Excerpts from Pekintimes.com:
Illinois lawmakers are once again taking up a long-debated topic: the consolidation of the state’s 656 local downstate police and firefighter pension funds into one unified system. While the idea has been discussed for years, it is now gaining momentum, thanks in part to Governor JB Pritzker, a Democrat, who established a task force in February to examine the issue more closely.
Outside of the task force, the Illinois Municipal League and a group of communities in the northwest suburbs of Chicago have been pushing for change. They’ve proposed several options, arguing that consolidation could lead to significant savings for taxpayers and improve the financial health of these retirement systems.
Currently, there is a single pension fund for non-uniformed municipal workers in downstate Illinois called the Illinois Municipal Retirement Fund (IMRF). However, municipalities outside of Chicago that operate full-time police and fire departments each have their own separate pension funds, with individual boards and administrative staff.
The IMRF is currently in much better shape than other public pension funds, with a funding ratio of about 90%. This is due to state law requiring local governments to make annual contributions, even if it means increasing property taxes or cutting other services.
Before recent changes, many police and firefighter pension funds were underfunded during tough fiscal years. In addition, these funds face restrictions on the types of investments they can make, which limits their growth potential. As a result, these funds are typically only around 55% funded on average.
Supporters of consolidation argue that combining the funds could save local governments as much as $21 million annually in administrative costs—roughly $1,000 per member. That money could be redirected into the pension pools instead. A larger, unified fund would also have greater flexibility to diversify its investments, reducing risk during economic downturns.
If the 69 public safety pension funds managed by the Northwest Municipal Conference had achieved returns similar to those of the IMRF between 2003 and 2015, their assets might have grown by an additional $978 million. This could have cut their unfunded liabilities—estimated at $2 billion in 2016—by nearly half, bringing them down to just over $1 billion. These funds would have gone from being 61% funded to 80% funded without any tax increases.
The Northwest Municipal Conference and the Illinois Municipal League have put forward multiple consolidation options. These include merging all funds into the IMRF, creating a new statewide system for downstate police and fire pensions, or keeping a single fund but allowing local trustees to handle day-to-day operations. Another option is splitting the funds into two separate plans—one for police and one for firefighters.
Despite the potential benefits, many local pension fund officials and members remain skeptical. One major concern is the high cost of transitioning from 656 separate funds to one system, estimated at up to $150 million. The president of the Illinois Public Pension Fund Association noted that this expense could take up to a decade to fully pay off.
For now, lawmakers are expected to wait for the findings and recommendations of Gov. Pritzker’s task force before making any decisions. The report is anticipated later this year, and it could shape the future of Illinois’ public pension system.
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