Ask anybody in Granite City's government what's wrong with the city's fire and police pension system, and you'll get a simple answer: The city doesn't put enough into the funds.
"There's only a few pension funds in the state of Illinois that are fully funded," said City Treasurer Gail Valle. She's the official custodian of pension funds and mails out the checks to pensioners.
So why doesn't the city put more money into the funds?
"It would bankrupt us," Valle said. However, the city must fully fund its pension plans by 2016, according to a state law that took effect at the beginning of the year. A pension account is considered "fully funded" if its account will cover benefits for future and current retirees.
To prepare, Granite City voters will cast ballots on March 20 on a nonbinding referendum asking if the city should increase property taxes collected for the two funds.
The city would need to increase the amount spent on police and fire pensions to $4.2 million from $1.9 million; the increase would add about $190 to the property tax bill for a house valued at $100,000.
Mayor Ed Hagnauer said that if voters decide they don't want to increase their taxes, the city will have to reduce its police and fire department payrolls (and future pension costs) by not replacing retirees.
"If we want to keep things the way they are, we have a decision to make," Hagnauer said.
In 2005, the police and firefighters' pension funds both had roughly half the money needed to fund obligations, according to reports from Tepfer Consulting Group LLC.
This year, the firefighters' pension fund had 38.4 percent of the amount needed to fund its obligations — it has $17.9 million and needs $46.6 million.
The police pension fund has 39.1 percent of the amount needed to fund obligations — it has $16 million and needs $40.8 million.
The police pension fund pays benefits to 64 people; there are 60 active officers. The firefighters' fund pays benefits to 67 people; there are 57 active officers.
Firefighters and police receive from 50 percent of their last day's salary if they retired with 20 years experience at age 50;they receive 75 percent if they retired with 30 years experience after they're 50.
Active police officers contribute 9.1 percent of their salaries; firefighters contribute 9.45 percent of their salary. Investments and the property tax levy provide the rest of the pension funds' assets.
Both pension funds are governed by boards made up of three union members, two of whom are active and one who is retired, and two people appointed by the mayor.
Members of those boards have long sounded the alarm that something isn't right.
"The city has underfunded the pension fund for a number of years," said Lt. Tom Paul, secretary of the police pension board. The city is working to improve the situation, he said.
Arthur H. Tepfer, of the Tepfer Consulting Group, said in the reports issued Nov. 7, that much of the money available to invest was already committed to benefits for existing pensioners.
"This is a warning sign that the fund is experiencing the beginning of a potential downside in funding," Tepfer wrote.
The city last fully funded its firefighters pension in fiscal year 2002. In fiscal year 2000, it was within $69,211 of fully funding its police pension. Since then, the gap has widened considerably.
Figures provided by the state Department of Insurance show the city's contribution dropped before Hagnauer took office and still hasn't quite returned to its previous level.
Fire pension board member Chad Toeniskoetter said the city should have put the full amount in every year.
Hagnauer said the amount increased in every year he was in office except fiscal year 2009-10. "We tried to increase it every year," he said.
The mayor said the job of funding the pension system was made harder by the economy, storms and efforts to increase the number of police officers and firefighters.