NORTH RIVERSIDE — The mayor of a small suburban community west of Chicago thinks the village was unfairly “singled out” for underfunding police and fire pensions in the years during the recession when revenue was low.
An appeals court ruling in December determined that the village of North Riverside doesn’t have an adequate reason for shorting the pension fund for several years prior to 2013 – an issue that started in an administrative hearing and wound its way through the courts for more than two years.
North Riverside officials argued that the impact of the recession prevented it from fully contributing to the pension fund – an excuse the village hoped would lead the state to forgive lapses. Fully funding the pensions, which amounts to approximately $2.2 million each year, could mean cutting services if the economy takes a dive again, Mayor Hubert Hermanek told the Cook County Record. Though the choice all those years ago wasn’t made by him, he said it came down to a tough call between funding the pensions and maintaining services.
“It appears that North Riverside was singled out, because just about every community underfunds or doesn’t fund their pensions,” he said. “I wish the state, the county and the courts would realize it’s not something we willfully do. There’s only so much money that can go toward paying the bills. If we fully fund the pension, that leads to a decrease in services and layoffs. It’s very difficult to make that decision to fund the pension when the residents are going to suffer.”
During the administrative hearing, the state ruled against the village and ordered it to pay into the pensions. North Riverside fought the decision in appeals to the Cook County Circuit Court and to the Illinois First District Appellate Court. In the Dec. 19 appeals court ruling, a three-judge panel sided with the Illinois Department of Insurance and its Public Pension Division. The decision, written by Justice John Simon, found that the village had opportunities to raise additional revenue or to reallocate the money it had to pay into the pension fund.
“There was evidence that the Village spent its money on discretionary endeavors it prioritized more than contributing to the police and firefighter pensions," Simon said. "That is a violation of the Pension Code. The Village had simply made choices to allocate funds elsewhere."
Hermanek said North Riverside owes a $2,000 fine for not paying the full $35 million it owes to the pension fund. During the last three years or so, the village has fully funded the pension. But costs increased by $400,000 this year because the state of Illinois recently increased the expected lifespan of workers receiving pensions. Additionally, the village has to make up for investment losses the fund sustains.
Being a non-home rule municipality, North Riverside doesn’t have the same option as other communities to raise property taxes to cover its pension obligations. Instead, those payments come out of the general fund – revenue that comes from retail sales taxes. Hermanek has sought alternatives that would eventually eliminate some of the village’s pension obligations, including privatizing the firefighting force. But a lawsuit pending in the courts will determine whether he can legally terminate the union’s contract. Under the arrangement he wants, retirement payouts for the fire department would roll into a 401(k) retirement plan, rather than a pension system. Currently, North Riverside employs 16 firefighters, Hermanek said. And many more retired workers are receiving pensions.
While the economy that supports the 6,700-resident village has been strong enough to fully fund pensions in recent years, Hermanek will keep pushing for solutions to rein in “out-of-control” obligations.
“It’s just unsustainable,” he said.