Editor Note: Alderman Judy Stearns voted against at least 2 budgets specifically because of unfunded pensions. She was ignored by the Mayor, City Manager, and the rest of the Council.
by: Carl Woodward CPA
The two communities where I am located (Bloomington/Normal, Illinois) have not fully funded their pension and health care obligations over the last few years. An audit of the most recent financial statements available shows that Bloomington is behind over $130 million and Normal is behind more that $70 million – for a combined total of over $200 million(Normal shows an increase of approximately $14 million in the most recent time period). This is huge. Approximately 10 years ago these two communities were behind approximately $30 million – a substantial increase in a relatively short time.
The benefits promised today are simply not being paid for today but put on the “charge card” of these two communities as they have decided to spend past and present tax revenues on other past and current expenditures, and not on their past and present pension and health care obligations. These communities received the benefits from services rendered now and in the past, but the political leaders expect they will be paid (pension/health care obligations) where they place them at the feet of future generations. This could be considered “theft” from future generations – – – in many ways imitating the all too familiar “Ponzi” scheme. Future generations will have to pay for this lack of adequate funding by diverting their future tax payments to pay for these obligated historical incurred expenditures (benefits).
My state, Illinois, is ranked last or next to last in being financially responsible (Wall Street Journal and others), due in great part to its lack of funding for its employees pension and health care benefits. My two local communities, Bloomington and Normal are “role models” for how not to be financially responsible. I have yet to read or hear any elected officials have a substantial meaningful proposal to get these unfunded obligations under control. I wonder why this might be? It could be they just care about the prestige of being an elected official, don’t care, ignorance, or lack of the decision making ability or discipline to do the right thing. None have had the professionalism to publicly respond to comments and concerns raised by myself and others. That says a lot (politicians).
I have heard public official’s state they are on a “pay as you go” basis for some of these unfunded pension and health care benefits. By stating this they lead the public to believe “pay as you go” is reasonable method. Some might actually believe this is an acceptable method. It is not. It is just a continuation of what is going on now with the unfunded pension costs, but it sounds “good”.
Illinois law creates an obligation upon municipalities to fully fund these past due amounts by the year 2040. We will see if these municipalities do the right thing or just meet the minimum legal obligations, which is a very low standard compared to what the actuaries feel would be more prudent.
What right does a politician today have to spend and obligate today what will have to be paid for by the next generation when the next generation has no voice, no vote, or no say in the matter? This selfishly benefits us the current citizens but puts the obligation on the next generation.
Elected officials owe a fiduciary duty to the electorate and by not accepting financial responsibility NOW they are failing this duty and us – – – if they cannot take responsibility and begin to fix this problem they need to get out of the way to let others do the responsible thing, the right thing.
Written by Carl Woodward, CPA 309-830-4747 Bloomington, Illinois [email protected]