Thursday, December 02, 2010
Why are the Peru Police and Firemen pensions underfunded?
City Treasurer Gary Hylla provided the city council with another "wake-up call" at last nights meeting. Hylla informed the council of the poor financial condition of the Peru Police and Peru Firemen pensions. Fortunately the Firemens pension fund appears in better shape than the Police fund, but both remain underfunded according to figures provided by the Illinois Department of Insurance, which is the agency assigned to oversee government retirement funds in the state. Experts in the field agree that a fund can be considered properly funded when its assets are at least 80% of its obligations. At present the Peru Firemen pension is funded at 75.53% and the Peru Police pension is funded at just 45.63%. I had just read an in-depth story in last Sunday's Chicago Tribune about this issue titled "Suburbs face their own pension mess". Check it out at in the Tribune Watchdog section at http://www.chicagotribune.com/. The Tribune story points out that numerous suburban city leaders' failures and mis-steps have collectively helped create another staggering layer of crisis beyond the better-known problems that have the state in a stranglehold. And last night Treasurer Hylla confirmed that Peru's elected officials have failed in their resposibility to properly levy taxes and transfer those dollars to the pension funds, therefore pushing more and more debt to the future. Essentially, kicking the can down the road. Nor have they worked to lessen the burden on the funds by adjusting plan benefits, employee contributions, or by simply not hiring new employees. Sadly, the practice of pushing debt forward by elected officials is all to familiar in the city of Peru and this is just one more example of that. Last night Alderman Dave Potthoff described the requirement to contribute to these funds as an "Unfunded Mandate" from the state of Illinois. It is in fact an "Unfunded Obligation" from Peru's elected officials. One person interviewed for the Tribune story put it best by saying, "When you have politicians with this discretionary authority, where they don't have to pay, that's a real problem. They gave themselves a huge tax break during the best economic times we had." City officials in Peru have been shorting these funds and others for too long. All the while claiming the most prosperity and lowest taxes around. That's easy enough. Don't fund your Library and don't fund your employee pensions. Not exactly a sound long-term financial strategy. Now the hens have come home to roost and there are even more bills past due than we thought.
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4 comments:
Sadly Steve your comments are again slanted toward selected quotes from the Chicago Tribune in reference to the collective measures of the reform in pension funding. It easy to cast stones when your running for office, its easy for you to place the blame game on the past. Its also easy for you to scream we need a tax increase at every possible problem (library,pensions,etc). I am sure you wouldn't place blame on the early retirement program introduced by your Mayor or even the fact that you may never get pension reform with the union controlled State of Illinois. Lets get back to Peru. Treasurer Hylla mentioned that Peru is looking to their own tables to determine Peru's pension liability. The current pension payout structure is financially unsustainable for all municipalities not only Peru. Between 1997 and 2008 the unfunded liability of these funds grew by 297%, despite the taxpayer increase of 162%. Taken from the report by the Illinois Municipal league. The need for reform is long overdue by the State, your local city has no control over the pension fund. A typical 30 year employee would contribute about $300,000, an employee or spouse can draw almost $7.5 million over a 30 year retirement. I don't think the answer to the pension problem is a result of taxpayer contributions. Tell that to the people losing their homes or looking for employment or on a fixed income. Please include a list of cities where everything is ideal and they have fully funded pensions. I tend to believe that you may have been from the school of thought that expects bigger government and higher taxes.
You have read the Tribune story. You obviously do not agree that elected officials in cities and towns should be required to abide by the pension funding structure provided by the Department of Insurance actuarials. Personally, I believe cities do have an obligation to use the tax dollars they levy for exactly what they are intended for. In this case funding employee pensions. I only want to know that my tax dollars are being used as intended. Between 1997 and 2008 the unfunded liability of these funds grew because the cities, like Peru, made the decision not to continue to contribute to the funds as necessary. I'm sure you understand the position of the Illinois Municipal League is hardly unbiased. In fact, there are many examples of "golden parachute" maneuvers and pension "spiking" by retiring IML officials who are actually allowed a pension through the Illionois Municipal Retirement Fund. So they are more a part of the problem than the solution. I'm all for reform of the entire pension system, and I'm all for a fair pension program for public employees. I don't understand your comment about people losing their homes. You can't really be suggesting the housing crisis is the result of taxation for public pension funding. I'm sure you remember those wide open and unregulated lending practices by the banks that caused the near financial collapse of the entire country. The Tribune article indicated there are indeed some cities in Illinois with fully funded healthy pension funds for Police and Firefighters. I would only hope that elected officials in Peru make an honest effort to learn how to do same. Honestly.
Its simple.... You proposed that taxpayers pay the pension benefits. The trickle down effect of higher taxes places a burden on many that are faced with a mortgage payment and higher tax bill. Maybe you believe that higher taxes have no effect on mortgage payments. As a employee I have followed the pension payments and according to law all the amounts levied have been placed in those determined pension funds. Are you again saying that some took the money and left town? Honestly? The lack of fully funded pensions is a result of "spiking salaries", in which a employee gets a raise or promotion prior to retirement. Early retirement, including overtime on the scale, poor investment returns(yes,some retirement funds were placed in checking accounts for decades). Total pension payouts grew by 221% from 1997 to 2008. Your local mayor or city council has no control of the rules or the investment. If you have evidence of the City of Peru allocating designated pension contributions for any other purpose than we have a criminal action. I don't believe you can spin that one on us taxpayers.
Anon 4:39p.m.-9:55A.M. Why don't you stay directed to the subject being discussed. Your thoughts are all over without a direct solution to any of the problems you have stated. You have told us what you tend to believe about Steve - why don't you tell us what you believe about yourself? Please try to accomplish without your statistics because they are not only boring they are also not decision determining.
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