Illinois cities take on more debt to meet retirements
Pension deficits are pushing communities to consider more borrowing – and gambling with the proceeds – as pensions continue to consume a larger share of budgets.
Illinois municipalities are battling a $75 billion pension debt, forcing mayors to consider gambling to pay pensions — in more ways than one.
Chicago turns to the real game, looking to focus casino revenue to his pension debt from the police and the fire brigade. Kankakeee and other municipalities are trying another form of gambling: pension bonds.
Kankakee Faces $109 million pension debt owed to its police and firefighters. The funds have about a quarter or less of what was promised to retirees.
City leaders plan to borrow: sell 20-year pension bond bonds. They hope to get the money at a low rate of interest and bet that they can invest it and earn a higher rate.
The problem is that taxpayers usually lose that bet, the Government Finance Officers’ Association pointed out. Pension bonds put taxpayers’ money at risk and often leave governments with more debt rather than less because they often fail to earn a high enough return.
Illinois state leaders have set an example for cities by willingly risking taxpayers’ money: Illinois owns 30% of the nationwide pension bond debt. The more unconventional the debt, the more you know a government is in trouble.
Kankakee taxpayers will still feel the pain of the bond plan, with a 2% sales tax and increased property taxes also being discussed to pay off pension bonds. And Kankakee isn’t alone in the pension bond bet.
the Bradley Village Council in February 2021, approved the sale of $11.8 million in pension bonds to help address their $10.5 million unfunded public security debt. Skokie recently borrowed $176 million to help pay for “unsustainable” pension promises. Wheaton, Berwyn, Moline and East Moline have all recently used the loan to pay their pensions. Chicago also has considered issuing pension bonds to help pay off his debts.
These bond programs are a stopgap measure to keep city finances from collapsing under the burden of pensions. Even if the bonds are not used, municipalities are still under pressure to find money from more traditional sources: taxpayers.
nils recently proposed an 88% increase in his property tax, in part due to rising pension costs. Decatur recently approved an increase in property taxes for the payment of pensions for police and firefighters and the repayment of bond debt. River Forest too increase in property taxes this year to help pay his police and fire pension obligations, which eat up more than 40% of the city’s property tax. Elmhurst explores a range of possibilities tax increases to cover infrastructure debts.
But there is a better way than more debt and higher taxes.
State lawmakers can give cities the tools to control future growth in pension obligations and reduce that $75 billion debt. They can give themselves the opportunity to repair the state’s $317 billion debt to its five statewide retirement systems.
To gain this control, legislators must let people vote on an amendment to the Illinois Constitution that will curb future pension growth.
Pension debt is a key driver of state property taxes, which consistently rank among the highest in the nation. While the state of Illinois and the city of Chicago’s retirement systems often make headlines for their lack of funding, local governments across the state are in a similar state.
Many jurisdictions are far from being able to pay their pension obligations. But state lawmakers haven’t allowed a lack of money to stop them from actively floating and approving pension expansions, including a successful $850 million expansion for pension cost adjustments. life of firefighters in Chicago that lawmakers later considered expanding to municipal police at a cost of $3. billion. Police expansion has stalled.
Illinoisans already pay some of the highest taxes in the nation, largely to pay retirement debts, so the Kankakee plan, including tax increases, is nothing new.
Illinois leaders can act today on lasting pension reform. The constitutional amendment, coupled with the Illinois Policy Institute’s harmless retirement plan, could save Illinois about $2.4 billion in the first year and more than $50 billion through 2045. The plan would also fully fund the five pension systems, wiping out that $317 billion debt. and allow the state to resume providing the services that taxpayers expect.
Additionally, it would allow local governments to stop taking risks with taxpayers’ money and constantly raising property taxes that cause Illinois to move to other states.