Sheila Weinberg, founder and CEO of Truth in Accounting
The Algonquin-Lake in the Hills Fire Protection District Pension Fund's unfunded liability has jumped 379 percent over the past 10 years, according to a report by the Illinois Department of Insurance (DOI).
The 2015 Biennial Report summarizes the financial health of all state and municipal pension funds. It reports that property taxpayers in the two suburbs had $5.375 million in unfunded liability at the end of its 2014 fiscal year, up from $1.12 million at the end of 2005.
“There’s only two ways to fix this: bring more money into them by increasing taxes and/or cut benefits,” Sheila Weinberg, founder and CEO of Truth in Accounting, told the McHenry Times. “And neither of those is likely."
Actuaries are business professionals who advise pension plan trustees on how much money to set aside to fund these mandates. The pension is currently underfunded by approximately 25 percent, according to their calculations, which means it will run out of money before paying promised benefits.
“Time is not on the district’s and other municipalities’ side because of interest,” Weinberg said. “These pensions have been mandated (by the state), but the districts don’t have the money to fund them. Community members need to decide if they’re contributing too much or if their salaries need to be reduced."
There are active 46 firefighters in the Algonquin-Lake in the Hills Fire Protection District who earned an average total compensation of $106,347 in 2014, according to the DOI Report. But this number doesn't reflect the value of their guaranteed retirements.
Algonquin and Lake in the Hills property taxpayers-- not the firefighters themselves-- bear the overwhelming burden of funding these pension each year. And that burden continues to grow, tripling over the last decade.
In 2014, taxpayers contributed $943,136, or $20,503 to the pensions of each firefighter, 71 percent of the total paid into the pension fund. In 2005, they contributed $286,893, or $8,196 for each firefighter.
The issue: retired Algonquin-Lake in the Hills firefighters are collecting benefits that are 20 times their individual savings, according to Department of Insurance data.
One example: Frederick H. Schau retired from the district in March 2011 after 24 years of service. He paid $117,624 into his pension over that career. Yet four years into retirement, he's already collected nearly three times that total-- $335,060.
Over 25 years of retirement, Schau will collect $2.3 million and over 30 years, he'll collect more than $3 million despite having saved less than $120,000.
Schau saved less than $5,000 per year towards his retirement. The retirement he is receiving would have required him to have put away approximately $80,000 per year.
Property taxpayers are on the hook for the difference.
“As time goes, the accrued benefits are getting larger and larger, and we don’t have the money to pay for them, “ Weinberg said. “It’s not fair to the local district taxpayers because these state legislatures have been mandated that the districts have to pay. It’s not fair to firefighters because it’s part of the contract they signed.”
According to the U.S. Census, the median household income in Algonquin is $103,446; in Lake in the Hills it is $85,536.