When it rains, it pours. On Feb. 22, Gov. Quinn in his budget address said Illinois faces serious budget issues. On March 2, Mayor Tisdahl in her state of the city address said Evanston faces a challenging economic climate.
The message from our political leaders — higher taxes and lower services are likely to continue. Be prepared. Think about that next week when you vote.
On March 20 voters will decide two referendum issues with significant financial implications — whether to eliminate Evanston Township and whether to spend $48 million on new school construction projects.
Presentations for eliminating Evanston Township indicate the City of Evanston can provide the same services and taxpayers could save $500,000 each year.
The D65 School Referendum will increase annual taxes $127 for a $400,000 house in Evanston.
That may not sound like much.
But if current trends of property tax bills rising at double the rate of inflation continue, the owner of that $400,000 house, who now pays a total of about $8,000 per year in real estate taxes, will have to pay $10,000 or more a year five years from now.
And why is that likely? In addition to normal cost increases, our state and local budgets are being impacted by rising pension, retiree health care, and Medicaid costs.
Most people know Illinois is in terrible financial shape. But the reported $85 billion of underfunded state pensions understates the magnitude of the problem. That’s because state pension funds use unrealistically high investment assumptions.
Our largest fund, the Teachers Retirement System, currently assumes 8.5 percent for its investment return compared with other funds which assume 7.5 percent.
TRS is conducting a normal review of its assumptions and results will be released by mid-year. Stay tuned.
State woes trickle down to the local level. The state government will continue to cut funding to local communities. Organizations in Evanston are grappling with unpaid bills and reduced funding from Illinois.
Illinois is likely to shift more costs to local communities. Shifting the funding of the state portion of the Teacher’s Retirement System to local communities has been suggested by Governor Quinn, Speaker Madigan, and Senate President Cullerton.
If this cost shift occurs, D65 will need to pay an additional $4.2 million per year and D202 would need to pay about $2 million per year. The actual cost for D65 and D202 will increase if the aggressive return assumptions at TRS are lowered to more realistic levels.
The City of Evanston continues to face budget challenges. During her recent address, Mayor Tisdahl said that “revenues remain under pressure and expenses are rising.”
Pension issues continue to pressure the city budget, and will likely continue to pose further challenges along with rising healthcare costs.
This year the City allocated $16 million just to fund fire and police pensions, up from $8 million in 2007. Future pension contributions will increase if investment returns fall short of expectations.
Additional uncertainties in Evanston surround teacher contract negotiations at both Districts 65 and 202.
Contracts expire later this year. Recently D65 revised their projected budget deficit for fiscal 2015-2016 from $8.8 million to $2.4 million. This forecasted deficit does not include any operating expenses for a new school which could add approximately $2 million more to the deficit.
There are many challenges facing the limited resources in our state and community. Only when all the risks and hidden costs are revealed and understood can voters make informed decisions.
The current reality for Evanston residents is higher taxes and lower services for the foreseeable future. It’s time to start dealing with our fiscal constraints. Vote to eliminate the township and against the District 65 school referendum.
Jim Young was a member of the City of Evanston’s 2008 Blue-Ribbon Pension Committee.