THE STATE JOURNAL-REGISTER
Illinois municipalities, including Springfield, will likely face higher pension costs for some of their employees in 2010 because of the country’s financial meltdown.
The Illinois Municipal Retirement System, which provides pensions for more than 2,900 local governments around the state, has lost $3.6 billion out of its investment portfolio since the first of the year. That’s just through Sept. 30, before the stock market took a precipitous dive.
The result, said IMRF executive director Louis Kosiba, is the retirement system will probably be asking local governments to kick in more money in 2010.
“My best estimate at this time is that most IMRF employers will see a rate increase,” Kosiba said Wednesday.
The amount of the increase won’t be known for several more months, Kosiba said, though he added, “I’m fairly certain they will not be hit with a 50 percent rate increase.”
IMRF traditionally has been one of the best-funded public pension systems in the state. That’s partly because IMRF doesn’t rely on state funding, unlike the grossly underfunded systems covering downstate teachers, university workers, state employees, judges and lawmakers.
IMRF gets its money from employee contributions, employer contributions (i.e. local governments) and from investments. At the start of the year, IMRF was 100 percent funded, Kosiba said. Investment losses have pushed that below 80 percent.
“The markets have been so volatile, my board of trustees have been evaluating if rates have to go up more quickly than normal,” Kosiba said.
Local governments already facing a cash crunch will learn in early April how much they have to contribute to IMRF, a figure given as a percentage of payroll. The amount contributed by employees will not change.
In 2008, the city of Springfield is paying 11.18 percent of its IMRF-covered payroll to the pension fund.
In 2009, that figure will actually drop to 10.3 percent, Kosiba said, but will be higher in 2010.
The five state-funded pension systems carry a $42 billion debt because the state (as the employer) often did not make its share of the contribution. Skipping the contribution is not an option available to IMRF employers.
“If it goes up, we will have to fold that into our budget discussions next year,” said Ernie Slottag, spokesman for Springfield Mayor Tim Davlin.
Slottag said that in 2007, Springfield paid almost $7 million for IMRF pensions, with employees contributing about $2.8 million.
How much the rate goes up will depend on IMRF’s funding needs and also “demographics” of the city’s work force. If it appears some rate hikes will be large, Kosiba said, IMRF will work to mitigate the impact, perhaps spreading out the increase.