Peoria City Council axes Public Safety Pension Fee, opening up wider debate on how instead to pay down staggering pension liability
Peoria City Council members voted 9-2 on Tuesday to end the Public Safety Pension Fee, setting up lively discussions for alternative sources of funding, with some council members stating the city is taking a “band-aid” approach to paying nearly $400 million in fire and police pension liabilities.
Council members Chuck Grayeb (2nd District) and Denise Jackson (1st District) voted to extend the pension fee.
City Manager Patrick Urich said before the vote the fire and police pension liabilities of the budget have continued to see fiscal pressure to make additional contributions.
“We recommended as part of the budget to extend the fee. The way the ordinance was drafted, it would set the fee to collect $2,044,700 and then freeze that, at that level, and would be there indefinitely unless council acted on,” Urich said to council members.
Following Urich’s recommendation, at-large council member Sid Ruckriegel said the council is witnessing the sun setting of a fee.
“When this fee was put in three years ago, it was reported to be able to do something to the ultimate liability that we faced,” Ruckriegel said. “We’ve seen that liability continue to grow exponentially since this fee was actually put in. I think the residents of Peoria have spoken up pretty loudly that this is something that should be included in our traditional budget and not as an extra fee they’re seeing on their properties.”
Ruckriegel introduced a substitute motion to deny the extension with at-large council member Beth Jensen seconding the motion. Jensen said she voted against the fee three years ago and stated other revenue sources should be considered to pay the pension liabilities.
Third District council member Timothy Riggenbach believes a group effort down in Springfield could change the current timeline of pension payment. At-large councilm ember Zachary Oyler agreed with Riggenbach, saying “all this did was help take the eye off the ball for the actual problem.”
Fifth District council member Dennis Cyr asked, “It would a fair assessment for me to say the $2 million is just a band-aid on our problem like councilman Oyler said...on the $360 million, it’s a band-aid, correct?” Council member Cyr prompted to Urich. “...(R)eally this is just a band-aid. It doesn’t provide a solution on the $360 million unfunded liability.”
Urich said the city would need to pay more than $28 million a year to pay the unfunded liabilities while also ensuring funding for current employee obligations.
“That number pushes closer to $40 million a year of what we should be contributing towards pensions,” Urich said to Grayeb. Urich said the city is currently funding around $27 million, but is still underwater with current obligations.
“If the general assembly decides that they want to extend the enumerated period out 20 more years that buys a little bit of time. We still have to pay those back...we still need to make those contributions,” he said.
Grayeb pointed out without the fee, the city may need to cut positions, affecting public safety in his remarks.
“I know an election cycle is coming up for some of these at-large people, but there is going to be life beyond 2024,” Grayeb said, adding "(we) need to have life in Peoria where people want to live. And that means they need the core basic services.” Grayeb said without pension funding public safety, including police, fire, public works as well as code enforcement, could face cuts.
Ruckriegel had issue with some of Grayeb’s framing on the issue as well as his diction, claiming he isn’t against public safety.
Riggenbach proposed looking at the 38 potential staff hires with more information on the positions before finalizing the 2022-23 budget with their approval.
Urich said there are three options on the table for funding the pension.
The first includes the city cutting more than $4 million in expenses out of the budget over the next two years. Urich claimed 24 positions out of the general fund would need to be eliminated.
The second option lowers the pension contributions to $2 million over two years — roughly $550,000 in each of the pension funds, police and fire. Expenses would need to be cut under $2 million over the next two years, possibly eliminating 11 positions out of the proposed budget.
Urich followed up with his recommendation, the third option, on funding the liabilities in absence of the pension fee.
Urich said he expects the estimated $10 million budget surplus to grow an additional $2 million based on personal property replacement tax, income tax, and sales tax collections.
“...(My) recommendation at least for the first two years would be to lower the amount of pension contributions we’re making in the short term, but also use some existing revenues (budget surplus) that we’re anticipating to come in this year,” Urich said. “So, that will buy two years basically, but after that, you’re going to have to look at where additional revenues are going to come from.”
Urich said with the current state pension system all the city council can do is “pay the bill.”
Council members Cyr, John Kelly (At-Large), Oyler, Riggenbach, and Ruckriegel disagreed with Urich and voted "no" on the pension motion in the budget proposal.
At-Large council member Kiran Velpula was confused on what exactly was being proposed and abstained.
“I heard both sides of the discussion, but for me to make an informed decision I really wanted to understand the base of it,” Velpula said. “I didn’t know how to explain my thought...I really am confused because at 2:30-3 o’clock I got the same thing," referencing the email report back with pension funding options).."And now I’m supposed to vote and I don’t know what I’m voting for.”
Velpula asked if the council could delay the vote, but it was after a divided 5-5 vote on the motion. Velpula’s abstaining vote counts in the negative and the tie vote means it failed.
Before the failed budget vote, Mayor Rita Ali summarized the conflict Peoria is facing with rising pension costs.
“I just want to say first that we have a broken pension system throughout the state of Illinois. We’re not the only ones experiencing these huge liabilities. Under the current structure that we have, we’ll never catch up...not in our lifetimes...we’ll never catch up,”she said. “So the only choices that we have right now until we can work with Springfield to fix the broken system is those band-aid approaches. Those [are] short-term strategies, because we’re in a survival mode. We still have to support our community.”