COVID-19 economic hit forces Peoria to cut 45 city jobs, offer buyouts
Peoria’s financial problems grew critical from the coronavirus, but the long-term threat of pension debt will remain even after more severe cuts are made.
Peoria is offering early retirement incentives after cutting 45 city jobs, struggling to immediately cut $10 million out of an expected $50 million revenue loss as a result of the COVID-19 pandemic and lockdown orders.
Small business earnings are down 83.4% from January and unemployment in the city is at 19.3%, according to city data. The metro area has the second-highest unemployment rate in the state after Rockford.
Peoria City Council members voted in May to cut $10 million in spending, mostly through layoffs and furloughs. The current round of cuts is half what had been considered, and the majority are vacancies that will not be filled with 18 actual layoffs. Police and firefighters are included.
The city was also forced to pause $26 million in capital spending and restructure $10 million of debt to offset the expected revenue shortfall of $50 million.
Council members pushed back on the city manager’s original plan to cut 99 jobs, decrying service reductions for city residents. Cuts in the police department, the elimination of three fire engine companies, less plowing in the winter and slower responses to community complaints were expected.
The proposal said city leaders offered labor unions a 10% salary cut to stop the layoffs, but the unions declined. The early retirement incentives are hoped to prevent some layoffs.
Peoria City Manager Patrick Urich closed his presentation on budget threats by reminding city council members that while COVID-19 is driving problems this year, pensions are more problematic long term. He cautioned that future deficits will be caused by the rising cost of pensions, which means more cuts or more taxes.
In October, residents were slapped with a “public safety pension fee” to help the city get an additional $1.2 million by the end of 2019 to pay down pensions. Urich said pension payments for public safety retirees grow 11% each year. The fee was implemented to avoid a property tax increase.
During the past decade, Peoria has seen its annual public safety pension costs double to $20 million from $10 million, according to the State Journal-Register. Peoria residents see 95 cents of every property tax dollar for police captured by police pensions, which is projected to increase to 100% of property tax collections next year. Firefighter pensions already capture every property tax dollar intended for fire services.
That hasn’t been enough to avoid service cuts. The city cut 38 first responder positions in November 2018 to address a budget shortfall driven by pensions. Eighty-five percent of the city’s property tax revenue goes to pensions.
Peoria’s taxpayers have already suffered enough in the past year from fewer services and higher taxes. As the COVID-19 recession pushes the city closer to the edge, it needs the ability to control pension costs.
State lawmakers must pursue a constitutional amendment to reform pensions. Without serious reform, growing pension costs will only lead to more tax hikes and service cuts in Peoria and other local communities.