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SB 3538 - Pension Reform Signed

Some background: Police and Fire salaries and benefits make up 73% of the City's annual salary and benefit expenditures.  In the 2010 budget cycle, the Fire pension obligation increased $917k (+43%) and the Police pension obligation increased $628k (+24%) over budget year 2009.  By 2033, the State mandates that municipalities fully fund their pensions; currently these pensions are funded at 57% and 49% for Fire and Police.  If the rest of the budget was held constant, this $1.5 million increased would account for roughly a 7.7% increase in property taxes.
Note: The City has approved a 0% increase for 2010

Bottom line: Public safety pensions and the way we elect to fund those pensions are vital to the interests of taxpayers and employees alike. 

A follow up to my Tweet on December 15th: during my first meeting as a newly appointed member of the Northwest Municipal Conference's Legislative Committee, the group discussed pension legislation which had passed the House and Senate, awaiting attention by Gov. Quinn.  On Thursday, December 30th, the Governor signed Senate Bill 3538 (Public Act 096-1495) - public safety pension reform.

Our City's Police and Fire Departments are home to heroes.  We owe them our gratitude and a pension system that is solvent and able to make good on it's obligations. SB 3538 is expected to save the State of Illinois over $250 billion in the next 35 years and help ensure that benefits exist for all current and future public safety employees.  This bill created a two tier pension system; the following is a brief description of some of the changes that new employees (hired after January 1, 2011) will see:

Retirement Age: Increase in retirement age from 50 to 55.  Employees can choose to retire after age 50 with a 6% penalty for each year before 55. 

Salary: The maximum salary for pension calculation is established at $106,800.

Pension "Spiking": Instead of calculating pensions based on the employee's salary on the last day of service, the new system will calculate pensions using the highest 8 years out of the last 10 years served.

Cost of Living Increase: The cost of living annual increases will be based on 3% or 1/2 of the consumer price index -- whichever is higher -- instead of an automatic 3% increase.

Local Obligation: While this legislation mandates that all municipalities fund their pensions at 90% by 2041, it allows the pension funds to subtract the State's commitment amount if the State falls short of their obligations (in other words, the local governments will not be penalized if the State is not responsible).

Pooling: Requires a study that will assess the 636 police/fire pensions and determine if pooling would be more efficient. 

Below you'll find the votes cast by our elected representatives in the State House & Senate.  I've included a short form that will send a "thank you" email to each of the YEA votes and Governor Quinn's Office; take a few minutes out of your busy day to say thanks to those who helped pass SB 3538. 

Representative Elaine Nekritz
Representative Mark Walker
Senator Dan Kotowski


Representative Rosemary Mulligan

Senator Susan Garrett



Sources: Illinois Municipal League, Northwest Municipal Conference, Chicago Sun Times, and ABC7 Chicago

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