The Carbondale Observer

News and commentary about Carbondale, Illinois and SIUC

Funding Police and Fire Pensions: Sales Tax or Property Tax?

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The Southern Illinoisan had an article Tuesday on potential changes to the Illinois police and fire department pension system:

The Illinois House of Representatives could vote this week on the changes, which include increasing the retirement age from 50 to 55 and requiring employees to be on the job for 30 years before being eligible for their full pensions.

It also caps the salary that public employees could use to calculate their retirement at $106,800 starting next year. (This amount would increase annually by half of the Consumer Price Index.)

The Illinois senate passed a version of the changes, which would apply to new hires, earlier this year. Pension contributions are controversial because the municipal costs are mandated by the state. Municipalities must raise the money themselves.

This year’s increase will cost Carbondale $810,730, and current revenues are not expected to cover the increase. At last week’s meeting, the city council discussed options to meet the rising pension costs for public safety employees. City staff recommended levying a property tax to cover the increase. The city has abated its portion of the property tax since 2002.

Councilman and mayoral candidate Joel Fritzler suggested raising the sales tax 1/4 percent instead of levying a property tax. Fritzler pointed out that property taxes in Jackson County are higher than taxes in Williamson County, while our sales tax is 1/4 percent lower than Marion’s. Fritzler also said that many people from outside the community work and shop in Carbondale, using city services. A sales tax would collect revenue from these people.

Outgoing Councilwoman Pohlmann spoke in favor of the property tax. Pohlmann said the property tax is more stable than the sales tax and the revenue is available sooner.

City council candidate Don Monty spoke against service and personnel cuts during the citizen’s comments. Monty, a former assistant city manager, said he remembers going line by line through past budgets and making cuts. He said all the fat has been cut from the budget and further cuts would be devastating to city services. Monty also favors the property tax over the sales tax.

I can see both sides of this, but I lean slightly toward the property tax. I realize that Jackson County property taxes are higher than those of neighboring counties, but (as Fritzler and Pohlmann pointed out) this is the result of the other taxing bodies in the county. Significantly reducing property taxes would require action from those bodies.

According to Mayor Cole, the additional property tax levy will come to roughly $73 on a $100,000 home. That’s not a lot of money, and it will support the city’s pension obligations. That said, a 1/4 percent sales tax increase also wouldn’t be too great a burden.

Long term, pension reform is necessary. Unfortunately, Illinois state government is dysfunctional and genuine reform seems unlikely unless a pension crisis forces changes. At least in theory, voters could force legislative action, but municipal fire and police pensions aren’t the kind of issue that excites voters.

Comments are welcome.

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Written by The Carbondale Observer

December 1, 2010 at 7:45 am

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