Ill. Gov. Quinn Signs Public Safety Pension Reform Bill

CHICAGO – Illinois Gov. Pat Quinn late last week signed into law public safety pension reforms that raised the ire of Chicago Mayor Richard Daley who warned the changes would drive up property taxes by $550 million.

Chicago’s opposition stems from provisions in the legislation that require it to shift in 2015 to an actuarially based funding formula and reach a 90% funded ratio for its police and firefighters funds in 25 years, a timeframe and ratio higher than that imposed on other local governments or the state, Daley said in a statement.

The city’s annual payments are currently based on a formula tied to a percentage of salaries and it falls far short of the actuarially based required contribution to move toward a funded ratio of 90%. Daley also voiced concern that the legislation puts the added funding burden solely on the city’s shoulders by not requiring a hike in employee contributions and that it specifically calls for funding to come from a property tax increase.

Under the legislation, the city’s annual contribution to its police and fire pension funds would increase from $309 million in 2015 to $856 million with further annual increases needed over 25 years. Daley had hoped that Quinn would put off signing the reforms until a trailer bill in the works was presented to lawmakers for consideration during a brief veto session that starts this week.

“The direct result of the governor’s actions will be a massive property tax hike for Chicago residents of at least $550 million, or about a 60% increase in our current property tax levy. In fact, Governor Quinn has just imposed the largest property tax increase in the history of Chicago,” Daley warned in a statement.

The city intends to still push for legislation that would reduce the mandated funded ratio, extend the time to reach that funded ratio, and call for increased employee contributions. At the close of 2009, the city’s firefighters fund was 30% funded and the police fund was at 37%, according to a May 2010 report issued by a pension commission appointed by Daley.

Quinn signed the legislation late Thursday ahead of the New Year’s holiday. In his news release, he touted the legislation as a means to stabilize municipal pension systems and to protect the benefits of current employees while offering attractive benefits to new employees.

“Firefighters and police officers put their lives on the line each and every day to keep us safe,” Quinn said. “These men and women who serve so selflessly must continue to have access to quality pension benefits that are also affordable for municipalities throughout the state.”

The legislation also establishes a two-tier pension system, cutting benefits for new public safety employees beginning Jan. 1. The law imposes caps on annual cost-of-living increases, raises the retirement age, and limits pensions to 75% of an employee’s salary for all new employees. Chicago is not opposed to the new two-tier system. The legislation was approved by the General Assembly in early December.

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