Illinois Group Wants Municipal Pension Consolidations

An organization of Illinois municipalities seeks to consolidate the state’s 650-plus downstate public safety funds.

The separate funds and their investment assets would be transferred into the Illinois Municipal Retirement Fund. They would create two new omnibus funds: one for all downstate police, the other for all downstate firefighters. By placing their individual accounts into a larger entity, the group’s thinking is that the money would get a better return.

All local pension boards would be reduced to determining pension payouts and disability eligibility. Investments would be managed by the municipal funds as separate accounts, similar to how a bank operates. This means the assets of better funds would not be used to prop up plans in worse shape.

Another proposal of the Illinois Municipal League is to extend the amortization, or debt payment period, by 10 years, from 2040 to 2050. It also wants to cut the funding target requirements from 90% to 80%, calling for a comprehensive study be done regarding the costs and benefits of full consolidation.

 “These bills show the forward-thinking,” wrote Brad Cole, the group’s executive director, in a February email to the legislature and other state officials detailing the bills.

According to the municipal league, Illinois is burdened with $11.1 billion in unfunded liability from its municipal funds. In total, the state has about $133.5 billion of pension debt.

In a meeting last week with Dispatch-Argus-QCOnline.com editorial board members, Cole and  Moline Mayor Stephanie Acri said that the league’s studies show that consolidation alone would earn the funds “$1.7 billion,” or “at least 2 more percentage points” from dividends.

“The issue is, we are wasting all this money in duplication,” he said at the meeting. “We’ve got to do something about all the money we’re losing.”

A problem Cole and Acri both pointed out is that more often than not, taxpayers end up paying for retirement fund liabilities in ways such as raised property taxes.

“You hear from people who are concerned about the plowing of their streets who pay a lot in real estate tax, but they don’t understand the nuance of how the real estate tax is invested in the community and in those pensions,” Acri said at the meeting.

Illinois Gov. J.B. Pritzker has created two task forces to determine if consolidation would be the best move.

While consolidating small pension funds has been on the state’s radar for some time, a lack of contribution payments from municipalities has hobbled its finances. Most of the public debt is in the larger plans, such as the teachers and employees’ retirement systems. Politicians have also long-addressed their desire for reform, but little usually happens, and state budgets tend to swallow up what would have been proper payments.

This only grows two things: the unfunded liability, and next year’s contribution promises in the state budget. Pritzker’s current budget calls for $7.1 billion. It is expected to be around $8.2 billion the following fiscal year, increasing to roughly $9 billion by fiscal 2022.

Cole could not be reached for original comment. Acri declined comment.

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