Quincy pensions cost 126% of local property taxes
Quincy property taxes don’t generate enough to pay for community pension costs. Despite this heavy burden, there is so much state and local pension debt that the average Quincy household owns more than $ 35,600.
Quincy’s average household has state and local pension debt of $ 35,689, of which approximately $ 6,000 comes from local police, fire, and community systems.
If that pension debt had to be paid tomorrow, it would take 77.3% of the median household income of $ 46,189 for a year.
The city of Quincy has nearly $ 102 million in local pension debt, according to the latest data provided to the state auditor for fiscal year 2019. That debt includes $ 49.7 million for fire pensions, $ 51.9 million for police pensions, and $ 238,000 for community workers.
Pension experts consider a coverage ratio of less than 60% to be “deeply concerned”, while a coverage ratio of 40% can be a “point of no return”, i.e. the inability to make the required contributions or to maintain an adequate level of coverage – without painful cuts or serious structural reforms. The Quincy Fire Department Fund is only 41% funded, while the Police Pension Fund saves only 47 cents for every $ 1 in future promises.
Pension contributions were $ 7 million for Quincy in fiscal 2019, representing 126% of the total of $ 5.5 million in property tax collected.
The local pension crisis is driving property tax hikes as mayors and other local officials struggle to keep up with the growing financial burden. Local executives have been inundated with pension systems by state law and have virtually no options to cut costs or improve sustainability on their own.
Rock Island, Illinois, City Manager Randall Tweet summed it up, “We’re just trying to keep our heads above water. I imagine it’s the same story in every city across Illinois. “
Property taxes on a Quincy home that averages $ 116,300 in value is $ 2,275, or 2% of the value of that home.
Illinois’ worst pension debt has become a known problem. Over $ 144 billion in pension debt for the five nationwide pension systems equates to nearly $ 30,000 in debt for each household that must be met with further tax hikes or further cuts in core government services.
Less well known is the nearly $ 75 billion in pension debt held by Illinois local governments, which is the main reason behind Illinois’ second-highest wealth tax in the country. Combined with the state’s pension debt, politicians who poorly managed the pension system dug a $ 219 billion hole.
As in other Illinois communities, the cost of retirement in Quincy has continued to rise for years. Quincy has also seen the problems associated with lucrative pensions and public servants trying to maximize their benefits.
After a top civil servant retired in 2020, a fire department lieutenant was promoted to captain. After working as a captain one day, he decided to take part in a city’s early retirement program. He then took unused vacation days until he reached his official retirement date. His one-day service as captain meant that his pension would make him an additional $ 2,000 more each year than if he had retired as a lieutenant.
This type of manipulation has become far too common for the Illinois communities already drowning in pension debt.
Taxpayers in Quincy and many other cities are being asked to pay more to get less. Rising annual pension costs are crowding out local government spending on services that residents want and need.
In recent years, Illinois cities have been forced to either lay off current workers, raise taxes, or both to keep up with the cost of these pension systems. For example:
- Jerome, Geneseo, and Norridge raised property taxes in 2018 to pay retirement costs.
- Chicago’s southern suburb, Harvey, sacked a quarter of its police officers, more than half of its other law enforcement officers, and 40% of its firefighters in 2018 after the state intercepted funds destined for the city under a pension law to coerce cities to make the necessary pension contributions.
- In 2019, the pension law was also triggered in North Chicago and East St. Louis. The resulting increase in city household retirement costs resulted in cuts of $ 1.3 million in north Chicago, including layoffs of three firefighters and nine layoffs of firefighters in East St. Louis.
- Peoria, which cut 38 first responder jobs and 27 community jobs in 2018, had to cut another 45 jobs in 2020 after COVID-19 exacerbated the city’s pension-related budget problems.
The combination of higher taxes and deteriorating services is a major reason Illinois residents have increasingly fled to other states. The 2020 census marked the first time in 200 years that Illinois lost population between ten-year censuses, driven by Illinois residents moving to other states.
The Illinois state and local pension crisis is the greatest public policy challenge the state faces. It contributes to almost all other fiscal and economic problems, including high property taxes, cuts in government services, economic stagnation, and brain drain from Illinois.
The only viable solution to the Illinois retirement crisis begins with a constitutional amendment that allows for a reduction in future performance growth for current workers and retirees. The current pension clause, which prevents changes not only in employment benefits but also in the future rate of growth in under-work benefits, is a pair of fiscal handcuffs for mayors who have few options besides tax increases and benefit cuts.
A pension reform plan developed by the Illinois Policy Institute for the state systems “keep it harmless” can save around 2.4 billion in the first year instead of the 90 percent reduction that the heads of state are hoping for. All of this is accomplished while preserving every dollar of retirement benefits pledged to public service workers for work already done.
Similar reforms to local pension systems could offer overburdened homeowners significant tax breaks, free up resources for spending on ongoing services, or finance a combination of both. Such relief is badly needed in Danville.
Real pension reform, beginning with a constitutional amendment, is the only way to stop the Illinois exodus by finally offering taxpayers value for their money.