Illinois lawmakers ponder merger of local police and fire pension funds

March 23, 2019 18

SPRINGFIELD (Illinois News Network) — Illinois lawmakers heard from municipal officials Thursday on the idea of consolidating their police and fire pensions and also giving them “first in line” privileges for local spending.

Illinois currently has more than 650 local police and fire pension funds. Many of them are poorly equipped to pay their coming retiree costs. The Illinois Municipal League and others are proposing to consolidate them in an effort to save on administrative costs.

“Pension boards currently are governed by about 3,300 pension board trustees from over 650 funds that require training, have their own investment managers, business managers, attorneys, actuaries and accountants,” Mount Prospect Mayor Arlene Juracek said. “Consolidation into the [Illinois Municipal Retirement] Fund as proposed in House Bill 1567 will increase investment returns, significantly reduce administrative costs, and mitigate the property tax burden, all while not encroaching on constitutional protections.”

The Illinois Municipal League has introduced several proposals that consolidate local police and fire pension funds in differing ways, many of which give the pension funds membership in IMRF or add provisions similar to those IMRF has.

“We have to represent the taxpayer in this equation because we cannot keep paying more and getting less,” IML president Brad Cole said.

The Thursday hearing was subject-matter only, meaning no votes were taken.

James McNamee, president of the Illinois Public Pension Fund Association, opposed consolidation, saying police and fire pension funds are underfunded in comparison to the Illinois Municipal Retirement fund because there was no law requiring funding until 2011.

“You had the dinner table and there’s one child who gets the full meal and there’s the other child who gets the little half meal over there because that one has to be paid and the other ones didn’t,” he said.

IMRF’s distinct characteristic that McNamee referred to is the statutory requirement for municipalities to make the full required payments into the fund. This expenditure takes priority over all other expenses that a governmental body would incur and is largely why IMRF is funded so well compared to others.

McNamee told lawmakers that the pension fund managers have hit their investment goals but local municipalities have been shorting them in contributions, something less common since the new law came into full effect in 2018.

Illinois’ police and fire pension funds gained a powerful enforcement tool last year when they were granted the ability to certify that a municipality was delinquent in their contributions to the fund and then were able to have state-collected tax money meant for the municipality redirected to the pension. This provision has threatened to hobble local governments and led to many towns hiking fees or property taxes to pay for pensions, or cutting staff and services.

Officials estimate that pension consolidation would save the funds $33 million to $50 million annually.

Cole says the pension funds are approximately 55 percent funded on average.

Reporting by Cole Lauterbach

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