Thursday, April 8, 2010

Budget Woes

Here's a major reason Carbondale is in financial trouble: pensions and workers' compensation premiums. According to the proposed budget over the last five years, the amount the city has to fund has increased by:

Fire Pension: 46.82%
Police Pension: 38.55%
Illinois Municipal Retirement Fund: 140.56%
Workers Compensation: 95.98%
Health Insurance: 40.26%

These are all plans the city has to fund by state law, but we're not getting any money from the state to help fund them. Your classic unfunded mandate. Don't look for the increases to let up. The city projects police pension funding to increase by 26% in FY2011

1 comment:

  1. I would like to offer some clarification about the Illinois Municipal Retirement Fund that may be useful if you write about pensions in the future.

    You wrote that "the amount the city has to fund has increased by: Illinois Municipal Retirement Fund: 140.56%"

    The City of Carbondale's Regular Plan contribution to IMRF in 2010 is 10.19% of payroll. In 2006 (five years ago), it was paying 9.14% of payroll...an increase of approximately 11% over five years and NOT 140.56% as posted.

    The City's IMRF Sheriff's Law Enforcement Plan contribution in 2010 is 12.91% of payroll. In 2006 it was contributing 13.63%. That cost has DECREASED by more than 5% over five years.

    IMRF is a responsible investor that designs its portfolio to achieve the greatest return with an acceptable amount of risk. It is highly diversified by investment type, geographic region and management style to withstand short-term market variations and ensure steady returns over the long-term. Seventy professional investment firms handling 81 separate accounts manage IMRF’s investment portfolio in compliance with the Illinois Pension Code and IMRF’s policies.

    While IMRF did lose money during the unprecedented market downturn in 2008, it earned $1.6 billion in 2005, $2.7 billion in 2006, $1.8 billion in 2007 and approximately $4.4 billion in 2009.

    Further, the IMRF Board of Trustees recognizes the budget challenges employers face and adopted a plan to moderate the impact of 2008 investment losses on 2010 rate increases on employers.

    Most employers were given the option of “phasing in” rate increases, which would cap most yearly increases at 10 percent. The City of Carbondale accepted the phase-in plan.

    In addition, IMRF is not part of the state pension system, nor is it the same as the police and fire pension funds.

    IMRF is a defined benefit public pension fund covering units of municipal government (e.g., local park districts, school maintenance workers, etc.) in Illinois — and is neither managed nor funded by the state. Instead, it is independently managed by an autonomous board representing participating municipal employers, employees and retirees. It is funded by participating individual municipal employers, participating employees and investment returns.

    If you have any questions or would like more information, feel free to email me or you can visit www.imrf.org.

    Linda Horrell
    IMRF Communications Manager
    lhorrell@imrf.org

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