Pension payments are the biggest financial challenge facing Springfield. At Wednesday’s first city budget hearing, officials agreed on that much, but argued over what to do about it.
The debate boils down to what you think the problem is: the state-mandated goal to get the municipal pension system 90% funded by 2040, or the unfunded liability.
To Springfield budget director Bill McCarty, it’s the mandate.
“How are we going to pay for the state mandate to get to 90% funding which is, by the way unnecessary, but how are we going to get there and meet that mandate by 2040?” he asked.
By his office’s estimates, the city will need an additional $243 million in revenue over the next 20 years to meet the goal. That’s tens of millions more than what it will raise through property taxes, which mostly funds the payments now.
Ward 7 Ald. Joe McMenamin countered that McCarty is missing the point.
“We have underfunded our pensions, and as you underfund pensions, it just means you push the liability in the future years,” McMenamin said. “Such that, it absorbs more and more of your operational budget such that then you have to keep increasing taxes and or reduce services.”
He said even as the city pension payments have grown, so has the unfunded liability, or debt. He said the city should be paying millions more per year to address the growing debt now.
Beverly Bunch is a professor of public administration at the University of Illinois Springfield and attended the budget hearing. She studies public safety pensions and said the debate about pensions is helpful in educating the public about the financial challenge.
“To me, the main focus should be on helping people understand how big those additional revenues are going to need to be, and then having a plan, how we're going to finance that,” Bunch said. “And that could be through cutting services or increasing revenue sources such as taxes or fees.”
In the last year, the city council approved a measure to use some of the city’s reserves at the end of the fiscal year towards police and fire pensions. The council also earmarked half of the revenue from a tax on recreational marijuana sales to pay down pension debt.
Bunch said these are steps in the right direction, but it will take much more money to fund future payments.
Mayor Jim Langfelder’s ’s spending proposal for the fiscal year that begins March 1 includes the state-required pension payment.
Springfield’s proposed spending plan for next fiscal year includes no new taxes, and suggests shelling out an extra $3.8 million more than last year from the general fund, totaling $130 million
The budget includes new equipment for police vehicles, parking meters that accept credit cards, and funds to hire a homeless outreach coordinator, among other new expenditures.
McCarty said the proposal presented to aldermen last night balances expenses and resources, despite some challenges. For example, the city will have to move $225,000 to the motor vehicle parking fund, which has seen declining revenues. It also plans to spend about $1.5 million in reserves.
The plan also calls for using money from a fund earmarked for infrastructure repairs instead of the general fund to pay for some new initiatives. For example, the mayor suggested using $200,000 from the account for streets and other infrastructure projects, which is funded by sales tax revenue, for a new tree planting program.But some council members argue road repairs should be paid for before any beautification efforts.
Council members will have to approve a budget before the new fiscal year begins in March.
A budget hearing on funding for a number of city divisions, including Office of Public Works, Convention and Visitors’ Bureau, and the Office of Planning and Economic Development is scheduled for Thursday at 5:30 p.m. at the City Council Chambers.
On Wednesday, January 22, the Lincoln Library, and Springfield Police and Fire Departments will present.
And on Thursday, January 23, the Office of Human Resources, City Water, Light & Water and the Office of Budget and Management will present. The hearings begin at 5:30 p.m. in the City Council Chambers.