Went to the Rainbow Restaurant in Algonquin Saturday morning.
State Senator Karen McConnaughay and Algonquin Village President John Schmitt.
State Senator Karen McConnaughay and Algonquin Village President John Schmitt were holding court, so to speak, at a table by the front window.
Ten to fifteen local residents and officials were in attendance.
McConnaughay was one of a handful of Republican legislators who held a Chicago press conference this week to lay out the conditions to get their votes for a budget.
Part of the deal is supplying votes to pass a temporary income tax hike to 4.95%–not 5%.
The tax would run for four years.
All of the proceeds would have to be used to pay off old debt, which amounts to about $14 billion.
If any is used for other purposes, the tax disappears.
There will be a cap on state spending linked to some past year.
In return for the tax hike votes, there would be enacted a four-year property tax freeze.
Schmitt allowed how that would not matter to his village government because its property taxes have been frozen for a number of years.
The Illinois personal income tax hike from 3% to 5% for the period January 1, 2011 – December 31, 2014 was billed as “temporary.”
State unfunded pension liabilities grew during that time.
From January 1, 2015 – current the rate has been 3.75%, which is still a hike over the 3%.
State unfunded pension liabilities continued to grow, and past due bills exploded.
And now another proposed income tax hike is being pitched as “temporary.”
The only thing permanent about the income tax hike proposals is deception.
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As of April 30, 2016, Village of Algonquin taxpayers owed $18M to the Algonquin Police Pension Fund and $5M to the IMRF pension fund.
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That is assuming the Police Pension Fund investments return an average of 6.75%.
If the Police Pension Fund returns an average of 5.75%, then taxpayers owe $26M.
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That is if the IMRF pension fund returns an average of 7.48%.
If the IMRF pension fund returns an average of 6.48%, then taxpayers owe $9M.
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And there are all sorts of other actuarial assumptions such as salary hikes, disability payments, retirement age, life expectancy, etc.
If actuarial assumptions are short in any of those assumptions, taxpayers pay 100% of the difference.
Continuing the discussion on pensions, this time considering the percent funded.
Looking at the verbiage used in the FY 2016 Village of Algonquin CAFR, percent funded formula can be calculated by:
Plan Fiduciary Net Position / Total Pension Liability.
The Village of Algonquin Police Pension Fund is 55% funded ($22,296,006 / $40,545,899).
The IMRF pension fund for the Village of Algonquin is 81% funded ($21,118,923 / $26,092,665).
Note, IMRF has a different percent funded for each employer.
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How can we ballpark what the means to a property taxpayer?
Here is one method, that may or may not be very accurate (more research required to determine accuracy).
The formula to approximate a parcel’s percent of the unfunded liability for these pensions:
(Parcel’s property tax due / Extension ) x unfunded liability.
That formula is most accurate if the Village funds 100% of pensions based on property tax revenue.
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That formula would work for IMRF, Police, and Fire.
TRS (teacher and administrator pensions) is a state responsibility on behalf of the school district, so the formula could also be used for TRS for comparative purposes only, keeping in mind TRS pensions are currently a state responsibility.
There has been talk in the past (it does not seem to be a current discussion) of shifting future TRS underfunded amount to local (not the historical underfunded amount).
As most know, income taxes and other revenues fund the state, not property taxes.
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The Village of Algonquin does not have a fire department.
The Algonquin – Lake in the Hills Fire Protection District is a separate property taxing district.
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As one can see, information about pensions is buried in financial reports.
That is not convenient or even practical for the average taxpayer.
Each property taxing district should have a section of its website devoted to pensions, explaining this type of information.
In many property taxing districts, underfunded pensions is a major financial obligation.
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Contemplating what could have been.
One method that could have been used to prevent the game of hiking pension benefits:
The retiree receives a proportionate share of the pension.
If the pension is 80% funded, the pensioner receives 80% of the amount due that year.
If the pension is 50% funded, the pensioner receives 50% of the amount due that year.
That is probably not politically viable.
But it introduces the concept of shared risk.
Placing the entire burden of underfunded pensions on the taxpayer, results in the game of hiking salaries, pension benefits, and using money for pet projects, while shorting the annual pension contribution.
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The village has $9,997,675 bond debt service (principal and interest).
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Summary of Taxpayer IOU’s to the Village of Algonquin:
Underfunded Police Pension: $18M
Underfunded IMRF Pension: $5M
Bond Debt Service: $10M
Total: $33M.
$33M = $33,000,000.
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Use the formula above to approximate a parcel’s share of that $33M based on proportionate share of property taxes paid.
Once again, the accuracy of that formula depends on the percent each revenue source funds pensions and bonds.
But it is at least a starting point, and probably more meaningful to the average property taxpayer than using per capita statistics.
It’s simple.
Pensions are out of control.
A tax hike will in the long run do little to fix the problem.
The pension system needs to be revised to provide a system that the taxpayers can continue to afford.
I would not penalize any people who are retired or close to retirement but we can certainly change t
he system for new or recent hires and maybe some kind of proration for those in between.
Our county pays the second highest property taxes in the nation.
Coupled with a 5% income tax and a typical federal tax of around 20% plus all the other taxes and fees, people are easily paying in a large percentage of what they own.
An absence of structural improvement only makes it worse.
Illinois Policy Institute
Homeowners in Collar Counties Pay Highest Property Taxes in Illinois
by Joe Kaiser
April 26, 2017
This study reports median property tax bills.
County – Illinois Ranking – National Ranking
Lake – 1 ($6,881) – 21
DuPage – 2 ($6,274) – 27
McHenry – 4 ($5,941) – 30
Kane – 5 ($5,735) – 33
Will – 6 ($5,567) – 34
Cook – 8 ($4,586) – 67
http://www.illinoispolicy.org/homeowners-in-collar-counties-pay-highest-property-taxes-in-illinois
Algonquin is an ICLEI city. They are lost already.
Here’s a short, truthful and informative article about the Illinois budget crises that is
well worth two minutes to read:
http://mchenrytimes.com/stories/511128870-taxpayers-say-reform-but-lawmakers-hear-more-taxes-policy-pro-says
Hi Cindy, what does the acronym ICLEI stand for?
Thx
Is ICLEI ‘International Council for Local Environmental Initiatives?’
If so, how does that hurt?
Is it a bogus program that costs more than it will ever be worth?
If Republicans vote for this believing the lie that the $$ will pay down the old debt, I am done voting in Illinois.
It’s agenda 21 and the UN; and they signed up to be a sustainable city quite awhile ago. They are toast. Read up a bit:
http://www.thesleuthjournal.com/iclei-primer-a-k-a-agenda-21-your-town-and-freedom-threatened/
Lorna? When you say how does it hurt…that is probably exactly what happened when the dopes signed on to that program. It all sounds so promising and innocent. Look again. They are trying to lock everything down, and these folks just signed up for it; just like average Joe people sign up for cable teevee, facebook and do google searches and purchase from Amazon with abandon. What could be the harm? Look again.
Another redistribution of wealth scheme/scam from the anthropomorphic climate change hucksters.
Spineless Illinois Republicans.
Meanwhile my Texas Leg. just passed a balance budget, passed a Bill punishing sanctuary locales, refused to throw away any additional funds to education, refused to touch billions in reserves.
My favorite?
Republicans chasing around and scuffling with crybaby Dems on the House Floor.
Rauner Senator Karen McConnaughay seems to be Bruce’s point man on this – has she been promised that she’ll finally get a state appointment after all this time?
Because McConnaughey certainly seems comfortable, like all the other Rauner Senators and Reps are, with brazenly conning us into “not looking behind the curtain” of these “reforms” to see Rauner’s SIXTY-SEVEN PERCENT INCOME TAX HIKE on working families…
Without any discussion or desire to comprehend the massive influx of tax dollars and good paying jobs that would result from a legal hemp and cannabis industry, this meeting was lacking impact.
Just minutes ago, a program showed the potential of a TRILLION DOLLAR industry in cannabis.
All the propaganda pushed by the government that cannabis is as dangerous as heroin and has ZERO medicinal use is quickly dismissed as disinformation when one becomes enlightened by TRUTH!
And hemp would be more valuable than med/rec cannabis! Remember that the last IL Governor that vetoed hemp research ended up in jail on corruption charges. Its ALL about the money, and right now there is more money to be made by keeping cannabis illegal by the monopolies that profit from prohibition namely the private prisons, big pharma, alcohol and tobacco and of course FOSSIL FUEL/chemical herbicide giants. Hemp needs ZERO herbicide because it grows faster than weeds.
Our US attorney general Jeff Sessions has reportedly received large campaign contributions from prohibitionists. Now he has sent a letter to Congress asking permission to enforce federal law
where states have voted to legalize. He claims marijuana addiction is only slightly less harmful than heroin addiction! Never heard him talk about the dangers of tobacco or alcohol addiction
Tobacco, alcohol and prescription drug abuse kill millions of Americans EVERY YEAR, but not one death from cannabis abuse. (of course there are very rare instances when someone eats too much and falls off a balcony and dies, but the death was the result of an action taken after consuming, not the herb itself.
IT IS A FACT that where legal cannabis is available, deaths from Opiods and PTSD induced suicide are remarkably reduced. Alcohol consumption and related problems decrease as well
Illinois needs jobs and FREEDOM… not more prisoners.
Happy Fathers Day!
Ten to fifteen residents…on a Saturday…
I really struggle with the question of whether residents of Illinois deserve the government they have or not.