Illinois House OKs Consolidation of 650 Local Pension Programs

The bill would create two statewide funds, one each for firefighters and police officers

The Illinois House on Wednesday approved Gov. J.B. Pritzker’s plan to consolidate hundreds of municipal pension programs to boost investment returns and save administrative costs.

The House voted 96-14 to approve creating two statewide funds — one for police department employees, one for firefighters — out of nearly 650 municipal plans.

The Democratic governor contends it would relieve pressure on overburdened pension accounts outside of Cook County. With combined assets of $15 billion, he says investment returns could be increased by $800 million to $2.5 billion in the first five years, while relieving local governments of administering separate accounts.

“If you're a mayor, you want to make sure that your property taxes are kept at a minimum, you want to make sure that your pension funds are adequately funded,” said the bill’s sponsor, Democratic Rep. Jay Hoffman of Swansea. “If you are an individual who is working and paying into the system, you want to make sure that those retirement funds are solvent .... This bill meets all those goals.”

The legislation moves to the Senate with one day remaining in the General Assembly’s fall session. Approval would give Pritzker another in a string of legislative victories in his first year in office. But it does nothing to address monstrous funding gaps in the state’s largest pension programs — nine Chicago and Cook County retirement accounts which are $44 billion short of adequate funding and six statewide funds underfunded by more than $130 billion.

The plan underwent weeks of negotiations over administration and control. Republicans objected to a provision to improve benefits, at a cost of up to $95 million in five years, to newer employees. The so-called Tier 2 pension beneficiaries were hired after the state reduced pension benefits for new hires to save money, but forecasters now fear that they were cut so much they do not meet Social Security benefit minimums.

During debate on the floor, Hoffman assured critics that the boards would be governed by representatives of the municipalities, their employees and retirees, and not controlled by the state. The state, he said, could not “sweep” money from the accounts to pay other bills.

Rep. Allen Skillicorn, an East Dundee Republican, pointed out that last year, 220 of local pension accounts were short-changed; the responsible municipalities did not contribute the required annual amount. Hoffman said the legislation would allow the state comptroller to withhold other state money from those governments failing to keep pace.

GOP Rep. Ryan Spain said his hometown of Peoria is unable to fill 21 vacant police officer positions and 15 for firefighters because the pension costs are too high.

“As we debate the merits of consolidation of pension funds, we're seeing in our communities a different type of consolidation taking place,” Spain said.

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