For city officials, the idea of consolidating 650 downstate police and fire pensions into one will save money in the long run, provide better investment returns and provide more stability to weaker systems.
But representatives of the pension plans said consolidating them will cost money that could take up to 20 years to recover and that there are more pressing issues facing the systems, including Tier 2 benefits that are inadequate.
The goal of consolidating downstate police and fire pension funds has been on the radar of the Illinois Municipal League for several years. This year, it also got the attention of Gov. J.B. Pritzker who appointed a task force in February to look into the feasibility of consolidating local pensions “beginning with downstate police and fire funds.” The group is supposed to deliver recommendations by July 1.
In the meantime, the House Personnel and Pensions Committee listened to pros and cons of the idea.
“We need to see the most reform possible now,” said Brad Cole, executive director of the Illinois Municipal League. “We strongly believe consolidation is the way to do that.”
Higher pension costs put pressure on state government services or property taxes to pay for them, he said. Downstate police and fire pensions are funded at about 55 percent.
Mount Prospect Mayor Arlene Juracek, who is president of the Illinois Municipal League, said local governments face problems similar to the state when trying to keep up with pension payments.
“In Mount Prospect, we are actually making more than the minimum contribution, yet our levels are falling,” she said.
She said consolidating police and fire pensions into the Illinois Municipal Retirement Fund “will increase investment returns and significantly reduce administration costs, all while not encroaching on constitutional protections.”
She said a recent study showed millions could be saved each year in administrative costs with the consolidation. Administrative costs amount to over $1,400 a year for police funds, $1,369 a year for firefighter funds and only $368 a year for IMRF participants.
“We are leaving at least $380 million a year on the table statewide without doing this consolidation,” she said.
He acknowledged there would be transition costs associated with combining the funds, but she said combining them with IMRF would minimize those costs.
However, representatives of downstate police and fire funds said those transition costs would be steep.
“There are upfront costs and we have a lot of funds that will be burdened by them,” said Sean Smoot of the Police Protective and Benevolent Association. “This is going to cost some real money. It could take 15 to 20 years to recover it.”
Smoot also suggested it should be left up to individual funds to decide if they want to merge with IMRF.
“It’s their money, it should be their vote,” he said.
James McNamee of the Illinois Public Pension Association said “trustees has been doing a very good job in managing these assets. It was never an investment problem, it was a restriction problem.”
Some investments are off limits to the funds. McNamee said the association is opposed to consolidation.
IMRF Executive Director Brian Collins also urged lawmakers proceed with caution.
“IMRF is one of the highest funded plans in the country,” he said. “It got that way for a lot of reasons. There’s a very delicate balance. When I think of a large consolidation that would happen, I immediately worry we could throw any of those things out of balance.”
Contact Doug Finke: firstname.lastname@example.org, 788-1527, twitter.com/dougfinkesjr.
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March 21, 2019 at 05:27PM