December 8, 2010
Today the Civic Federation released its analysis of the Metropolitan Water Reclamation District’s FY2011 tentative budget. The Civic Federation supports the nearly $1.0 billion budget proposal, which represents a $681.1 million, or 41.1% decrease over final FY2010 appropriations. The large reduction in appropriations reflects the variance that often occurs between budget years for MWRD, due in part to changes in number and scale of capital projects and the timing of funds required to complete multi-year projects.
As in years past, the Civic Federation still has concerns about the long-term health of the District’s pension system. The District’s resistance to pension reform efforts including Public Act 96-0889, which the District believes will inhibit its recruitment capacities, is especially worrisome to the Federation. The effect of P.A. 96-0889 on pension systems across Illinois is of special interest to the Civic Federation as the law takes a first step toward improving pension system health.
As explained here in a blog post about the Chicago Park District pension system, P.A. 96-0889, which was enacted in April 2010, creates a new tier of benefits for many public employees hired on or after January 1, 2011, including members of the MWRD pension fund. Over time these benefit changes will slowly reduce liabilities for the MWRD pension system from what they would have been as new employees are hired, gradually replacing employees in the old benefit tier.
However, this change will not affect MWRD pension contributions under the current state statute requiring MWRD contributions to be a fixed multiple of 2.19 times employee contributions made two years prior.
The following table illustrates the pension reform changes instituted by P.A. 96-0889. Some of the biggest changes include an increase in full retirement age from 60 to 67 and early retirement age from 55 to 62; the reduction of final average salary from the highest 2 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% compounded to the lesser of 3% or one half of the increase in Consumer Price Index calculated as simple interest.
Members of the MWRD 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.