Pension consolidation coming to suburban fire and police departments
A historic plan to consolidate suburban and downstate fire and police pension plans passed the Senate Thursday with bipartisan support from local lawmakers.
Democratic Gov. J.B. Pritzker led the effort and has promised it will save millions in a state where local municipalities are bogged down with pension obligations.
The policy would merge 650 pension plans, not including Chicago's, into two statewide systems - one for fire retirees and one for police.
Proponents are betting the move could generate "as much as $1 million a day in additional returns" and provide stability for municipalities lacking revenue to pay the growing numbers of retirees.
Numerous suburban Republicans voted for the proposal.
"This plan creates the potential for greater investment returns and helps ensure financial stability," state Sen. Don DeWitte of St. Charles said. "The efficiencies of 650 different investment strategies have proved to be problematic, and millions of dollars are lost to pay for hundreds of sets of administrations."
Rep. Grant Wehrli of Naperville said consolidation was "a small step to save taxpayers' money all while increasing funding levels of police and firefighter pension systems."
Under the status quo, suburban and downstate police and firefighter pension funds underperform by nearly $1 million per day, officials have said.
Merging the "jungle" of plans "could result in greater returns of $820 million to $2.5 billion over the next five years alone," Pritzker said Thursday. "And they could earn billions more over the next 20 years."
Pritzker praised the collaboration of both parties, saying "we've begun to show Illinois can tackle its most intractable problems."
Republican State Rep. David McSweeney, an investment banker from Barrington Hills, said that with "a bigger pool of money, you have access to more funds," plus the ability to diversify portfolios and coordinate investment strategies.
McSweeney called the vote "tough" because of he opposed a provision allowing for benefit increases he estimated would cost about $90 million. But the investment gains outweighed the loss, McSweeney noted.
Democratic Sen. Christine Castro of Elgin was a key sponsor of the bill.
"I look forward to seeing it signed into law, but this is only the first step. There's still a lot of work to be done," she said.
Republican Sens. Jim Oberweis of Sugar Grove and Craig Wilcox of McHenry voted no.
Once Pritzker signs the measure, a pension transition board will be appointed by January 2020 and assets will be transferred over a 30-month period, said Barrington Mayor Karen Darch, an adviser on Pritzker's pension consolidation task force.
"A permanent board is to be elected 12 months after the transition board is seated - so a busy first year," she said.