The Evolution of the Fire Service in Three Graphs

Last August I wrote a post entitled "Is Illinois Fire Service Model Economically Viable?" The post discussed recent trends that are pushing municipal governments toward the pursuit of alternative models for the provision of fire protection services. The primary trend, of course, is the growing cost to operate a municipal fire department. Personnel and pension costs are squeezing municipal budgets and threaten cuts to other services, or higher property tax bills for Illinois residents.

In particular, I wrote about plans by the Village of North Riverside to contract with a private company to provide fire protection. Not surprisingly, unionized firefighters are objecting vociferously to the privatization plans of the Village even though the arrangement would ensure that North Riverside's current firefighters are retained by the private company. North Riverside believes that transferring fire protection services to a private company could save taxpayers $750 thousand during the upcoming budget year. That's big money.

The post also discussed how mandates forced on municipal governments by the state have played a large role in driving up the costs to operate a municipal fire department. Included within the post was a list of 29 legislative enactments that were essentially giveaways to the politically powerful statewide firefighter union. Make sure to take a look at the list and consider it in the context of the charts below. It's quite astonishing.

Unionized firefighters actively work on campaigns, make substantial political donations to candidates, and year after year see their legislative agenda advance through the General Assembly. And the firefighter legislative agenda costs money. Taxpayer money.

The statewide firefighter union is presently working overtime to convince the General Assembly to expand collective bargaining rights to include fire department staffing levels. What this means is that if a bargaining unit and management disagree on how many firefighters are needed, the issue goes before an arbitrator. If the arbitrator sides with the union, then the municipality is compelled to hire more firefighters than the elected officials and their management teams, including the fire chief, believe are necessary.

Just having the right to bargain over minimum manning exerts an upward pressure on fire department costs. Why? Because local bargaining units could use the threat of taking the issue to arbitration to win a concession or two from the municipality. If the municipality fears the prospect of losing an arbitration hearing and having to absorb millions of dollars over multiple years in unnecessary personnel costs, you can bet that they will trade something else to avoid the manning requirement. That something else likely costs money.

Firefighters argue that they should be able to bargain over minimum manning requirements because appropriate manning and staffing issues are a matter of safety for the firefighters and the public. But manning and staffing levels are a prerogative of elected officials and their management teams. The last thing that municipal officials desire is to expose their residents to danger and risk because of an understaffed fire department. Consequently, fire departments are not understaffed in Illinois. How can we be sure? For starters, where is the ongoing media coverage about all of the lives lost and property damage incurred as a result of a fire department staffing crisis? This coverage doesn't exist. Why? Because there isn't a staffing crisis. We have plenty of firefighters in Illinois. And we appreciate what they do.

But what DO they do? The fire service has evolved tremendously over the last several decades. And here's some good news that often doesn't get reported. We don't need as many firefighters because we don't have as many structure fires. And that's a positive development. Fewer fires mean that residents are safer. It's a success story. But if there are fewer structure fires, why is the statewide firefighter union pressing so hard for the right to take manning and staffing levels to arbitration?

Job protection. It's that simple.

Vox published a terrific article about the changing nature of the fire service and what firefighters actually do. While I've linked to the article, I'm going to include three of the graphs from the article below because they tell the story quite effectively. After viewing the charts, ask yourself if we need a law that would empower fire unions and arbitrators to impose additional costs on taxpayers for the purpose of hiring more municipal firefighters.

The number of structure fires is declining:

While the number of paid firefighters has been increasing:

And the firefighters are mostly responding to medical calls and not structure fires:

Policymakers must recognize that the fire service has evolved and that fire departments might more appropriately be considered as "emergency service agencies." Combating fires will always be a component of the fire service. And communities have become very sophisticated in cooperating with each other through mutual aid agreements to ensure that sufficient fire suppression personnel and equipment arrive at the scene of a structure fire. But firefighting has become a secondary obligation. Medical responses are the primary obligation. And it's an important function.

The point of this post is not to somehow argue that firefighters don't do important things. They most certainly do. But the Illinois General Assembly needs to stop legislating as if the primary activity of the fire service is putting out fires with all of the attendant danger. It's expensive to taxpayers and no longer predicated in reality.

Politico Cites Statewide Ballot Questions

Politico has a story about the ballot measures on which voters will opine across several states. Here's what they say about Illinois' referendum questions:

Prairie State voters on Nov. 4 will make their voices heard on what’s turned out to be a wedge issue in the contentious Illinois gubernatorial race: a tax hike on millionaires.

But that’s all they’ll get to do — the ballot measure is nonbinding, merely allowing residents to express their opinions rather than changing tax policy.

The Tax for Education Question asks citizens if they want to amend the constitution to add another 3 percent tax on individuals earning more than $1 million, to fund education. 

Illinois is a flat tax state, so individuals of all income levels pay a 5 percent rate. 

But that will drop to 3.75 percent at the beginning of 2015 because of the expiration of a 2011 income surtax. That’s going to leave a revenue gap, according to Gov. Pat Quinn’s budget office — so he and the Democrats proposed filling the hole by hiking levies on the wealthier.

They tried to get a constitutional amendment on the ballot this year but failed to garner the three-fifths legislative approval required. Now they’re settling for the nonbinding ballot measure, which they hope will give their colleagues the cover to vote for the tax hike down the road. 

Meanwhile, opponents of the measure are accusing Democrats of flooding the ballot with nonbinding red-meat measures that attract liberals — like this one and a minimum wage hike — who would vote for Quinn over his neck-and-neck GOP challenger, Bruce Rauner, who opposes the tax.

The article doesn't mention all of the ballot questions in Illinois (voting rights, minimum wage, birth control, and crime victims rights), so you can probably assume that the article isn't a comprehensive source for the various ballot measures around the country.

Tribune Slams FY2015 State Budget

The Chicago Tribune read the Civic Federation's report about the FY2015 State Budget and recoiled in horror. 

The report paints a gloomy picture of a deeply problematic FY2015 state budget that Statehouse insiders have known about since the budget was passed in late May. Bottom line - the FY2015 budget was a sham budget full of gimmicks and short-sighted financial provisions. Kudos to the Civic Federation for its detailed analysis of a very political budget designed to allow legislators to get out of Dodge and face voters without having taken controversial votes to either make the current income tax levels permanent, or implement the massive cuts necessary to align spending with actual revenues. Go read the whole Civic Federation report here.

Anyway, the Tribune held nothing back in its assessment of the situation:

We've all known since the General Assembly's spring session that lawmakers passed a bogus budget, although we didn't know just how bogus. We wrote at the time that fraidy-cat lawmakers had neither made their temporary income tax hikes permanent nor passed a budget that realistically matches spending to revenues after those tax hikes start to roll back Jan. 1. Profiles in cowardice. 

Springfield's foolish insistence on spending tomorrow's dollars today is one reason that all three major bond rating agencies rank Illinois as the nation's least creditworthy state. Each agency also attaches a negative outlook to Illinois, meaning all three may downgrade the state's harmful credit rating even further: 

Standard & Poor's warned on July 23 that this current budget "is not structurally balanced and will contribute to growing deficits and payables that will likely pressure the state's liquidity." That's what happens when politicians don't want to lose revenue from a tax increase — and make no provision for the tax rollback that they wrote into law.

Here's how my organization described the budget in early June:

The budget appropriation bills include a total of $35.7 billion in spending for FY2015. This budget has been referred to as a “middle-of-the-road” budget because it establishes spending levels between the $38 billion budget that was proposed with the assumption that the existing income tax rates would be made permanent, and a proposed “doomsday” budget that would have reduced spending levels to $34.8 billion.

The budget approved and sent to the Governor includes spending in excess of available revenues and marks a return to the practice of using gimmicks such as inter-fund borrowing, dubious revenue growth assumptions, and insufficient payments to reduce bill backlogs. Without an extension of the income tax rates prior to January 1, 2015, the budget will spring a $2 billion hole that would necessitate service cuts and layoffs.

It's certainly a more diplomatic assessment, but reveals the same unfortunate reality. And that $2 billion hole may be on the low side. Things will get interesting at the Statehouse in January of 2015. The elections will be over, but the hangover will just be getting started. 

Another Example of the Illinois Prevailing Wage Act Costing Taxpayers

Via the Chicago Sun-Times and Better Government Association, we have yet another example of how the Illinois Prevailing Wage Act undermines responsible public spending by making projects more expensive than they need to be. This time the hit is being taken by the state's Urban Weatherization Initiative, which is a program intended to train and put people to work weatherizing homes:

Many of those who have gotten work through the program are being paid not at the $20 an hour expected rate for these relatively unskilled jobs but instead at the scale the state sets for skilled carpenters — as much as $49 an hour. That’s because the program’s architects failed to recognize salaries would need to be in accord with the state’s Prevailing Wage Act, which doesn’t have a category for weatherization workers. With each home limited to repairs of no more than $6,500, the inflated pay has eaten up money intended for the improvements.

“Contractors are running away from this” because of the high pay, says Kerry Knodle, executive director of the Illinois YouthBuild Coalition in Rockford, a nonprofit agency involved in the project. 

“It’s killing the program,” says Percy Harris, chairman of the volunteer state board Quinn appointed to oversee the initiative.

The weatherization program is part of the $31 billion Illinois Jobs Now infrastructure investment program. Whatever one might think of the program, it's abundantly clear that Illinois' current prevailing wage rules sometimes appear to do a better job of compensating workers than actually maximizing taxpayer dollars to achieve targeted goals. 

The Illinois Prevailing Wage Act needs to do a better job of balancing wages with results-oriented objectives. 

Not All Pension Problems Were Created Equally

Eric Madiar wrote an interesting op-ed that reviews the state's long record of under-funding its pension systems. If you're following the Illinois pension crisis, you simply can't ignore Eric Madiar.

Eric is the chief legal counsel to Senate President John Cullerton. He has applied his keen mind toward addressing the state's pension funding crisis by seeking out reforms that are more likely to be deemed constitutional. A considerable amount of his time was spent researching archives of the 1970 Constitutional Convention to ascertain the original intent behind the "impairment" clause. 

While some disagree with Eric's conclusions, I can't think of a single person who questions the results of his deep water dive into the history of the constitution's "impairment" clause. Here's Eric's take on why the framers, informed by history, opted to insert the clause:

In 1917, the Illinois Pension Laws Commission warned leaders that the retirement systems were nearing “insolvency” and “moving toward crisis” because of the state’s failure to properly fund the systems. It also recommended action so that the pension obligations of that generation would not be passed on to future generations. 

The warning and funding recommendation went unheeded, as did similar warnings and recommendations found in decades of public pension reports issued before and after the pension clause was added to the Illinois Constitution in 1970. 

For decades, these reports consistently warned the public and lawmakers of the dire consequences of the state’s continued underfunding and of the significant burden unfunded pension liabilities posed for taxpayers. They advised that the pension clause bars the legislature from unilaterally cutting pension benefits of retirees and current employees. 

Indeed, one of the clause’s purposes is to prevent the state from reneging on its pension obligations during a fiscal crisis because of the burden imposed by unfunded liabilities. The clause was added at a time when the pension systems were no better than they are today.

And as it turns out, Illinois has had run-ins with the bond houses before:

These reports also reveal that as early as 1979 Moody’s and Standard and Poor’s advised Illinois that it would lose its AAA bond rating if it did not begin tackling its increasing unfunded pension liabilities. 

Further, a 1985 task force report noted that Standard and Poor’s reduced its bond rating for Illinois from AAA to AA+ because of the state’s “deferral of pension obligations,” and that another rating agency viewed Illinois’ pension funding as a future financial “time bomb.”

And his conclusion:

Given this well-documented history, it’s extremely hard to legitimately believe Illinois’ current situation is so surprising that the state constitution can be ignored and pension benefits unilaterally cut. As noted in my previous legal research, the pension clause does not support such a result.

I've written a previous post about why it's imperative to the broadest interests of the state that the Illinois Supreme Court find SB 1 to be constitutional. Go read that post for the argument, which is rooted in utilitarianism.

Suffice it to say, much of the funding crisis facing the state pension funds has resulted from deliberate under-funding. But what if we had a pension system that was eroding despite substantial funding increases? And what if that system was failing in large part because of severe structural imbalances and inefficiencies? And what if these structural imbalances threatened not only insolvency, but a combination of higher taxes and cuts to critical services in order to pay pensions?

The municipal police and firefighter pension funds meet these criteria and their problems need to be clearly distinguished from those that beset the state funds. Let's review some of the key data points:

• The overall pension payments to retired police officers and firefighters are escalating at an alarming rate. In 2012, $771 million was paid to 16,054 police and fire retirees. That is a 108% increase from payments made in 2004, which totaled $371 million over just 11,730 retirees.

• In 2000, the average funding levels for the municipal public safety pension funds were 74% (police) and 77% (fire). By 2012, these average funded ratios had declined to 56% for both the police and fire funds.

• Despite the funding level declines, employer contributions have risen dramatically and will continue to increase in the years to come. In 2004, employers contributed $109 million into the firefighter pension funds and in 2012 that contribution more than doubled to $290 million. In 2004, employers paid $138 million into the police pension funds and that number more than doubled to $339 million by 2012.

*Statistics from Illinois Department of Insurance (excludes Chicago)

In the case of the police and fire systems, more money is not solving the problem. The local funds are eroding based upon a confluence of factors aligned against their success.

I concluded the following with respect to the municipal police and fire pension crisis in the March issue of the Illinois Municipal Review:

Recent pension reform efforts have been accompanied by the blame game. This unhealthy dynamic results in harsh rhetoric and bitter accusations. And it resolves nothing. An honest analysis recognizes that all parties involved with the municipal police and firefighter pension funds bear some level of responsibility for the current problems. 

In some cases, cities have not made their full actuarial contributions. Public safety unions have made the pension systems more expensive through the pursuit of higher benefits. Previous General Assemblies have sought to accommodate the public safety unions by voting to increase the benefits without providing municipal governments with revenue to offset the higher costs. Local municipal police and fire pension boards have not been able to generate the assumed rate of investment necessary to keep municipal employer contributions from increasing. 

The dramatic growth in unfunded municipal pension liabilities was created collectively. Stabilizing the funds and avoiding the undesirable consequences of inaction will require collective solutions.  

Municipal governments and local taxpayers have a necessary interest in keeping employee pensions affordable. There’s only so much revenue that can realistically be raised to fund municipal government. Our police officers and firefighters have an interest in ensuring that the pension funds that pay their retirement benefits are viable into the future. All parties should commit to fixing the problem, not the blame.

The key takeaway from this post should be that not all pension crises were created equally. The framers of the 1970 Constitution were obviously concerned about the practice of deliberate under-funding as the principle threat to the pension funds and their participants. Under-funding is not the principal cause of the erosion of the police and firefighter pension funding levels statewide. It's been a contributing factor is some instances, but certainly not the sole cause of the problem. 

It's essential to recognize that the problems besetting the police and firefighter funds are the fruits of a very poorly designed system that was never appropriately modernized. We can't fix a deeply flawed system simply by throwing more money into a sinkhole. Arguments asserting that we should simply pump more money into the police and fire systems should be understood for what they are...demands for tax increases. That would be a slap in the face to the taxpayers. We all deserve better.

Updated Polls and Trail Sightings

I'm continuing to add updated polls to the "Polling Place" page. The latest poll of the Governors race shows Rauner leading Quinn by 3 points, which is within the margin of error. The page also has an updated poll chart from Reboot Illinois and an average of the polls from Real Clear Politics. 

Getting into the spirit of the election, here's the cover of the October Illinois Municipal Review magazine. 

I had the privilege of seeing both candidates speak at our annual conference last week. The Governor spent the balance of his time talking about his record and demonstrating his familiarity with various mayors and local projects. Candidate Rauner gave what I'm told is his standard stump speech on the need to fundamentally change the state's political culture.  The reaction to Governor Quinn was receptive and polite, and he received applause following his speech. Candidate Rauner had a few lines that elicited applause from the audience during his speech. I snapped the two pictures below:

GOP Candidate Bruce Rauner at the IML Annual Conference

Governor Pat Quinn at the IML Annual Conference

What's Up With the Tribune's Latest Poll?

As a political junkie I greatly enjoy a good election cycle. This includes following and comparing polling data and methodologies. 

The Chicago Tribune released a poll on September 13 showing Democratic incumbent Pat Quinn with an 11 point lead over Republican challenger Bruce Rauner. This rather large lead for Governor Quinn goes against the grain of almost every other poll that had Rauner ahead. An exception was the Democratic Governors' Association poll that had Quinn up by 3. 

But a poll showing such a stark difference from the rest raises some questions. First and foremost, why is the result so different? It certainly appears to me that the poll is an outlier. And that's not to say that Governor Quinn won't or can't win in November, or that the polling won't oscillate back and forth over the next several weeks. But compared to other polls released around the same time, it provided a result that was, well, weird. Consider these poll results that were released in the neighborhood of the September 13 Tribune poll:

YouGov had Rauner up by 4 (September 11)

DGA had Quinn up by 3 (September 11)

WeAskAmerica had Rauner up by 8 (September 3)

Excluding the WeAskAmerica poll published over a week ago and just focusing on the more recent YouGov and DGA polls suggest that the race is probably very close. And that's why the Tribune poll showing an 11 point Quinn lead is so striking. So what's up?

First of all, most of the polls employed a "likely voter" model. The Tribune poll conducted by APC Research utilized a "registered voter" model. But it gets a little confusing. This morning I listened to the Trib's Rick Pearson discuss the poll on WGN Radio's Sunday Spin (great show). He indicated that it was based on registered voters, but then suggested that the pollster asked the registered voters if they were likely to vote. It doesn't appear that the pollster used the traditional methodologies to determine if a voter was more likely to vote, such as whether they voted in previous elections, if they knew where their polling place was, etc. If the Trib pollster was trying to narrow the universe to likely voters, they used a pretty weak approach. A lot of people will tell a pollster that they intend to vote even though they probably won't show up on election day. That's why pollsters utilize a screening process to determine who really is a likely voter based not on intent, but historical practice. If the Trib pollster used a more involved screening process, it hasn't been fully explained. Since the paper said it polled "registered voters," then that's what I'm going with. And no less than stat guru Nate Silver says that registered voter polling is suspect. 

The second major issue with the poll is that it finds a party identification breakdown similar to a Tribune poll released in the fall of 2008. This equivalency suggests that the electorate will behave as it did in 2008. This partisan breakdown was determined by asking registered voters about their party identity. Even if this partisan breakdown is accurate, the political currents in 2014 are running in the opposite direction compared to 2008. Not only was 2008 a huge Democratic year as a result of war fatigue and an historic meltdown in the financial sector, but it was punctuated by tremendous voter enthusiasm for Barack Obama in Illinois and elsewhere. 

President Obama isn't on the ballot in November and there's a growing sense that the GOP may benefit from structural and policy advantages in 2014 that will result in an electorate favorable to their candidates. Illinois Democrats are sufficiently concerned that their voters won't be as motivated to come out on election day that they are pursuing strategies to mitigate this feared apathy. These include Democratic-favored ballot initiatives, a coordinated campaign with organized labor, and attempts to change the electorate by registering hundreds of thousands of new voters and turning them out. Time will tell if these efforts are ultimately successful. 

The 2014 Governor's race is likely to be very close either way. It's true that polls are just a snapshot in time and that an eternity remains in the Illinois Governor's race. Even so, I suspect that the Tribune snapshot is the equivalent of a blurry photo for the reasons stated above. It will be interesting to see what the next major poll suggests about the state of the race.