McHenry County Taxpayers Owe Over $130 Million for Underfunded Police and Fire Pensions…as of Two Years Ago

Commenter Mark has laid out all of the municipal police and fire pension fund money owed by McHenry County taxpayers.

Here is what Jack Franks is using to symbolize his campaign pledge to cut property taxes by 10%.

Here is what Jack Franks is using to symbolize his campaign promise to cut property taxes by 10%.  Local unfunded pension liability is not as large as that borne by the State of Illinois.

Let’s review police and fire pension funding status in McHenry County.

Remember, Jack Franks says he has a plan to cut taxes 10% to the taxing districts responsible for funding these pensions.

But he won’t show you the plan unless he gets elected.

For the data source see the above comment about Crystal Lake fire and police pensions.

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Algonquin-Lake in the Hills Fire Protection District Pension Fund

– 75% funded

– $5,375,018 unfunded liability

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Barrington Hills Police Pension Fund

– 59% funded
– $5,703,906 underfunded
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Algonquin Police Pension Fund

– 64% funded

– $11,062,231 unfunded liability

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Cary Police Pension Fund

– 52% funded

– $8,008,961 unfunded liability

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Cary Fire Protection District Firefighters Pension Fund

– 80% funded

– $820,590 unfunded liability

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Crystal Lake Firefighters Pension Fund

– 68% funded

– $11,917,321 unfunded liability

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Crystal Lake Police Pension Fund

– 58% funded

– $22,873,951 unfunded liability

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Fox Lake Fire Protection District Pension Fund

– 72% funded

– $214,327 unfunded liability

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Fox Lake Police Pension Fund

– 73% funded

– $4,628,041 unfunded liability

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Fox River Grove Fire Protection District

The Fox River Grove Fire Protection District dissolved its fund during the biennial period covered by the report.

The Fox River Grove Fire Protection District now participates in the IMRF pension fund.

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Harvard Fire Protection District

– Dissolved during the biennial period.

– The Harvard Fire Protection District has converted to the IMRF pension fund.

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Harvard Police Pension Fund

– 65% funded

– $4,618,227 unfunded liability

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Huntley Fire Protection District Firefighters Pension Fund

– 90% funded

– $2,055,063 unfunded liability

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Huntley Police Pension Fund

– 48% funded

– $6,364,608 unfunded liability

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Island Lake Police Pension Fund

– 49% funded

– $3,467,933 unfunded liability

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Johnsburg Police Pension Fund

– 42% funded

– $2,871,493 unfunded liability

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Lake in the Hills Police Pension Fund

– 79% funded

– $6,073,470 unfunded liability

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Lakemoor Police Pension Fund

– 32% funded

– $146,846 unfunded liability

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Marengo Police Pension Fund

– 44% funded

– $6,026,775 unfunded liability

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McHenry Police Pension Fund

– 52% funded

– $18,242,250 unfunded liability

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McHenry Township Firefighters Pension Fund

– 1,745% funded

– $3,532,437 surplus

(It’s a newer fund, so there is not 10 years of historical data.

Would need to gather all the facts before assuming or concluding anything about those figures.)

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Spring Grove Police Pension

– 42% funded

– $3,265,514 underfunded

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Woodstock Fire / Rescue District

– 52% funded

– $4,918,656 underfunded

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Woodstock Police Pension Fund– 66% funded

– $9,621,710 underfunded

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Grand total (note that some portions of some funds are the responsibility of taxpayers in Cook and Lake Counties):
$129,040,548.

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Over $130 Million Dollar shortfall in those pension funds as of April 30, 2014.


Comments

McHenry County Taxpayers Owe Over $130 Million for Underfunded Police and Fire Pensions…as of Two Years Ago — 8 Comments

  1. Mark, I’ve been reading these your police and fire pension posts and they do not make sense.

    Can you clarify what you mean by underfunded?

    Are you saying that $130 million needs to be paid this year alone in McHenry County in police and fire pension benefits.

    Just as an assumption, if a pensioner gets $50,000 per year, that would mean that there are over 2,500 retired police and fireman in McHenry County.

    There’s no way there are that many police and fireman in McHenry County, let alone retired ones.

    If the pension funds needed to be 100% funded today, and they are not, are there police and fire retirees that are not getting their pension benefits?

    That would be a bid deal.

    I know a few retirees and none of them have told me that they aren’t getting paid.

    The only thing I can figure out based on what you posted is that $130 million total is due at some point.

    Is that point 30 years from now? 40 years from now?

    If that’s the case, why should these pension funds be 100% funded today?

    Why raise taxes to get these pension funds 100% funded today?

    It doesn’t make sense.

    Also, if there is this longer horizon, just looking at this list, it looks as if these communities are actually ahead of the game as far as a percentage funded.

  2. Does anyone care to provide a single verifiable example of what any sitting Republican County Board member has done to address this in the last 2 years?

    I believe the crickets in my front yard are providing the answer.

    Just goes to show- creepy Republicans are every bit as good at licking fire and police union taint as any Madigan syncophant.

  3. Mr. John Lovaas, the point is that this massive amount of debit is NOT County business and can not be addressed by County Board members, nor a County Board Chair.

    The same is true for the huge bulk of our tax bills which goes to the school districts and McHenry County College.

    That cost is also NOT County Board business.

    Therefore, neither County Board members, nor a County Board Chair has any right or control over that Huge debt or cost.

    The same goes for the part of your tax bill which goes to the Townships, which, by the way, are extremely cost effective.

    That leaves only the part of your tax bill which goes to the County and the County Pension.

    10% of that will not be a deal maker or breaker for most folks and that is the Only part of your tax bill which the County Board members or County Board Chair can control.

    Please note that Mr. Walkup and others Have been working hard to reduce the taxes in the areas that they Do control.

  4. 130 million more reasons why people are abandoning Illinois.

    It could not be any more clear.

  5. Underfunded is the amount that should be in the pension fund, but is not, as of a specified date.

    The date of the statistics is April 30, 2014.

    The date for one fund was May 31, 2014, but for simplicity let’s just use April 30, 2014).

    $130 Million should have been in those funds as of April 30, 2014.

    The $130 Million is an IOU.

    +++++++++

    Here is the basic actuarial calculation used in the report:

    Actuarial Accrued Liability (AAL)

    less

    Net Present Assets, Actuarial Value

    equals

    Unfunded Actuarial Accrued Liability

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    What does the above formula mean in simpler terms?

    +++++++++

    Really simple description:

    Amount that should be in the fund

    less

    Amount that is in the fund

    equals

    IOU (Amount that should be in the fund, but is not)

    +++++++

    A little more complex definition:

    Amount that should be in the fund to pay the benefits earned by all current employees, inactive members (not employed but not retired…perhaps they are working somewhere else now) and retirees

    less

    Amount that is in the fund to pay the benefits earned by all current employees, inactive members, and retirees

    equals

    IOU

    +++++++++

    Those are layman’s descriptions.

    Actuaries go to school and take tests to learn the actuarial science.

    There are all sorts of assumptions and options in making the calculations.

    We are not getting into that.

    We are just attempting to understand the basics.

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    The source of the statistics is:

    Illinois Department of Insurance

    Public Pension Division

    2015 Biennial Report (report is issued every 2 years)

    Report covers the years 2013 – 2014.

    Report issued October 1, 2015

    http://www.insurance.illinois.gov > Documentation > DOI Reports >

    Thus presumably the next report should be issued around October 1, 2017.

    That report includes the number of active participants, inactive participants, and average active salary for each pension system listed above.

    +++++++++++++++++++++++++++++++

    The Better Government Association has a Public Safety Pension Portal that includes pay and pensions of individual employees and retirees.

    http://www.bettergov.org > Tools & Data > View All > Public Safety Pension Portal

    http://www.bettergov.org/public-safety-pension-portal

    ++++++++++++

    All of the retirees are now getting paid right now.

    ++++++++++++

    Say someone planned to retire with $1 million dollars in the bank (the value of full career fire and police pensions far exceed having $1 million dollars in the bank at retirement).

    But that person only had $600,000 in the bank at retirement.

    That person’s retirement would be 60% funded.

    That person would spend 60% less in retirement.

    With defined benefit pensions, the extra 40% comes from taxpayers.

    ++++++++++

    $130 Million should have been in the pension funds on April 30, 2014, but was not.

    $130 Million is the taxpayer IOU as of April 30, 2014.

    ++++++++++

    Here is a huge problem with $130 million IOU.

    The biggest contributor to a mature pension fund should be investment returns.

    There is zero investment return on a $130 Million IOU.

    The investment return on nothing, is nothing.

    Taxpayers make up 100% of the investment return shortfall in a defined benefit pension.

    Looking at the report,

    +++++++++++++++

    Who makes up the shortfall in investment returns in a defined benefit pension?

    Taxpayers.

    +++++++++++++

    The 10 year funding history for each of the fire and police pensions listed above is included in the report.

    The change of the 10 years can be looked at from a few perspectives.

    The dollar amount underfunded has grown substantially for most of the funds.

    The annual percent that each is underfunded has decreased for some of the funds.

    That is an important distinction.

    Even if the percent funded for a given year decreases, the amount owed to the fund can increase.

    For example, the Algonquin Police pension fund was 52% funded in 2005 while $5,213,667 underfunded.

    In 2014, it was 64% funded while $11,062,231 underfunded.

    The percent funded improved, but the dollars underfunded increased.

    ++++++++++++++

    Here is another problem with Illinois pensions.

    Anyone beginning their government career as of January 1, 2011, receives reduced Tier II benefits.

    Tier II is funding Tier I IOU.

    How long can that last?

    It depends on how much taxpayers are willing to pay in various taxes and fees or accept in reduced services before they leave the municipality / county / state.

    That’s the bottom line.

    If enough taxpayers are willing to stay in the municipality / county / state to fund the pensions, then the pensioners will be paid in full.

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    A lot of police and fire employees don’t understand the current underfunded status and / or the history of the hiked benefits and hiked salaries.

    The benefits could have been frozen (no legislative benefit hikes) and salaries hikes could have been held in check until pensions were full funded.

    That was not done.

    Funding that could have gone to pensions was diverted to salary hikes and other purposes.

    ++++++++

    Here is an updated chart showing the changes from 2005 to 2014.

    FPD = Fire Protection District

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    District – $ underfunded 2005 – $ underfunded 2014- % increase 2005-2014 – % funded 2005 – % funded 2014

    Algonquin Lake in the Hills FPD – $1,122,804 – $5,375,018 – 379% – 81% – 75%

    Algonquin Police – $5,213,667 – $11,062,231 – 112% – 52% – 64%

    Barrington Hills Police – $5,325,230 – $5,703,906 – 7% – 10% – 59%

    Cary Police – $3,393,899 – $8,008,961 – 136% – 50% – 52%

    Cary FPD – $463,464 – $820,590 – 77% – 66% – 80%

    Crystal Lake Fire Dept – $4,515,696 – $11,917,321 – 164% – 64% – 68%

    Crystal Lake Police – $12,261,281 – $22,873,951 – 87% – 57% – 58%

    Fox Lake FPD – $23,247 – $214,327 – 822% – (186%) (2010) – 72% (2014)

    Fox Lake Police – $4,133,333 – $4,628,041 – 12% – 58% – 73%

    Fox River Grove Police – $2,102,524 – $7,189,369 – 242% – 21% – 16%

    Harvard Police – $2,080,335 – $4,618,227 – 122% – 63% – 65%

    Huntley FPD – $369,371 – $2,055,063 – 456% – 89% – 90%

    Huntley Police – $2,505,743 – $6,364,608 – 154% – 33% – 48%

    Island Lake Police – $993,607 – $3,467,933 – 249% – 67% – 49%

    Johnsburg Police – $219,248 – $2,871,493 – 1210% – 75% 42%

    Lake in the Hills Police – $2,408,437 – $6,073,470 – 152% – 79% – 79%

    Lakemoor Police – $134,354 – $146,846 – 9% – 13% (2012) – 32% (2013)

    Marengo Police – $2,368,398 – $6,026,775 – 154% – 57% – 44%

    McHenry Police – $7,905,160 – $18,242,250 – 131% – 62% – 52%

    McHenry Township FPD – $5,482 – ($3,532,437) – (64,537%) – 66% (2012) – 1,745% (2014)

    Spring Grove Police – $999,313 – $3,265,514 – 227% – 49% – 42%

    Woodstock Fire Rescue – $592,861 – $4,918,656 – 730% – 50% – 52%

    Woodstock Police – $5,138,733 – $9,621,710 – 87% – 66% – 66%

  6. One typo.

    Should be, even if the percent funded for a given year increases, the amount owed to the fund can increase.

    ++++++++

    That seems counter-intuitive at first glance.

    If the fund is in better shape financially on a percentage basis, why did the amount owed to the fund increase?

    The reason is because the Actuarial Accrued Liability (AAL) increased.

    That’s the amount that should be in the fund.

    The Actuarial Accrued Liability can increase due to a number of reasons: more employees, salary hikes, benefit hikes, etc.

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