Blue ribbon pension committee chairman Mark Metz says Evanston should cut spending rather than raise taxes to fix its public safety pension funding shortfall.
“I think we’re being taxed an awful lot right now,” Metz said at Wednesday’s committee meeting.
“The crux of my recommendation would be to put the burden on the council and staff to make other budget cuts and find other sources of revenue” to meet the pension commitment “without any increase in taxes.”
Several committee members voiced agreement, but noted that almost every item in the city budget has vocal defenders who will turn out in force to oppose cuts.
Although no votes were taken, most committee members appeared to agree that the city should adopt a pension funding plan that would gradually reduce its unfunded liability to a more manageable level, but not try to completely eliminate the debt by the current state-mandated deadline of 2033.
They seemed to agree that, faced with public safety pension pension problems in municipalities across Illinois, the legislature is likely to extend that deadline, and they argued that, with its relatively strong credit rating, Evanston can afford to carry some amount of unfunded pension liability on its books, but not as much as it has now.
Most members also seemed to agree that the $140 million pension funding shortfall estimate provided by the city’s new pension actuary is the number the city needs to use in calculating its payment obligations.
Committee member Gerald Gordon picked up no support for his argument that the city might better use lower estimates provided by the city’s former actuary and a state pension panel.
Other committee members suggested that with recent poor performance of investment markets, the pension shortfall has probably grown since the March 2007 date used in setting the $140 million figure and might now be as high as $160 million.
Metz compared funding of the pensions over time to a playground teeter-totter or seesaw.
“It only goes in two directions,” Metz said. Either the city pays enough now so that the liability goes down over time, or it pays less, and the liability increases.
Committee member Peter Morris said he favors taking a conservative approach and paying more now. “The evils of compounding will kill us if we take lower payments as our short-term choice,” Morris said.
He added that after a few years the city could take another look at the numbers, and, if the trends then look good, it might reduce payments. But for over a decade, he said, the liability has kept increasing as a percentage of the public safety payroll.
The committee is schedule to meet again at 6:30 p.m. on Wednesday, July 2, in the Aldermanic Library at the Civic Center.
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