December 5, 2018
Expresses serious concerns about the future of the District’s pension fund
(CHICAGO) In an analysis released today, the Civic Federation announced its support for the Chicago Park District’s proposed FY2019 operating budget of $464.0 million. The full analysis is available here.
As detailed in the report, the Civic Federation is encouraged that the District is developing a financially responsible approach to its finances that includes keeping the property tax levy relatively flat, prudently managing its debt profile, maintaining a high level of fund balance, achieving savings and efficiencies and reducing the size of its workforce.
Despite these sound budgetary practices, the District faces significant challenges related to the sustainability of its pension fund. Following two and a half years of litigation, 2014 reform legislation aimed at stabilizing the fund was declared unconstitutional in its entirety in March 2018. The fund’s actuary projects that because of this ruling, the fund will run out of money in 2027, even if it achieves all of its demographic and economic assumptions. In FY2019, the District will provide a voluntary supplemental contribution to its pension fund in an effort to delay insolvency.
“The ruling striking down the Park District’s pension reform efforts has thrown the fund and the District into dire financial circumstances,” said Civic Federation President Laurence Msall. “While the Federation is encouraged by the District’s positive budgetary reforms, any achieved savings and efficiencies pale in comparison to the magnitude of its pension problem. A new plan of action is imperative.”
The Civic Federation is encouraged by the District’s good faith effort to keep the pension fund from insolvency by supplementing the woefully insufficient statutorily required pension contribution and is pleased that the District is in the financial position to do so. However, this supplement will still fall far short of the actuarial needs of the fund. The Federation urges the District to work with its labor partners, the Illinois General Assembly and the Governor to develop a new pension funding formula that would sustain a challenge via the pension protection clause of the Illinois Constitution and is supported by sustainable revenue sources.
In the Civic Federation's view, the collapse of the District’s 2014 pension reform package makes this an opportune time for the District to study consolidation of its pension fund into the Illinois Municipal Retirement Fund (IMRF), a longtime recommendation of the Civic Federation. Currently the Chicago Park District is the only park district in Illinois that does not participate in the IMRF and merging could result in efficiency and investment return gains.
The report makes a number of additional recommendations intended to further improve the budgeting practices and transparency of the District and urges the District to advocate for a State capital bill that includes funding for parks.