Pritzker advisers: Merging fire, police pension funds will save the system
Can the state solve its pension crisis by combining suburban and downstate fire and police funds?
A task force formed by Gov. J.B. Pritzker that includes a local mayor is recommending the unusual step for Illinois, known for having among the most units of local government in the U.S.
The Pension Consolidation Feasibility Task Force is advising merging about 650 pension plans, not including Chicago's, into two statewide systems -- one for fire retirees and one for police.
Task force members are betting this could generate "as much as $1 million a day in additional returns" and provide stability in cases where municipalities lack the revenue down the road to pay retirees.
"Under the current arrangement, Illinois' suburban and downstate police and firefighter pension funds are underperforming by nearly one million dollars per day," Pritzker said in a statement.
"That's not just a missed opportunity -- that's a hole these funds are digging deeper every year -- and then municipalities have to ask taxpayers to fill the hole," he added.
Barrington Mayor Karen Darch sat on the task force and Naperville Mayor Steve Chirico is a member of an Illinois Municipal League working group on pensions that provided advice.
"The proposal is not a silver bullet, but it does move the needle," Chirico said.
"If approved, this plan will trigger the most meaningful improvement to the public safety pension system since its inception. The only way for this plan to work is if both the taxpayers and the pension recipients win and this plan for pension investment consolidation will be a win-win."
Darch said "consolidations brings much improved investment returns and reduced overhead costs, and are a big win for municipalities, taxpayers and fund members."
Other local officials were cautiously optimistic.
Mundelein Village Administrator John A. Lobaito said his initial impressions were the report "makes a lot of sense with respect to the potential of achieving higher returns on investment.
"Likewise, consolidating the governance of the pensions from 650 statewide to two will likely bring about some efficiencies. At a minimum, having a plan to address the problem is a significant step forward."
The DuPage Mayors and Managers Conference stated that the proposal "would also provide much-needed relief to municipalities by potentially reducing costs that have squeezed the budgets of local governments throughout the state for years."
However, Arlington Heights Mayor Tom Hayes said, "I would be opposed to any portion of the plan that would adversely impact municipalities to help solve state budget problems."
Kane County Chairman Chris Lauzen, who is a former state senator, said "pension reform is the hardest but most important financial improvement that state and local governments can tackle. However, it's far more complex and difficult than bumper sticker oversimplifications," he noted.
"Bigger is not always better."