Oak Lawn Village Board members are facing some tough choices as they prepare for 2014 budget talks in the next 90 days, including such worst-case scenarios as property tax hikes and staff layoffs.
“We got a big time deficit problem and run-rate problem,” Village Treasurer Pat O’Donnell said in a pre-budget briefing to the village board on Tuesday. “Part of what got us here is that we need a little bit more formality around debt and credit policy, as well as tax policy.”
Oak Lawn needs to close an $8.7 million budget gap if the village is to pass a balanced budget as required by state law by the end of the year.
The preliminary projected general fund budget for 2014 is $59,449,844, which includes such day-to-day operating expenses as employee salaries, infrastructure, equipment and resident services.
In August, O’Donnell advised the board that Oak Lawn needed to increase its contributions to police, fire and municipal employee pension funds in the coming years to bring those funds in compliance with the state-mandated, 90-percent actuarial recommended pension payment by 2040.
The village currently faces $128 million in unfunded pension liabilities based on actuary figures from the state. By 2016, the village must show a good faith effort in replenishing liability funds or risk losing state-collected local revenue, such as sales tax revenue, that fall short of state-recommended employer contributions.
O’Donnell has recommended that the village make payments of $5.034 million to pension liability funds over the next five years.
At a press briefing on Wednesday afternoon, Mayor Sandra Bury said that to ignore pension liabilities would be reckless.
“This is what is so terrifying,” the mayor said. “If we don’t get a handle on it now, it will escalate to the point of becoming insurmountable. It almost is now.”
The village has also outspent what it has collected in revenue in 2013 – sales tax, income tax, property tax, other taxes, service charges and fines – leaving a $3.080 million hole.
Oak Lawn firefighters, 40 percent of whom are expected to retire over the next five years, have run up overtime costs just shy of $2 million. Firefighter overtime for 2013 was budgeted at $256,000, Bury said.
Firefighters are averaging $30,000 each in overtime costs. The firefighters’ union contract requires minimal staffing of four per truck. Oak Lawn firefighters have been working without a contract for three years. As a result, new firefighters haven’t been hired to replace those who retire or leave. To maintain staffing, firefighters are incurring overtime.
“This is not sustainable by any standard or stretch of the imagination,” Bury said. “It’s not being pro- or anti-union. What this one union agreement is doing is potentially forcing layoffs of other union people. This budget has to balance by law and you can’t have just one situation topple the whole financial solvency of the village. It’s not just this one situation but it certainly is a big part of it.”
In addition to the general fund and pension liabilities, the
village is carrying an a debt load of $100 million, mostly general village bonds and notes, which is not factored into the general fund.
The village’s fiscal picture could improve if state lawmakers pass pension reform. Also, the 111th Street and Cicero Avenue development, including the new Mariano’s, is anticipated to bring in much needed revenue several years down the road that hasn’t been factored into the five-year budget projections.
Asked if a property tax increase or staff cuts were in the picture for 2014, the mayor said nothing is off the table.
“If you think creatively and look at this creatively there are other options besides laying off people,” Bury said. “I don’t view village staff as cogs. I view them as families and neighbors … that would be a last resort. That is not the spirit of what we’re doing. It is certainly not off the table but our ultimate duty is the 57,000 residents in this town.”
The village board’s finance committee of the whole is
tentatively set to meet on Oct. 16 “to look at the scenarios and have a grown
up conversation,” O’Donnell said.
The village has provided Patch a copy of the pre-budget presentation from Tuesday's village board meeting.