Pensions consume nearly half of Schaumburg’s property tax levy

Schaumburg’s village board may have an opportunity to cut its property tax levy, but the village faces a challenge controlling its pension costs.

The Schaumburg village board could cut its property tax levy for the first time in five years at its upcoming Nov. 13 meeting. But as the village manager points out, Schaumburg is also relying on its property tax to pay rising pension costs.

The Daily Herald reported that some new revenue sources may allow the village to reduce the levy to $20.5 million from $20.7 million – a 1 percent decrease. But police and fire pensions will consume nearly half of the levy, totaling $9.7 million. Village Manager Brian Townsend told the Herald that rising pension costs are a primary reason the village’s current property tax levy may need to remain unchanged.

Until 2009, Schaumburg did not levy a village property tax, instead financing its operations through local sales tax revenue. The Great Recession, which coincided with increases in pension payments mandated by the “Edgar Ramp,” led trustees to enact its first property tax in November 2009. The village lowered its levy each year until 2014, and it has since remained flat. But the pension share of the village’s annual property tax levy has grown considerably in recent years, village data show.

Growth in pension costs has strained municipal budgets across the state, often resulting in higher property tax bills and a reduction in core services. In August, Peoria – where 85 percent of the city’s property tax revenue goes to pensions – sent layoff notices to 27 municipal employees in order to cover pension costs. This followed a similar crisis in the south Chicago suburb of Harvey, where 18 firefighters and 13 policemen lost their jobs to make room for pension funding.

Schaumburg has not found itself in that situation yet, but cities such as Peoria and Harvey should serve as cautionary tales for the rest of the state. And while services haven’t been cut in Schaumburg, local taxpayers are certainly feeling the pinch of rising property taxes.

In addition to the village’s police and fire pension costs, records from the Illinois Municipal Retirement Fund, or IMRF, show Schaumburg Park District’s 64 current IMRF-enrolled retirees have collectively received more than $6 million in pension payments, with $1 million going to one pensioner alone. These costs, coupled with the village’s police and fire pension liabilities, contribute to Schaumburg residents’ high property tax bills.

Schaumburg officials’ acknowledgment of its pension problem is a positive first step, but taxpayers are in need of reform – from both state and local lawmakers. Local leaders need to rein in spending, and trim bloated government salaries that inflate future pension benefits. State lawmakers can help in the short term by instituting 401(k)-style retirement plans for all new government workers. But if the state expects to overcome its pension woes, lawmakers must ultimately amend the state constitution to allow for changes to unearned, future retirement benefits for government workers.

Without these reforms, Schaumburg will risk following the same path as municipalities like Peoria and Harvey.