Palos Township’s $83M pension crisis on the ballot

A local referendum would tell state lawmakers how Palos Township voters would like to fix $83 million in pension debt for which they are responsible. Pension reform is the surest way to provide property tax relief.

Palos Township voters will have a chance to declare how they want to handle the public pensions driving up their property taxes – an $83.4 million debt for which they are responsible.

Government pension obligations just for police and firefighters cost taxpayers in Palos Township more than $8.3 million annually.

While the pension debt is for municipal employees only, all voters in the township get a say in how local and state pensions should be handled. Despite spending more than $8 million annually, pension funds within Palos Township owe more than $83 million to their municipal pension funds. Collectively, the municipal pension funds have a funded ratio of 64%.  Experts warn that pension funds with funded ratios of 60% or lower are considered deeply troubled, and municipalities within Palos Township already have pension funds well below this funding level. The Palos Park Police Pension Fund has a funded ratio of 52%, while the Palos Hills Police Pension Fund has a funded ratio of just 57%.

Large annual pension obligations coupled with massive unfunded liabilities are part of the reason property taxes within Palos Township are among the highest in the nation and tax bills continue to rise. Property tax rates across Palos Township exceed 2.1% of a home’s value per year – more than double the national median of 1%.

The typical homeowner in Palos Township pays more than $6,400 in property taxes annually, according to the U.S. Census Bureau.

Millions of residents’ property tax dollars are diverted away from services towards municipal pension debt within the township, leaving property taxes among the highest in the nation and driving tax bills higher every year.

Fortunately, voters in Palos Township will have the opportunity to begin to reverse this trend. A referendum will appear on the April 1 ballot that asks if voters would approve constitutional pension reform if savings could be directed towards property tax relief. The referendum reads as follows:

“Do you support constitutional pension reform to protect workers’ existing retirements and generate savings which could provide property tax relief or be reinvested in the community?”

While non-binding, the referendum is the first step in voters making their voices heard and telling public leaders pension reform to provide for property tax relief is an acceptable tradeoff for taxpayers. A pension reform plan such as one originally developed by the Illinois Policy Institute – based loosely on bipartisan 2013 reforms that passed the Statehouse and were approved by the governor – would help to eliminate state and local unfunded pension liabilities and achieve retirement security for government pensioners without taking away current benefits. A constitutional amendment is needed because the Illinois Supreme Court ruled in 2015 that any pension changes were unconstitutional.

With polls showing nearly 3 in 5 Illinoisans believe the value of public services they receive are not worth the property taxes they pay, this referendum will empower local voters to communicate their priorities directly to state leaders and start building momentum for substantive property tax reform across Illinois.