-0689 became effective on July 1, 2004.
Contains the following changes to the Downstate Fire Article of the Illinois Pension Code:

• Surviving Spouse Annuity of 100% of Pension Earned by Decedent, Retroactive to January 1, 2004
• Increased Minimum Pension for Survivors from $1,030 in 2004 to $1,159.27 by 2008
• Retroactively and Prospectively Increased Children’s Annuity by 3% Annually Through 2008
• Reciprocity Between Downstate Fire Funds and the Ability to Transfer IMRF Service to a Downstate Fire Fund