A few months ago I requested a copy of the 2014 City of Palos Hills budget in response to a neighbor’s comment. I had to submit a Freedom of Information request. The city has since put the budget online for all to view. When you read the budget you see this on page ten:
TOTAL EXPENSE 4,559,257
Total Revenue 4,599,257
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Total Expenses 4,559,257
TOTAL BALANCED BUDGET 0
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It seems good, doesn’t it? It balances out so nicely. Sure, you know that there will be unexpected expenses, but you’re pretty sure the city can handle it. Then one day you’re watching a television news program and you see a report about how much different taxing bodies owe in unfunded liabilities. You look up the report just to see how well your city is handling its finances. After all year-after-year-after-year-after-year-after-year Mayor Jerry Bennett and the City of Palos Hills report a balanced budget. When you read the numbers, a sick feeling comes over you. At least that’s what happened to me and what prompted me to start researching this blog series.
Ever since I’ve lived in Palos Hills I have heard Mayor Bennett talk about how efficiently the city is run. I remember reading that he wore a black tie to a Hills Chamber of Commerce meeting one year to signify that Palos Hills was “in the black” as the accounting term goes. Imagine my disappointment to find out that the City of Palos Hills budget is one big smokescreen. It is only balanced because Mayor Bennett, as the chief executive officer of City of Palos Hills, is shirking the city’s responsibility to its retirees and current employees by substantially underfunding its pension and healthcare funds. If the City of Palos Hills properly funded its pension and healthcare funds, there is no way the budget would balance.
Here are the unfunded pension and healthcare liability numbers provided by the Cook County Treasurer’s Office information for 2012 and 2011.
City of Palos Hills
Cook County Treasurer’s Office 2012 report
Police Pension Funded Ratio: 54.07%
IMRF = 80.20%
Retiree Health Plan = 0.00%
Total liabilities unfunded pension liability = $14,059,621
Cook County Treasurer’s Office 2011
Pension Percent Funded: -426.16%
Total liabilities owed = $15,269,742
City of Palos Hills (Heritage Foundation report)
Assets Available to Pay Bills = $5,134,436
Unfunded Pension Benefits = $10,737,525
Unfunded Retirees’ Health Care Benefits = $1,089,937
Other Liabilities = $6,989,178
Bills = $18,816,640
Financial Burden = $13,682,204
If you average the three numbers, the City of Palos Hills owes about $14,337,189. Given that the annual City of Palos Hills budget is $4,559,257, you would have to completely shut down the city for more than three years to pay off the existing debt. Or, to think about it another way, if you divide the $14,337,189 average by the 7,320 households Wikipedia stated are in Palos Hills, we each owe just under an additional $2,000. This means each household would need to pay about $2,000 just to pay off the current debt.
Long before I sat down to write this blog post, I did email Mayor Jerry Bennett to ask for some information. The text of that email is as follows:
To mayorbennett@paloshillsweb.org
Nov 5, 2013
Mayor Bennett:
I'm working on a series of blog posts about unfunded pension liabilities. Please provide the Palos Hills plan for funding the currently unfunded pension and healthcare liabilities. One source for the blog posts is this report: http://heartland.org/sites/default/files/05-16-13_cook_county_financials_report.pdf.
Also, please provide information about how Palos Hills ended up with so much unfunded pension/healthcare money. Every year you talk about what great financial shape Palos Hills is in, but how can the city be in great shape when the unfunded liabilities are about three times the total annual city budget?
Best,
Shari L. Schmidt
More than two months have passed and I have yet to receive a response from Mayor Bennett.
If you sat down one day to review your family budget and realized you owed at least three times as much money as you bring in every year, you’d have some hard decisions to make. Would you substantially cut your expenses? For the City of Palos Hills that would mean eliminating necessary services like the police department, public works and more. This is town that only provides the minimum services currently. What would it mean to our quality of life to cut police department officers or eliminate the public works crew? The other alternative is to raise taxes to cover the debt and properly fund the pension and healthcare funds in the future. This is a hard sell in a town that prides itself on having the one of the lowest tax burdens in the area. Of course, if those taxes are artificially low because Mayor Bennett is not properly funding the pension and healthcare funds, then it’s all one big shell game, isn’t it? In the end you’d probably talk to a bankruptcy lawyer. With large cities all around the country declaring bankruptcy, it’s quite possible Palos Hills will be facing that choice soon if Mayor Bennett does not provide the leadership necessary to get the unfunded liabilities under control.
Perhaps what’s most disturbing is how this problem is swept under the public view. Have you ever heard a Palos Hills elected official discuss this problem? I have read a lot of Palos Hills City Council meeting minutes. I have yet to read any conversation about the size of Palos Hill’s unfunded pension and healthcare liabilities. I certainly couldn’t find a single plan to resolve the problem. Since Mayor Bennett didn’t respond to my email request for one, I can only guess that there isn’t a plan. I’m sure if there was a plan Mayor Bennett would have been happy to provide it to one of his community’s citizens.
The really sad part to me is that so many towns around us aren’t running the -426.16% balance as reported by the Cook County Treasurer’s Office 2011 report. These aren’t towns with a larger tax base, nor are they sitting on an oil well. These towns have elected officials who just do their jobs as financial stewards, always handling the public’s money properly. They make the hard decisions when necessary and work with the public to solve problems. This tells me that no matter how many people say the unfunded healthcare and pension liabilities are a budget crisis, it’s really a leadership crisis.
