December 1, 2010
The Civic Federation released today its analysis of the Chicago Park District’s proposed FY2011 budget of $397.6 million. The Federation supported the District’s budget, which represents an increase of only 1.5% from the previous year. The District is continuing to successfully pursue non-tax revenues, is holding the property tax levy flat for the sixth straight year and will have a slight decrease in Full-Time Equivalent positions.
The Civic Federation is concerned about the overall health of CPD’s pension system. For FY2011, the District’s pension fund will be at a funded ratio below a level considered financially healthy. The funded ratio fell from 95.7% in FY2000 to 67.2% in FY2009. To help improve the long-term financial health of the pension system, the Federation recommends a number of changes that will require authorization from the Illinois General Assembly. Read these recommendations on page 6 of the analysis.
In April 2010 Public Act 96-0889 was signed into law, creating a new tier of benefits for many public employees hired on or after January 1, 2011, including members of the Chicago Park District pension fund. P.A. 96-0889 takes a first step toward improving the health of the pension systems of governments across Illinois, but does not affect the pensions of current employees.
Over time these benefit changes will slowly reduce liabilities as new employees are hired and fewer members remain in the old benefit tier. However, this change will not affect District pension contributions under the current state statute requiring its contributions to be a fixed multiple of 1.1 times employee contributions made two years prior.
Current employees participating in the Chicago Park District pension fund are eligible for full retirement benefits once they reach age 60 and have at least 4 years of employment at the District or age 50 with 30 years of service. The amount of retirement annuity is 2.4% of final average salary multiplied by years of service. Final average salary is the highest average monthly salary for any 48 consecutive months within the last 10 years of service. The maximum annuity amount is 80% of final average salary. For example, a 60 year-old employee with 30 years of service and a $60,000 final average salary could retire with a $43,200 annuity: 30 x $60,000 x 2.4% = $43,200. The annuity increases every year by an automatic 3.0% cost of living adjustment (COLA) based on the original annuity amount. Employees with 10 years of service may retire as young as age 50 but their benefit is reduced by 0.25% for each month they are under age 60.
The following table compares current employee benefits to new hire benefits enacted in Public Act 96-0889. The major changes are the increase in full retirement age from 60 to 67 and early retirement age from 50 to 62; the reduction of final average salary from the highest 4 year average to the highest 8 year average; the $106,800 cap on final average salary; and the reduction of the automatic COLA from 3% to the lesser of 3% or one half of the increase in Consumer Price Index.
Members of the Chicago Park District pension fund do not participate in the federal Social Security program so they are not eligible for Social Security benefits related to their District employment when they retire.