Putting Out The Fire
North Riverside has a novel answer for its pension crisis
Chicago Tribune June 26, 2014
North
Riverside is a small town with a big problem: It can't make its pension
payments.
The west Cook County suburb of 6,700 people faces a $1.9 million budget deficit. One big reason for the gap is that it has to make a $1.8 million payment to its police and fire retirement funds. North Riverside doesn't have the money.
The village can't tax its way out of debt. It can't borrow its way out of debt. It can't wait for state lawmakers to fix the problem. It needs a solution, now.
In short, it is much like the city of Chicago and countless municipalities around the state. It is in trouble.
On Monday, the North Riverside Village Board voted 5-1 to contract with a private company to staff its Fire Department. It's a creative answer — and not as risky as it might sound.
The city's 12 firefighters and four lieutenants will keep their jobs at their current salaries with modest raises ahead, but they will work for Paramedic Services of Illinois, which already provides ambulance service for the village. The head of the Fire Department will still work for the village.
North Riverside officials say they will save more than $745,000 next year in lower costs for insurance, overtime, sick leave and pensions by shifting employees to the private company. The firefighters' traditional pension plan will be frozen, and they won't lose any accrued benefits. Going forward, they'll have a 401(k) retirement plan, as so many private sector workers do.
The village already contracts for paramedic services with the firm that will employ the firefighters. Under the deal, the firefighters would have to become licensed paramedics — a real safety advantage for village residents.
North Riverside will save up to $4 million over the next five years through this deal, the village estimates. That will go a long way toward resolving the financial crisis.
Expect to see this kind of contract arrangement for essential services happen more often as local governments grapple with massive pension obligations and wait in vain for the Illinois legislature to provide them some relief.
Cities and towns are suffocating under the pressure of those pension obligations. North Riverside's firefighter pension fund has only 43 percent of the money needed to meet its obligations. The village didn't make full payments in recent years as tax revenues lagged.
The village was prompted to act now by a state law that forces local governments to ramp up pension contributions under threat of having sales tax revenue and state funding diverted to the pension plans if they don't comply. North Riverside received a warning last year from the state Department of Insurance. Village officials are scheduled to appear Thursday at a department hearing to explain what they're going to do to comply. Earlier this month, Moody's Investors Service downgraded North Riverside's credit rating.
So the village has its answer. It's a creative one. And we expect you'll hear a lot of towns making the same decision in coming years. Nobody else is giving them an answer for their financial woes. They have to find one on their own.
The west Cook County suburb of 6,700 people faces a $1.9 million budget deficit. One big reason for the gap is that it has to make a $1.8 million payment to its police and fire retirement funds. North Riverside doesn't have the money.
The village can't tax its way out of debt. It can't borrow its way out of debt. It can't wait for state lawmakers to fix the problem. It needs a solution, now.
In short, it is much like the city of Chicago and countless municipalities around the state. It is in trouble.
On Monday, the North Riverside Village Board voted 5-1 to contract with a private company to staff its Fire Department. It's a creative answer — and not as risky as it might sound.
The city's 12 firefighters and four lieutenants will keep their jobs at their current salaries with modest raises ahead, but they will work for Paramedic Services of Illinois, which already provides ambulance service for the village. The head of the Fire Department will still work for the village.
North Riverside officials say they will save more than $745,000 next year in lower costs for insurance, overtime, sick leave and pensions by shifting employees to the private company. The firefighters' traditional pension plan will be frozen, and they won't lose any accrued benefits. Going forward, they'll have a 401(k) retirement plan, as so many private sector workers do.
The village already contracts for paramedic services with the firm that will employ the firefighters. Under the deal, the firefighters would have to become licensed paramedics — a real safety advantage for village residents.
North Riverside will save up to $4 million over the next five years through this deal, the village estimates. That will go a long way toward resolving the financial crisis.
Expect to see this kind of contract arrangement for essential services happen more often as local governments grapple with massive pension obligations and wait in vain for the Illinois legislature to provide them some relief.
Cities and towns are suffocating under the pressure of those pension obligations. North Riverside's firefighter pension fund has only 43 percent of the money needed to meet its obligations. The village didn't make full payments in recent years as tax revenues lagged.
The village was prompted to act now by a state law that forces local governments to ramp up pension contributions under threat of having sales tax revenue and state funding diverted to the pension plans if they don't comply. North Riverside received a warning last year from the state Department of Insurance. Village officials are scheduled to appear Thursday at a department hearing to explain what they're going to do to comply. Earlier this month, Moody's Investors Service downgraded North Riverside's credit rating.
So the village has its answer. It's a creative one. And we expect you'll hear a lot of towns making the same decision in coming years. Nobody else is giving them an answer for their financial woes. They have to find one on their own.
UPDATE
Privatizing to solve pension mess -
North Riverside firefighters can show the way
By Diana Sroka Rickert July 8, 2014
In 1979, the original Sony Walkman was the newest way to listen to music. Switchboard operators still connected telephone calls.That's also when the Illinois village of North Riverside signed its first contract with the firefighters' union.A lot has changed in 35 years. But the union has clung to its decades-old business model and now faces a dilemma: adapt, or risk losing its only customer.
North Riverside has proposed a third option: Privatize the fire department.
No firefighters would lose their jobs. Instead, the public safety company already providing North Riverside's paramedic services would become their employer. Firefighters would be paid the same salary and receive comparable health insurance benefits. They would wear the same uniform and report to the same fire chief."Everything at the station would remain the same, except who signs the paycheck," said Village President Hubert Hermanek Jr.
Beyond preserving all the firefighters' jobs and keeping intact the level of fire protection, the move also would save the village more than $3.5 million over the next five years. Most savings would come from firefighters banking what they've put into their pensions and earning new retirement benefits through a 401(k).
It's hard to put a price tag on the bravery and service provided by any fire department. But on all accounts, this plan seems like a win-win for the community and rank-and-file firefighters.
However, for the head of the firefighters union, the plan is a no-go.
Why?
"We feel that our contract is binding and they cannot just replace it," said Rick Urbinati, president of North Riverside Firefighters Union Local 2714.Not ever? Not even after it has expired?"No. The contract stays in place," Urbinati said in an interivew.If the choice is between firefighters losing their jobs or everyone's job being protected at the private company, why not choose the latter?"In a century and a half, we do not work for private companies," Urbinati said.Why not?"That's the stance we have," Urbinati said.
But would the union consider a 401(k) instead of a pension?
"No," Urbinati said.
The objections boil down to : Employing firefighters through a private company would protect rank-and-file jobs, but displace the union.Even if the union reorganized with the private company, the union would face competition for providing services.."They're not going to have the same clout with this company as they have with the city council," said Adrian Moore, a privatization expert at the Reason Foundation. "All their political power won't matter. It will be, 'How much is this company willing to pay and is the company willing to hire other people?'
"Years ago, public unions were different. Pensions were commonplace and one could expect to keep the same job for a lifetime.
But because new ideas and competition constantly are introduced, society changes. At some point, we upgrade the Walkman for the Discman for the iPod. We learn to be flexible and embrace innovation, because the way things were done 30 and 40 years ago might not be the best way to do them today.
The question now for Local 2714 is whether it is willing to put the jobs of the rank-and-file firefighters ahead of its own self-preservation and yearning for "the way things were." Failing to do so will cost firefighters their jobs. Diana Sroka Rickert is a writer with the Illinois Policy Institute.
- The union's most recent contract expired April 30. The village of 6,700 faces a $1.9 million budget shortfall. Officials say $1.8 million is due to rising police and fire pension costs.
North Riverside has proposed a third option: Privatize the fire department.
No firefighters would lose their jobs. Instead, the public safety company already providing North Riverside's paramedic services would become their employer. Firefighters would be paid the same salary and receive comparable health insurance benefits. They would wear the same uniform and report to the same fire chief."Everything at the station would remain the same, except who signs the paycheck," said Village President Hubert Hermanek Jr.
Beyond preserving all the firefighters' jobs and keeping intact the level of fire protection, the move also would save the village more than $3.5 million over the next five years. Most savings would come from firefighters banking what they've put into their pensions and earning new retirement benefits through a 401(k).
It's hard to put a price tag on the bravery and service provided by any fire department. But on all accounts, this plan seems like a win-win for the community and rank-and-file firefighters.
However, for the head of the firefighters union, the plan is a no-go.
Why?
"We feel that our contract is binding and they cannot just replace it," said Rick Urbinati, president of North Riverside Firefighters Union Local 2714.Not ever? Not even after it has expired?"No. The contract stays in place," Urbinati said in an interivew.If the choice is between firefighters losing their jobs or everyone's job being protected at the private company, why not choose the latter?"In a century and a half, we do not work for private companies," Urbinati said.Why not?"That's the stance we have," Urbinati said.
But would the union consider a 401(k) instead of a pension?
"No," Urbinati said.
The objections boil down to : Employing firefighters through a private company would protect rank-and-file jobs, but displace the union.Even if the union reorganized with the private company, the union would face competition for providing services.."They're not going to have the same clout with this company as they have with the city council," said Adrian Moore, a privatization expert at the Reason Foundation. "All their political power won't matter. It will be, 'How much is this company willing to pay and is the company willing to hire other people?'
"Years ago, public unions were different. Pensions were commonplace and one could expect to keep the same job for a lifetime.
But because new ideas and competition constantly are introduced, society changes. At some point, we upgrade the Walkman for the Discman for the iPod. We learn to be flexible and embrace innovation, because the way things were done 30 and 40 years ago might not be the best way to do them today.
The question now for Local 2714 is whether it is willing to put the jobs of the rank-and-file firefighters ahead of its own self-preservation and yearning for "the way things were." Failing to do so will cost firefighters their jobs. Diana Sroka Rickert is a writer with the Illinois Policy Institute.
