Show All Answers

1. What is a pension?

The State of Illinois has established defined benefit pension plans for police officers and firefighters in Illinois. A defined-benefit retirement plan is a type of pension plan in which an employer/ sponsor promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. Illinois has more than 1,298 municipalities and more than 650 public safety pension funds. Public safety employees are entitled to retirement benefits, and those benefits are established by the State of Illinois, not the City of Peoria.

2. Who makes Public Safety Pension Fund Decisions?

Pensions are funded by employee contributions, investment returns, and municipal contributions. Employee contributions are set by the State (9.91% of pay for police and 9.455% if of pay for fire). The State has created local boards to oversee the investments on behalf of active and retired police officers and firefighters. The City has two of the five seats on the pension board. Investment returns are set to achieve 6.5% annually, and if the investment target is not met, the City has to make up the difference. If the investment returns exceed expectations, it can reduce the amount the City has to contribute. The amount the City has to fund is determined by an actuary, or by the Illinois Department of Insurance every year. Under state law, police and fire pension systems must achieve 90% funding by 2040.

3. What is the fiscal condition of the Peoria Police and Fire Pension Funds?

According to reports from the Illinois Department of Insurance, the city’s police and fire pension funds have $165 million and $149 million in unfunded pension liabilities, respectively, and just under 50 cents on hand for every $1 needed to pay for future pension benefits.  Because of the City’s fiscal condition, both funds have more retirees collecting pensions than actively paying into the system.

4. How are public safety pensions funded in Peoria?

For many years, Peoria used income taxes and property taxes to make its contributions to public safety pensions. Today, 73% of the City's property taxes go to police and fire pensions. Public safety pension funding is the fastest-growing portion of the City's budget. The growth in these contributions have diverted municipal revenues away from funding other important programs and services. In 2008 the City contributed $8.5 million to police and fire pensions. In 2018, the City contributed $18.4 million to police and fire pensions. The City took two rescue squads out of service in 2019, and have left numerous police officer positions vacant in order to balance the budget. Total headcount in the City is at the lowest levels in 25 years.