Don't cut pension funding

Mayor Elizabeth Tisdahl and three Evanston aldermen deserve praise for not taking the easy way out on public safety pension funding Monday night.
They were presented with an actuarial report that would let the city trim its payment to the fire and police pension funds next year by about $700,000 -- from $14.9 million to $14.2 million.
But that saving would come at the cost of having the pension funding level decline slightly -- from 45.7 percent to 45.6 percent for the police fund and from 45.6 percent to 45.3 percent for the firefighters.
And that's assuming the actuary's projections about the investment performance of the funds come true.
The mayor said she wants see the pension funding level increase -- to at least 50 percent -- within the next few years.
And so, she said, the city should set aside as much for pensions next year is it did this year.
Theoretically, under current state law, the pensions plans are to be 90 percent funded by 2040, but the state has repeatedly extended its funding deadlines.
Aldermen Don Wilson, 4th Ward; Mark Tendam, 6th Ward, and Coleen Burrus, 9th Ward, shared the mayor's sentiment, with Wilson adding that he wants to set aside "at least as much" for pensions next year as this year.
Only Alderman Ann Rainey, 8th Ward, spoke in favor of setting funding at the lower level recommended by the actuary, arguing the level he recommended "is not that much less than last year."
But the mayor countered that "the sooner we put more money in, the less we have to spend in the long term."
The views of the other five aldermen on the issue weren't clear, and at the request of City Manager Wally Bobkiewicz, the aldermen agreed to try to reach consensus on a pension funding level for next year at acity council meeting at 7 p.m. Tuesday, Sept. 18.
Bobkiewicz suggested it would be difficult to find the money to maintain the pension funding level without resorting to employee layoffs.
So, he said, he needs to know the council's wishes on the issue before he has to submit the proposed city budget for 2013, which is due to be released Oct. 12.
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Comments

What are the pension costs at realistic rates?

What will the obligation be if more reasonable rates of 4% or even 6% are used ? So far the city has been living in fantasy land about what the true costs are. This allows them to keep making promises AND giving pension, salary and benefits that are out of line with what the city can continue to pay.  While the rate applies to pensions, the salary and benefits still come out of what the city has and can raise. 
A story the other day was of a company locating a few miles from the Illinois border because of taxes and un-certain Illinois pension and other conditions.  France is in an up-roar because the fourth wealthiest man in the world is getting Belgian citizenship because of France's condition.   Remember the British super-stars who moved to the U.S. years ago because of the high taxes there ?
I don't know if companies would locate in Chicago rather than Evanston, but Skokie is certainly attractive for both commercial, service, and manufacturing.  Wilmette does not have much manufacturing that I know of but service industry and certainly at least as many IT and other such professionals would like it there. 
Evanston is surrounded by opportunities.  If we don't get our finances in order we could be picked clean.  NU is pretty much locked in.  Kendall certainly was not. Evanston Hospital safe to stay where it is---but someday there may be enough push to move the Wilmette border to Central---I suspect there are many who wish the border was even further south !

Illinois Debt Takes Toll on Services

New report yesterday on Illinois's fiscal crisis -- see New York Times and Evanston Now coverage.
Clearly Evanston will suffer not only from the state's problems but our own pension debt and the way the Council and other bodies keep pour money out to their causes---to get votes.
Of course the city and state will try to solve it with increased taxes instead of getting its house in order.
The same elected officials will do the same things as long as the voters keep electing them.  Those who elect them never seem to see the problem but the rest of us are the ones who suffer.

What is expected rate of return?

When we say pensions are 50% funded- what does this mean?  Why are they not 100% funded?
if the city doesn't make the expected returns  in the markets, of if they lose money, how will this affect pensions in the next 5 years? 10 years?

Pensions

The actuary is projecting a 7 percent rate of return.
50% funded means that half the money needed to pay lifetime benefits already earned by all current and retired employees has been set aside.
If rate of return is lower than projected, taxpayers will have to kick in more money in the future to close the gap.
-- Bill