Gov. J.B. Pritzker’s proposal to consolidate downstate and suburban police and fire pensions got a boost Friday when a major police union announced it would back a compromise plan.
Pritzker last month unveiled a plan to merge roughly 650 local pension funds for suburban and downstate public safety workers into two statewide funds, a move aimed at narrowing a growing funding gap and easing the property tax burden on homeowners.
The consolidation plan was a top priority for the first-year governor during the General Assembly’s fall session, which is set to conclude Thursday after three more days in Springfield.
A bill encapsulating Pritzker’s original proposal was introduced during the first week of the General Assembly’s fall session.
The governance structure of the boards that would oversee the pooled pension funds has been a sticking point for police unions, but the Illinois Fraternal Order of Police announced in a statement Friday that it would back proposed amendments to Pritzker’s initial proposal after “extensive talks” with the governor’s office and legislative leaders.
Rather than representation being split evenly between employee trustees and employer representatives, the pension fund boards would have five members who are employees or retirees and four members who represent employers. A supermajority would be needed on votes on investment and actuarial decisions.
"We agree in principle with these proposed amendments but want to make sure they make it into the final language of the bill,” Illinois Fraternal Order of Police State Lodge President Chris Southwood and Illinois Fraternal Order of Police Labor Council Executive Director Shawn Roselieb said in a joint statement Friday.
Consolidating the hundreds of public safety pension funds would be “an important step forward in alleviating the growing burden of local property taxes and produce significantly better returns for first responders,” Pritzker spokeswoman Jordan Abudayyeh said in a statement Friday. “The administration is pleased that support continues to grow and appreciates the backing from police organizations, who have joined with firefighters and municipal representatives in supporting this commonsense reform.”
The idea of consolidating the public safety pension funds – which together have roughly $11.5 billion in unfunded liabilities – is not new, but many previous attempts have failed to advance in the General Assembly as police and firefighter unions, and other interests have pushed to retain local control. The state’s largest firefighters union, which has opposed past consolidation efforts, has been supportive of the current proposal.
According to a report issued by a pension task force Pritzker convened shortly after taking office, each day the funds remain separate, they collectively forfeit almost $1 million in potential investment returns. The report, citing a state Department of Insurance analysis, concluded that if the funds were to perform similarly to larger Illinois pension plans over the next five years, it would mean additional investment returns of $820 million to $2.5 billion.
In Pritzker’s proposal, each police or fire department would maintain a separate account within the two larger statewide funds, held in a pair of trusts separate from the state treasury. Assets and liabilities would not be shifted from one municipality’s plan to another, but pooling the funds for investment purposes would allow for fewer administrative fees that are currently paid separately by each of the local funds.
Over the past decade, the annual investment returns earned by the suburban and downstate police and fire funds, on average, have been about 2 percentage points lower than those of the Illinois Municipal Retirement Fund, the state’s best-funded public pension fund and a model for the proposed consolidation.