KANKAKEE — Kankakee is falling far short of the state’s recommendations on how much to contribute to its police and fire pension funds, which could cause severe budget problems down the road.
This has been a problem for years, one city officials acknowledge. When pensions are underfunded, future taxpayers will have to pony up to make ends meet.
For every municipality with police and fire pension funds, the state Department of Insurance gives an annual suggestion on contributions.
According to the department’s reports, Kankakee’s fire pension fund is in the worst condition. Last year, a total of 48 active employees paid into a pension fund, and 74 former firefighters collected benefits. Usually, a department has more employees than pensioners.
In the 2018 fiscal year, the state recommended Kankakee contribute $3.9 million to the fire pension fund, about $800,000 higher than the previous year. The city ponied up $2.6 million, $1.3 million less than suggested — the widest gap in years by far.
The fire pension fund is 17 percent funded, among the lowest in the state.
For the Kankakee police pension fund, the state recommended a contribution of $3.7 million in 2018, up $700,000 from the previous year; the city put in a million less, a much larger shortfall than previous years. The pension fund is less than a third funded.
In 2018, 65 employees contributed to the police pension fund, which supported 61 retirees. Since 2012, the number of employees has fallen as pensioners have increased.
City officials have taken action with the pension funds that they say will turn the tide. Last year, the City Council increased the sales tax by 2 percentage points, projecting that would bring $7 million more to the city. The plan was to dedicate the new money to the police and fire pension systems, shifting the burden from property taxpayers.
In its first year, the plan appeared to have worked, with the city’s portion of property tax bills dropping by a quarter.
It’s unclear how that affected the local pensions funds because the Department of Insurance does not have 2019 fiscal year data on its website yet. In an email, the city’s finance director, Elizabeth Kubal, said the city does not have the information yet as final details are being worked on for the fiscal year 2019 Department of Insurance reports.
‘NO EASY SOLUTION’
In her monthly video last week, Mayor Chasity Wells-Armstrong said there was some sentiment on the City Council to deposit the tax money from marijuana sales, which the state will start allowing in January, into the police and fire pension systems.
But the mayor said she would like to use the marijuana tax money to reduce the $35-per-year vehicle sticker fee, which she said hit poor families particularly hard.
In an interview, Alderman Chris Curtis, R-6, who recently announced he would run for mayor in 2021, said he would rather the marijuana tax go toward police and fire pensions than put more of a burden on property taxpayers.
Curtis said the city always should keep the police and fire pensions in mind when extra income comes the city’s way. For instance, with the city getting more money from video gambling machines, he suggested there be some threshold where that money could go to pensions.
“There is no easy solution to this,” Curtis said. “If we could slowly stabilize the pension fund, it would help with our bond rating and the city’s financial status.”
Richard Sims, a retired police officer who chairs the police pension board, said the sales tax arrangement has helped the pension funds.
“We have been told that even if we’re 55 percent funded, we are fine. The officers kick $500,000 into the fund every year. We don’t need to be 100 percent funded. The money is coming in all the time,” Sims said.
‘A DEATH SPIRAL’
Ted Dabrowski, of the Wirepoints research organization, said Kankakee has among the worst funded police and fire pensions in the state. He noted cities must follow state pension laws, so there is little they can do to contain costs.
The crisis in police and fire pension funds will strike poorer towns such as Kankakee first before spreading to wealthier communities, Dabrowski said.
“It’s a death spiral, unless something changes,” he said.
One way towns can decrease their costs is to keep salary increases to a minimum, he said. But that’s hard because police and fire unions have a lot of power in negotiations under the state’s collective bargaining law, he said.
“If cities don’t pay up, police and fire unions have forced arbitration. What’s the mayor going to do — fight them or give in? As long as collective bargaining laws so strongly favor unions, then they’re going to get raises,” Dabrowski said.
He said the Department of Insurance’s recommendations are “very reasonable” and are based on a number of factors, including actuarial statistics.
Most other area towns are paying the contributions recommended by the Department of Insurance. Bourbonnais, for instance, has been paying the exact police pension contribution suggested by the state for years. And Bradley has been exceeding its suggested amount for its police fund the last seven years, one time by nearly $150,000. The Bourbonnais and Bradley funds were funded at 69 and 63 percent, respectively.
Manteno, however, occasionally shorts the suggested contribution for its police pension fund, but balances it out by exceeding the recommendation by tens of thousands in other years. Manteno is funded at 89 percent.
Other municipal workers are in the Illinois Municipal Retirement Fund. The state of these pensions funds is typically above 90 percent.
If a municipality shorts IMRF, the fund can go to court to force contributions.