“…I am supportive of a recent recommendation that the General
Assembly take action to consolidate these police and fire pension systems. This
would eliminate duplicative administrative costs and allow the systems’
investment assets to be combined to provide for better investment opportunities
and higher returns…” -Representative Grant Wehrli
-Consolidation of the
police and fire pension funds will not address the existing unfunded liability.
-Consolidation of the
police and fire pension assets will affect actuarial assumptions; thus, some
funds’ assumptions will be lowered (thus, increasing the unfunded liabilities)
while other funds will increase (thus, decreasing the unfunded liabilities).
-Consolidation of the police
and fire pension funds will not address the flawed Tier II benefit plan that is
violating the “Safe Harbor” provision of the Social Security Administration.
-Consolidation of the
police and fire pension funds will be costly: consider administrative costs,
transition costs, legal costs, exit charges, market volatility, to name just a
few expenditures.
-Consider there are restrictions
already in place on what types of investments (for instance, low-yield fixed
income investments) that these pension funds can make.
-The plan to
consolidate the police and fire pension funds is overestimating gains. Each
fund has a different funding level and liability-maturity profile.
-There will be no
guarantee that there will be taxpayer savings.
-There will be no
guarantee the pensions will ever be fully funded.
Sources:
Dabrowski, Ted and John
Klingner. “Consolidation of Illinois Police and Fire Pensions: a good idea with
limited impact and many risks.” Wirepoints. 10 October 2019. https://wirepoints.org/c
Heenk, Bart and Sarah
Smart. “Pension Consolidation: is it all good news?” Investment and Pensions
Europe. April 2018. https://www.ipe.com/reports/special-reports/thought-leadership/pension-consolidation-is-it-all-good-news/10023898.article
Kass, Amanda. “Is
Consolidating Assets of Public Pension Funds a good idea?” Crain’s Chicago
Business. 16 October 2019. https://www.chicagobusiness.com/opinion/consolidating-assets-illinois-public-pension-funds-good-idea
Wehrli, Grant. “Naperville’s
Pulse in Springfield: Can Police and Fire Pensions Be Consolidated?” Positively
Naperville. 18 November 2019. https://www.positivelynaperville.com/2019/11/18/napervilles-pulse-in-springfield-can-police-and-fire-pensions-be-consolidated/107421
Illinois Passes Police, Fire Pension Consolidation Bill
ReplyDeleteMove could boost returns by $2.5 billion over five years.
The Illinois Senate passed legislation that will consolidate 650 police and firefighter pensions, sending the bill to Governor JB Pritzker, who has said he will sign it into law.
The bill, which the senate passed 42-12, amends the Cook County Article of the Illinois Pension Code to allow for the pensions to pool their funds into two statewide funds for investment purposes – one for police and one for firefighters. It will also allow contributions to be taken from any revenue source, including, but not limited to, other tax revenue, proceeds of borrowings, or state or federal funds.
The move is intended to help improve the financial stability of the pension funds, while easing pressure on local governments to raise taxes to fund those pensions.
“Bipartisanship in this general assembly has achieved what none of their peers from previous general assemblies has been able to do,” Pritzker said in a news conference after the vote passed the state senate, “consolidate the jungle of police and fire pension funds that serve first responders in the suburbs and downstate.”
Last month, a bipartisan task force on pensions created by Pritzker released a report that said consolidating the plans’ investment assets was the single most impactful step the state can take to address the underfunding of the police and fire pension funds.
“This step is immediately actionable and beneficial to the health of the plans, retirees, and taxpayers,” said the report.
If the more than $14 billion of suburban and downstate police and fire plans were to achieve investment returns like the other larger Illinois plans over the next five years, they would collectively generate an additional $820 million to $2.5 billion alone. That is the result of analysis by the state’s Department of Insurance The report also added that if they earn comparable returns over the remaining 20 years on their statutory ramp to 90% funded status, they would create an additional $3.6 to $12.7 billion in investment returns alone.
The Illinois Municipal League, a government sector lobbying association, lauded the passage of the bill.
“This has been a top priority for municipalities across Illinois for several years and will provide much needed financial relief to local governments and their taxpayers while also protecting the retirements of our public servants,” Illinois Municipal League Executive Director Brad Cole said in a statement. “While the latest compromise isn’t perfect, this is an important first step that will benefit employees, retirees and taxpayers across the state.”
https://www.ai-cio.com/news/illinois-passes-police-fire-pension-consolidation-bill/