A little town in Illinois can’t make payments to its police pension fund and the state is garnishing the town’s tax revenues. It’s the shape of things to come; call it pension musical chairs and the game has begun in Illinois. From Ted Dabrowski and John Klingner at wirepoints.com:
Harvey, the first domino in Illinois: Data shows 400 other pension funds could trigger garnishment
You’d be mistaken to think Harvey, Illinois has a unique pension crisis. It may be the first, and its problems may be the most severe, but the reality is the mess is everywhere, from East St. Louis to Rockford and from Quincy to Danville. A review of Illinois Department of Insurance pension data shows that Harvey could be just the start of a flood of garnishments across the state (click here to see the list).
Harvey made the news last year when an Illinois court ordered the municipality to hike its property taxes (already at an effective rate of 5.7 percent – six times more than the average in Indiana) to properly fund the Harvey firefighter pension fund, which is just 22 percent funded.
Now, the state has stepped in on behalf of Harvey’s police pension fund. The state comptroller has begun garnishing the city’s tax revenues to make up what the municipality failed to contribute. In response, the city has announced that 40 public safety employees will be laid off.
Under state law, pensions that don’t receive required funding may demand the Illinois Comptroller intercept their municipality’s tax revenues. More than 400 police and fire pension funds, or 63 percent of Illinois’ 651 total downstate public safety funds, received less funding than what was required from their cities in 2016 – the most recent year for which statewide datais available.
Two-thirds of Illinois’ 355 police pension funds failed to receive their full required contribution in 2016. And 60 percent of Illinois’ 296 firefighter pension funds suffered the same fate.
If those same numbers continue to hold true, all those cities face the risk of having their revenues intercepted by the comptroller.