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Police/fire pension reform awaits Gov. Quinn’s OK

by Kevin Olsen
staff reporter

Public safety pension reform is sitting on Gov. Quinn’s desk awaiting his signature after the General Assembly approved changes relating to new hires earlier this month.

Reform for police and fire pensions is expected to save billions in the long term for municipalities throughout the state. Public safety pensions are an unfunded mandate from the state to individual towns and have handcuffed many municipalities financially over the last several years. Current police officers and firefighters will not be affected by the reform. The state approved pension reform for all other employees earlier in the year.

“I think we made some great progress on pensions,” said State Rep. Kevin McCarthy (D-Orland Park), who sponsored the bill. “It’s the biggest budget problem the state is facing.”

If the governor signs the bill, it will increase the retirement age from 50 to 55. If employees retire at 50, it will result in a 6 percent reduction for each year prior to turning 55. McCarthy said allowing people to retire at 50 is a “blueprint for bankruptcy.”

Perhaps most significantly to the reform is the rules for calculating the final pension. Instead of the current system of basing pensions on the final pay day, the salary would be determined by an average of the final eight years of salary. Pensions will be capped at $106,800 with a cost-of-living cap starting at age 60 at 3 percent or half of the consumer price index (CPI), whichever is less. It used to be 3 percent compounding. Surviving spouses will only receive two-thirds of the pension after the benefactor dies. They previously received 100 percent.

McCarthy said he was “proud of the progress” made and that the state had to do something to stop pensions from being “spiked” on final salaries, depleting funds and stretching municipalities’ finances thin. Residents rejected a Palos Park referendum is February, which would have brought in about $200,000 annually for the police pension fund.

“Pretending that debt’s not out there doesn’t do any good for anyone,” McCarthy said. “I think we made the system much more uniform.”

Local city officials have embraced the pension reform, even if may cost a little more money in the short term. Palos Park Village Administrator Rick Boehm said it will save significant sums of money in the future, even if payments slightly increase over the next few years.

“In the long run, it will certainly assist,” Boehm said. “Like most municipalities we think it’s a good start, but it needs to go further.”

The reform offers long-term reprieve for municipalities, but it also states pension liabilities must be funded 90 percent by 2040. Currently Orland Park is 71.3 percent funded while Palos Heights and Palos Park are 60 percent and 48.9 percent, respectively.

Starting in 2016, state-shared revenue will be diverted from the difference between employer contribution and required actuarial contribution. Orland Park, Palos Park and Palos Heights have all been making appropriate contributions based on actuarial recommendations. Most communities use similar actuarial services, Boehm said.

McCarthy said there is no fear that pension changes will affect people wanting to become police officers or firefighters. He related it to the fact that schools still attract good jobs for teachers despite reform to new hires earlier in the year.

McCarthy, like municipal officials, still wants to see more done to pensions in regard to current employees and will continue to work on further reform.

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