Mundelein fire department dispute shows weight of growing pension costs
Village officials are trying to control expenses by cutting staff as growing pension costs continue to gobble up local tax dollars.
A growing staffing dispute between the village of Mundelein and its fire department is broadcasting the severity of Illinois’ local pension crises. Legacy costs across the state are forcing residents to pay more for less.
In order to reduce costs, Mundelein village officials are chewing on a proposal to cut the number of lieutenant-level positions in the local fire department by half – to three positions from six – through attrition, according to the Mundelein Review.
The firefighters union filed an unfair labor practice charge against the village with the Illinois Labor Relations Board in January, according to the Mundelein Review. The charge cites concerns related to personnel changes in the department.
Regardless of how this staffing dispute is resolved, it exposes long-term funding problems for Mundelein’s fire department. This staff reduction proposal comes on the heels of the village’s decision to ask Mundelein taxpayers to pay more for the very services that are being cut.
In December 2017, Mundelein village trustees voted to raise the village’s property tax levy by $630,000 in order to make police and fire pension payments.
In fairness to village trustees, Mundelein’s levy remained flat for five years prior to the December vote, and for good reason. Lake County, where Mundelein is located, has the highest property taxes in Illinois and the 21st highest in the nation, according to 2011-2015 U.S. Census Bureau data.
At the same time, the village faces fiscal hurdles from the Statehouse, including reductions to the village’s share of income tax revenue and a new state-imposed sales tax handling fee, agreed to as part of last summer’s state budget deal.
But the biggest factor sapping revenue away from services is the village’s growing pension costs.
Mundelein’s fire pension fund has 74 cents on hand for every dollar it owes in future benefits. Though the fund is in better shape than many other municipal fire pension funds in Illinois, it has still been an albatross for taxpayers. From 2006 to 2016, village contributions to the fire pension fund increased more than 40 percent. But despite this massive increase in taxpayer dollars, the pension fund’s funding ratio plummeted, going to 74 percent funded in 2016 from 88 percent funded in 2006.
The situation is even worse for Mundelein’s police pension fund, which has less than 57 cents on hand for every dollar it owes in future benefits, despite long-term increases in village contributions. From 2006-2016, taxpayer contributions to the police pension fund increased nearly 47 percent, but the pension fund actually ended up worse off, falling to 57 percent funded in 2016 from 60 percent in 2006.
The problem isn’t taxpayers; the problem is defined-benefit pension plans.
Statewide, local pension debt has skyrocketed to nearly $57 billion in 2016, up from $38 billion in 2010. But future tax hikes to fight this losing battle appear inevitable, as the state is requiring all local pension funds to become at least 90 percent funded by 2040.
While cutting positions in the fire department has raised the ire of the union and raises the specter of reduced services for residents, Mundelein village trustees have little wiggle room. The state mandates municipalities like Mundelein maintain and fund costly defined-benefit pension systems for police and professional fire departments, regardless of residents’ ability to pay.
And taxpayers are picking up the tab. Local pension debt is one of the key drivers of rising property taxes in Mundelein and in communities across the state.
For Lake County homeowners, property taxes have been growing out of control for years. An Illinois Policy Institute study found that between 2000 and an average of years 2009-2013, the average property tax burden for Lake County residents grew by more than 44 percent.
The long-term solution to local pension crises is for the state to allow municipalities like Mundelein to transition new employees toward 401(k)-style retirement plans. A similar plan has already been implemented for more than 20,000 state university workers and has been operating successfully since 1998.
Residents in Mundelein, and across the state, shouldn’t have to keep paying more in taxes for reduced services. But unless state lawmakers act to allow serious reforms at the local level, there’s little doubt property taxes will grow and resources for critical services will shrink.