Evanston’s Finance and Budget Committee reviewed figures Tuesday night showing city spending was considerably less than budgeted last year — but saw bad news on the horizon about public safety pension funding.
The committee recommended that the City Council amend the 2022 city budget to reduce total spending by $34 million to just under $326 million.
Overall 15 city funds had expenses higher than budgeted last year — adding up to $2.56 million — but four funds had lower spending than expected — for total spending cuts of $37 million.
Most of the reduced spending, $20 million, resulted from American Rescue Plan Act funds that were received from the federal government last year but hadn’t yet been spent by year end.
The next biggest item was a $15 million reduction in water fund spending that resulted from capital improvement projects that were started but not completed in 2022.
So much for the good news.
The picture on pensions was not nearly as encouraging.
David Livingston, the committee’s chair, said he anticipates that, when actuarial reports for the city’s public safety pension funds come out in the next month or two, they will show that the city has fallen further behind in meeting its pension funding obligations.
That, Livingston said, is mainly because of a drop in asset values as a result of stock market declines last year, but another contributing factor will be the increases in pay for police and fire employees agreed to by the city in new contracts earlier this year.
Livingston said his best estimate is that the value of assets in the two pension funds fell from about $297 million to $260 million, while liabilities increased from $467 million to $483 million.
That cuts the pension funding ratio from 64% to 54% — and the salary increases in the new contract may shave another 3% from the funding ratio.
The City Council has set a goal of achieving full funding of the public safety pensions by 2040 — and by that date, Livingston suggested, the city will need to have close to a billion dollars in the pension funds
The committee deferred any action on setting specific annual funding targets for the pension programs until a future meeting.
There is probably a very large unrealized loss in the pension funds bond portfolios as well, since bonds have dropped significantly in 2022. Even if unrealized bond losses are not reflected in pension fund financial statements (I am pretty sure unrealized equity losses are), the committee should contemplate those losses in their recommendation.
We should do away with these onerous public pension schemes.
Most Everyone has moved away from pensions, but the tax payers are stuck with providing guaranteed income for a select few while we also pay top dollar for their salaries. This needs to end.
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