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From excerpts on Pekintimes.com:
Illinois legislators reconvened discussions last Thursday regarding a recurring issue: the potential consolidation of the state's 656 local downstate police and firefighter pension funds into a unified system. While this concept has lingered in legislative circles for quite some time, Governor JB Pritzker has recently lent his support, appointing a task force in February to explore the matter.
Beyond the task force, the Illinois Municipal League and a coalition of suburban Chicago municipalities have spearheaded efforts, proposing up to seven alternative strategies they believe would reduce taxpayer burdens while enhancing the financial stability of these retirement systems.
Presently, the sole pension fund catering to non-uniformed municipal workers in downstate Illinois is the Illinois Municipal Retirement Fund (IMRF). However, communities outside of Chicago with full-time, professional police and fire departments maintain separate retirement funds for these personnel, each governed by its own board of trustees and administrative staff.
IMRF stands out as the most financially robust among Illinois' public pension funds, boasting a 90% funding ratio. This strength stems from state laws mandating annual contributions from local governments, even if it entails hiking property taxes or cutting other public service expenditures. Until recently, similar requirements did not apply to police and firefighter pension funds, which frequently faced underfunding during periods of economic hardship for local administrations. Additionally, these funds have been constrained by legal limitations on investment types. Consequently, such pension funds typically reach only around 55% funding levels.
Advocates argue that merging these funds could save local governments $21 million annually in administrative expenses alone—approximately $1,000 per member—which could then be redirected toward bolstering the pension pool. A unified entity akin to IMRF would also enjoy greater investment flexibility, potentially shielding the fund from economic downturns impacting specific sectors.
Had the 69 public safety funds managed by Northwest Municipal Conference communities achieved the same returns as IMRF between 2003 and 2015, their assets could have grown by an extra $978 million. This would have slashed their estimated $2 billion unfunded liability in half, reducing it from slightly over $2 billion to just above $1 billion, without increasing local taxes. These funds would have transitioned from 61% to 80% funded status.
The Northwest Municipal Conference and Illinois Municipal League presented multiple consolidation models. Options include integrating all funds into IMRF, allowing IMRF to oversee both investments and daily operations; establishing a standalone statewide system for managing only downstate police and fire pensions; maintaining a singular fund while delegating day-to-day administrative decisions to existing local trustees or governing bodies; and creating two distinct statewide programs—one for police and another for firefighters. Administrators and members of these local pension funds remain skeptical about consolidation.
One major concern is the substantial transition cost, estimated at up to $150 million, which could take a decade to recoup. The president of the Illinois Public Pension Fund Association noted that this expense would significantly impact funding.
It's unlikely lawmakers will act before Gov. Pritzker's task force releases its findings and recommendations later this year.