Elmhurst Leaders Wait on Pension Reform Impact

Michael Kopp, assistant city manager, said the city of Elmhurst has never had problems funding the police and fire pensions, and reform legislation passed last week by the General Assembly should not change that.

Until Gov. Pat Quinn signs the new legislation though, Kopp, who is also the city's fire department chief, said they don't know what the true impact of the legislation will be. If the bill is signed, which at this point remains uncertain, the proposed changes will affect levies starting in fiscal year 2011-2012.

Responding to an outcry of municipalities around the state struggling to meet their pension obligations, the legislature passed a reform measure to contribute greater amounts to the pensions. The new legislation would make local police and firefighter pensions less generous for future hires around the state. Then new rules kick in Jan. 1. The bill would require municipalities to increase funding of the pensions in order to bring them to 90 percent solvency in the next 30 years. The measure will not affect current city employees. The legislation passed the House on Nov. 30 and the Senate on Dec. 1 by wide margins.

The bill:

• caps pensionable salaries at $106,800
• raises the normal retirement age from 50 to 55
• allows early retirement at age 50, but with a 6 percent reduction in pension for each year prior to age 55
• spreads the final average salary over eight years to prevent last-minute pension spikes
• starts cost-of-living adjustments at age 60 for retirees and survivors

Kopp said over the long haul this legislative reform will be a benefit to the Elmhurst taxpayers. He said the reforms will also help with the city's pension liabilities.

Kopp said Elmhurst's pension funding is higher than many other area municipalities. He said the police and fire pensions are funded at about 66 percent.

"We're funded to the level where we're supposed to be," Kopp said.

In fact, Kopp said tax levies on the two pensions decreased by $400,000 this past year. Kopp attributed the city's pension position in part to being a home rule community, which provides flexibility to explore various funding sources.

Several municipalities around DuPage County included a referendum on the November ballot asking voters if the governor and General Assembly should take steps to reform pensions. In DuPage County the referendums were overwhelmingly supported. Elmhurst voters, however, did not have such a referendum on the ballot.

Not all municipalities are happy with the new legislation. Chicago Mayor Richard Daley said the legislation will cause a spike in property taxes. Public employee unions, including the Illinois Fraternal Order of Police, also opposed the reform measure.

The Illinois Municipal League called the legislative action a "positive first step," but said additional reforms are needed.

"These additional reforms need to address the existing pension debt as well as protect municipalities that make a good-faith effort to fulfill their pension funding obligations," the IML said on its Web site.

While some municipal leaders in Illinois raised concerns about laying off police and fire employees due to the high pension costs, Kopp said Elmhurst leaders have not had to consider that as an option. He said he does not think it will be a future concern either.

"We've never had an issue where that will be the case," he said.