Peoria pensions causing police, fire layoffs as property tax hike sought

Emergency services have been cut in Peoria because public pension costs are growing. Voters will be asked whether a property tax hike should fix the problem.

Pensions continue to crowd out emergency services in Peoria, where residents in April will vote on two referendums asking about increasing the city’s property taxes to fund police and fire pensions.

Following weeks of debate, the city council voted Dec. 8 to place the questions on the ballot. Voters will be asked separately whether they want to increase property taxes for the police pension fund and the fire pension fund.

The ballot questions will only be advisory. They will gauge public support for property tax hikes to fund the two pensions.

Peoria City Manager Patrick Urich said police and fire pensions take up 54% of the city’s General Fund Operating Budget. Peoria’s fire pension only had 48% of the funds needed to meet its obligations at the end of 2019, and the police fund had 50% of needed funds, according to the Illinois Department of Insurance.

In November 2018, Peoria eliminated 22 firefighter and 16 police positions, following 27 earlier municipal employee layoffs, in order to make city payments to the public pension funds.

In 2019, Peoria residents faced a new property tax fee devoted to funding public safety pensions. The fee ranged from $10 to $200, depending on the property size.

In June the city cut 45 jobs and offered early retirement incentives to deal with revenue shortfalls.

“We could very well be looking at 100% of our property taxes going to police and fire pensions and still not totally address the problem,” Peoria Mayor Jim Ardis said in 2019. At the time, the city had cut nearly 20% of its workforce over five years and seen pension costs double from $10 million to over $20 million in a decade.

Local governments in Illinois are required to bring local pension funds up to at least 90% funding by 2040.

“The unfunded part [of pensions] is blowing up. The ability for any of us to get to a 90% funding ratio by 2040 is impossible,” Ardis said.

Peoria residents saw 95 cents of every property tax dollar for police captured by police pensions in 2019 – with that number projected to increase to 100% of property tax collections in 2020. What’s worse, every property tax dollar intended for fire services already goes to firefighter pensions.

Peoria is a long-running example of an increasingly common pattern across Illinois: growing pressure on local governments to hike property taxes to pay for pensions while residents continue to receive fewer core public services.

The same pattern holds for Chicago, where the pension crisis continues to deepen in spite of new property tax hikes aimed at funding pensions.

The city of Chicago approved Mayor Lori Lightfoot’s $94 million property tax hike in November, with Chicagoans projected to face an increase ranging from $104 to $255 in higher property taxes. Pensions will cost at least $1 billion more annually by the end of Lightfoot’s first term as mayor than they did in 2019 at the end of Mayor Rahm Emanuel’s term.

Ultimately, it is impossible for Peoria, Chicago or the many municipalities across Illinois to fill their growing pension liabilities by dumping in more tax revenue. The only solution that will actually fix the problems is amending the Illinois Constitution to stop future, unearned benefits from growing faster than inflation.

Ending the 3% annual raises in pension income will protect the public pension funds, protect taxpayers and ensure retirees can continue to count on the funds for many years without losing a dime of current benefits.

If state lawmakers are serious about fixing municipal and state pension debts, and stop those debts from continuing to eat public services, they need to place an amendment on the ballot that allows slower growth of future benefit increases, while protecting already earned benefits.

Until then, expect municipalities and the state to continue cutting public safety and other services to make their pension payments.