There are 217 police and fire pension funds in suburban Cook County. The taxpayer-supported systems, with collective assets of nearly $5 billion, are intended to provide public safety workers and their families with stable retirement incomes.

But a Better Government Association Rescuing Illinois analysis found dozens of local police and fire pension funds are in financial peril, putting retirement incomes at risk, as well as the fiscal health of numerous municipalities.

If you don’t see the video above, click here and watch it on WTTW.

Rescuing the troubled funds may require tax hikes, service cuts or both, say experts. Already, some public safety agencies are looking to privatize or merge with neighboring departments in an effort to cut personnel and ease future pension payouts. Whatever the method, taxpayers can expect to bear a heavier financial burden because of the severe local pension shortfall.

READ MORE: Why Public Safety Mergers Are Inevitable

A Rescuing Illinois report finds cross-border consolidation of police, fire and emergency services is the next major step for cash-strapped municipalities.

In all, unfunded liabilities for police and fire pension funds throughout suburban Cook County total $3.3 billion, according to a BGA analysis of the most recent municipal pension fund data.

Fifty-eight or roughly a quarter of the systems are less than half-funded, meaning there is fewer than 50 cents for every dollar owed in long-term benefits, according to the analysis. Generally, a minimum 80 percent funding is considered healthy. A state law approved in 2010 requires such pension plans to be 90 percent funded – by 2040.

Troubled Ten

A list of the worst funded police and fire pension funds in suburban Cook County, with at least $1 million in assets.



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Source: Municipalities, most recent financial reports.

At the current low funding levels the systems aren’t cushioned against investment losses, and may have to liquidate assets to pay benefits, raising the risk that some systems could run dry. In such a scenario, taxpayers could be responsible for any shortfall. (If and how municipalities and pension funds can declare bankruptcy and get out from under financial obligations is unchartered terrain.)

“The gravity of the situation goes from grave concern to outright terror,” says Roger Huebner, deputy executive director of the Illinois Municipal League. “Some of the funds are in such bad shape I don’t know how they recover.”

This municipal pension mess comes atop alarming money shortages in pension funds for employees of the State of Illinois, City of Chicago and Cook County. Each of those agencies has been trying to work out a legislative solution.

Without a doubt, the collective unfunded liabilities of those bigger pensions (in excess of $100 billon) are far greater than the combined suburban pension shortfall. However, the fire and police pension woes threaten to have a far greater financial impact on mid-sized and small municipalities because they have fewer viable options to raise revenues or cut costs to plug a pension hole.

Who’s to blame for the problems on the municipal level – where there’s been little public discussion about solutions – depends on who you ask.

Alsip’s Alarming Pension Calculations

Salary bonuses given to Alsip police officers have a lasting impact on their pensions – and taxpayers.

By Patrick Rehkamp and Andrew Schroedter/BGA

Pension sweeteners are among the reasons some municipal retirement funds are in dire shape.

Take Alsip, for example. Two veteran police officers in the south suburb each received “longevity” bonuses of more than $21,000 apiece and then retired almost immediately – with the bonuses factored into retirement benefits.

Because of those bonuses the two officers stand to collect additional pension payments totaling $1.8 million over their lifetimes, further straining Alsip’s financially troubled retirement fund as taxpayers are saddled with much of that total.

Alsip officials don’t know the total cost of using the bonuses for pension calculations, but prior to 2009 approximately 18 other officers retired with the same perk, according to a source with knowledge of the system.

“I’m sure it’s going to cost [the pension fund] a pretty penny,” Village Finance Director Deborah Freischlag said of the bonuses. “I’m sure [the pension plan] would be funded in a better way if those never happened.”

The intent of the bonuses, given to cops with at least 20 years on the force who were at least 50 years old, was to get higher-salaried officers off the books. Plus, the earlier that officers retire the more they – rather than taxpayers – have to pay in health care costs, said pension fund president Richard Dalzell, who is also a village trustee.

Officials are now questioning that logic.
“The original aspect was it was going to be cost neutral,” said Dalzell. “Obviously that wasn’t the case.”
Charles Ralphson retired in 2011 after he received a $21,000 longevity bonus. His initial annual pension was $63,872 – roughly $13,000 more than it would have been if his bonus had not been used for his pension calculation and he still retired at the same time, according to records and interviews.

If Ralphson, 52, lives into his mid-80s – actuarial estimates show someone his age will likely live until 84 – he will receive an extra $1 million in pension payments, according to a Better Government Association analysis.

“I’ll just let it speak for itself,” Ralphson said. “It was a provision in our [union] contract. I know it was approved by the village.”

Steven Daddona retired in 2009 just days after he received his longevity bonus. His initial annual pension was $73,444. If his bonus hadn’t been counted, his initial pension would have been $58,755 – a roughly $15,000 difference.

If Daddona, 57, lives into his mid-80s he stands to collect more than $800,000 in additional pension payments, the BGA analysis showed. He did not respond to numerous calls.

The Illinois Department of Insurance, the state regulatory arm for municipal pensions, told Alsip officials that pensions should not be calculated like this but no sanctions were issued, according to Dalzell.

A spokeswoman for the Department of Insurance declined to comment.

Moving forward, the village will no longer allow the bonuses to boost pension figures, Freischlag said.
Alsip’s police pension fund currently has 38 cents for every dollar owed in long-term benefits, financial records show. A minimum of at least 80 cents is considered ideal.

Observers say reasons include chronic underfunding, sluggish investment returns, overly generous benefits and, in some cases, potentially improper pension sweeteners.

Statewide there are 660 police and fire retirement systems outside Chicago. State law requires towns with 5,000 or more residents and which employ at least one full-time police officer or firefighter to create and administer pension systems for those workers. A fire protection district must create a fund if it employs at least one full-time firefighter.

In suburban Cook County there are 121 police and 80 fire pension funds, plus 16 separate fire protection district pension funds. In all, there are 5,900 annuitants; an additional 8,500 police and firefighters could collect a pension down the road.

The BGA reviewed the finances of each system – by analyzing documents, and contacting every pension agency or municipality – and found 204, or 94 percent, were below the 80 percent threshold.

Other revelations include:

  • The fire pension funds in Blue Island, Cicero and Melrose Park have just 32 cents for every dollar owed, the lowest among systems with at least $2 million in assets.
  • On the police side, Blue Island, Burnham, Summit and Willow Springs ranked among the lowest, each with less than 30 cents for every dollar owed.
  • Until recently the Stone Park police fund had just seven cents for every dollar owed. The village issued a $2 million bond in April, in essence borrowing money to pay its pension debts. Its funding ratio now stands at an estimated 23 percent, the fund’s attorney says.
  • A search of municipal and state records uncovered examples of alleged pension sweetening in Alsip and Blue Island and at the Pleasantview Fire Protection District. In Alsip, for example, two police officers retired days after receiving “longevity bonuses” of more than $20,000 each. Over their lifetimes those pay bumps could result in total additional pension payments of $1.8 million, according to a BGA analysis.
  • From 2010 to 2013, the total annual required contributions for Harvey’s police and fire funds was $10.1 million. State records show the south suburb, however, paid just $140 during that four-year span.

The Illinois Department of Insurance oversees pension funds statewide but historically there was little the agency could do if public safety workers got a last-minute pension boost, or a municipality didn’t meet its obligations. The department could levy a modest civil penalty but such fines were rarely issued.

In short, there’s been little oversight to this point.

“Yeah, obviously I’m concerned,” says former Stone Park Police Officer Robert Keaty, who collects an annual pension of $63,613. “I put in over 30 years. I don’t want to have to worry every month” about his fund’s financial condition.

Soon there could be repercussions, though.

The state law adopted by legislators in 2010 also empowers pension funds to intercept (in gradually increasing increments) sales taxes, grants and other revenues owed to the towns by the state if the required contributions aren’t made. That doesn’t take effect until 2016 but the law’s impact is already being felt, though not necessarily in ways that rank-and-file police and firefighters may appreciate.

North Riverside may privatize its fire department in part because of concerns that the village would go broke if it can’t afford its pension obligations and state revenues were intercepted, North Riverside Village Attorney Burt Odelson says.

The BGA found at least three other Cook County suburbs – Chicago Ridge, Forest View and McCook – are exploring or have already picked a cost-saving alternative to a municipal-run fire department. Rising pensions costs and concerns that precious state revenues could be garnished has brought the towns to this point.

Chicago Ridge and Forest View are weighing the benefits of joining a fire protection district, or paying a neighboring town to provide the emergency service, among other options. 

McCook, however, has made up its mind to shutter its fire department and hire a private company.

Beginning Aug. 4, employees of New Lenox-based Kurtz Paramedic Service Inc. will fight fires and respond to emergency calls, says McCook Mayor Jeff Tobolski, adding the move will save an estimated $600,000 annually.

Municipal officials who are unwilling to go that route shouldn’t look to state lawmakers for immediate relief, as no major reforms that address the police and fire pension crisis appear to be in the pipeline.

“Legislators understand it has to be done but it’s incredibly contentious and painful,” says state Rep. Elaine Nekritz (D-Northbrook). “No one is chomping at the bit to do that.”

This story was written and reported by the Better Government Association’s Andrew Schroedter and Patrick Rehkamp, with the BGA’s Katie Drews contributing. They can be reached at (312) 821-9035 or