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An editorial piece from *PoliticsEarly&Often* examines the state of municipal pension funds across Cook County:
There are 217 police and fire pension funds in suburban Cook County. These taxpayer-supported systems, which hold nearly $5 billion in assets, are meant to provide stable retirement income for public safety workers and their families. However, a report by the Better Government Association (BGA) reveals that many of these funds are in serious financial trouble, threatening both retirees’ benefits and the fiscal stability of local governments.
Experts warn that fixing these underfunded systems could mean higher taxes, reduced services, or both. Some agencies are already looking into privatizing or merging with neighboring departments to cut costs and reduce future pension obligations. No matter the approach, taxpayers will likely end up paying more due to the severe underfunding. According to BGA data, the total unfunded liabilities for police and fire pensions in suburban Cook County amount to $3.3 billion.
Fifty-eight, or about a quarter, of the pension systems were found to be less than half-funded—meaning there was less than 50 cents on the dollar for long-term benefits. Most financial experts consider a funding level of at least 80% as healthy, while a 2010 state law requires these funds to reach 90% funding by 2040. At current levels, these systems are vulnerable to investment losses and may have to sell off assets just to meet obligations, increasing the risk of insolvency.
If a system runs out of money, taxpayers could be left to cover the shortfall. The legal process for municipalities and pension funds to declare bankruptcy is still unclear and untested. This crisis comes on top of similar issues in larger pension systems, such as those for state employees, Chicago city workers, and Cook County staff. While the overall liabilities in those systems are much higher—over $100 billion—the impact on smaller towns is more immediate and severe due to limited resources for raising revenue or cutting expenses.
The causes of the problem remain hotly debated. Some point to chronic underfunding, poor investment returns, overly generous benefits, and in some cases, questionable practices like “pension sweeteners.†State law requires any town with 5,000 or more residents and at least one full-time police officer or firefighter to establish a pension fund. In suburban Cook County, there are 121 police and 80 fire pension funds, plus 16 fire protection district funds, serving over 5,900 retirees and an additional 8,500 potential beneficiaries.
The BGA reviewed all 217 systems and found that 94%, or 204, were below the 80% funding threshold. Some of the worst performers include Blue Island’s fire fund, which has only 32 cents per dollar owed, and several police funds, including those in Blue Island, Burnham, Summit, and Willow Springs, each with less than 30 cents on the dollar. One particularly alarming case was Stone Park, where the police fund had just seven cents per dollar before issuing a $2 million bond to pay its debts. Now, it's estimated to be at 23%.
The BGA also uncovered instances of alleged pension sweetening in Alsip, Blue Island, and Pleasantview. For example, two officers in Alsip received $20,000 longevity bonuses days before retiring, potentially adding $1.8 million in extra pension payments over their lifetimes. In Harvey, the police and fire funds required $10.1 million annually from 2010 to 2013, but the town paid just $140 during that time.
While the Illinois Department of Insurance oversees pension funds, it has historically had limited power to intervene if funds are mismanaged or underfunded. That changed with the 2010 law, which allows pension funds to intercept sales taxes and other state revenues if contributions aren’t made. Though this doesn’t take effect until 2016, the threat of revenue loss is already influencing decisions.
North Riverside, for instance, is considering privatizing its fire department to avoid financial collapse due to pension obligations and potential revenue garnishment. Other suburbs, like Chicago Ridge, Forest View, and McCook, are exploring alternatives. McCook has already decided to contract with a private company, Kurtz Paramedic Service Inc., starting August 4, which is expected to save about $600,000 per year.
This growing crisis highlights the urgent need for reform, transparency, and accountability in how local pension systems are managed. Without meaningful action, the financial burden on taxpayers—and the stability of small communities—will continue to grow.
Thanks, Dan.