With Evanston’s 2023 budget scheduled for adoption Monday, council members will be faced with a tough decision about whether to act on their finance committee’s recommendation to boost public safety pension funding.

If the proposed $4.5 million increase in pension funding were to come entirely from the property tax, it would require a roughly 8% boost in the city’s property tax levy — at a time when both school districts are imposing their maximum allowed increase of 5%.

But the city’s chief financial officer, Hitesh Desai, in a strongly worded memo prepared for Monday’s meeting, says staff believes it would not be financially prudent to fund all the extra pension contribution from the general fund surplus or by making more upward revisions to revenue projections.

Desai says the revenue projections are now in line with pre-pandemic numbers, that a widely-anticipated recession could cut income from most city revenue sources and, with all the city’s collective bargaining agreements expiring at the end of this year, “there is the potential for significant wage increase requests.”

The proposed budget forecasts that the union contracts will end up calling for no more than a 4.5% increase in wages and benefits in 2023.

But with the consumer price index currently showing a 7.7% increase for the past 12 months, and Social Security’s cost of living increase for 2023 set at 8.7% — the budgeted figure may turn out to be insufficient.

Desai says the city “needs direction for a pension funding policy and goal which is sustainable from year to year instead of funding decisions based on annual general fund balances.”

The latest version of the proposed 2023 budget cuts total planned spending from $402.5 million to $390.6 million, mostly by pushing off proposed capital improvement projects to future years.

The new staff budget proposal also boosts projected Personal Property Replacement Tax revenue by $500,000 and Real Estate Transfer Tax revenue by $250,000 above amounts in the original proposed budget.

At last Monday’s meeting Ald. Devon Reid (8th) said the city’s local motor fuel tax rate is just 3-cents a gallon and proposed increasing it to 5 cents. He won council support for a one-cent increase instead.

But city staff now say the current gas tax rate is already 5-cents a gallon. A staff memo says a further one-cent increase would raise about $165,000 a year in new revenue.

Bill Smith is the editor and publisher of Evanston Now.

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  1. Great info! I wonder if someday governments could switch to 401k plans the way corporations have. I just read here that the switch to 401ks was caused by the tendency of even healthy companies to terminate their pension plans early. They stopped doing that when the had to pay a reversion tax of 10 percent. https://www.cato.org/commentary/where-have-all-pensions-gone But I guess governments don’t have any incentive to change their pension systems, and couldn’t switch to 401ks even if they wanted to, according to the IRS:
    “State or local governments or political subdivisions, agencies or instrumentalities of state or local governments, are not eligible to maintain 401(k) plans (except if adopted before May 6, 1986). However, they can provide similar tax-favored retirement benefits for their employees through a 457(b) plan.”

  2. @Joy – very oversimplified: it’s not specifically a 401(k), but plenty of governments have shifted from plans with a defined benefit (e.g. pensions) to defined contributions (similar to 401(k)s, IRAs, etc.). Yet in Illinois, pension structure is set by Springfield. The city has no authority to change the fundamental structure of employee contributions paid or benefits received. If you want it to change, write your legislators.

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