Gov. J.B. Pritzker signs measure to consolidate hundreds of police and fire pension funds

Gov. J.B. Pritzker on Wednesday signed a measure consolidating hundreds of downstate and suburban police and fire pension funds into two statewide funds.

Both chambers of the General Assembly overwhelmingly approved Pritzker’s plan to consolidate 650 downstate and suburban public safety pension funds during the fall veto session, delivering the first-term governor his top priority before legislators adjourned for the year. Pritzker on Wednesday hailed the move as a “banner accomplishment."

The plan pools funds from the hundreds of funds into two statewide funds -- one for police and one for firefighters, in an effort to increase investment returns.

The governor pitched the plan as a way to increase investment returns for the pension funds that collectively have $11.5 billion in unfunded liabilities, and to alleviate the property tax burden on homeowners. The measure doesn’t touch any of the statewide pension funds that cover state workers or teachers, or any of Chicago’s pension funds, which face massive unfunded liabilities.

“We’re trying to address every level of pensions,” Pritzker said Wednesday.

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Together, the existing police and fire pension funds have enough assets to cover only 55% of liabilities, which is far short of the state-mandated target of 90% funding by 2040. That has dropped since it was nearly 63% before the Great Recession, according to a report earlier this year from the legislature’s bipartisan Commission on Government Forecasting and Accountability.

Pension fund consolidation has been discussed for decades in Illinois, but failed to gain traction in the General Assembly as police and fire unions and other interests have fought to retain local control.

“Each time we got close to the finish line, it failed,” said Pat Devaney, president of the Associated Fire Fighters of Illinois and a co-chair on the pension task force Pritzker convened earlier this year.

This time, the state’s largest firefighters’ union backed the plan from the time Pritzker rolled it out in October, signaling it might have a path forward in the General Assembly.

The task force issued a report earlier this year that concluded that each day the funds remain separate, they collectively forfeit $1 million in potential investment returns. Citing state Department of Insurance analysis, the report estimates that if the consolidated funds were to perform similarly to other larger Illinois pension funds, it would mean additional investment returns of $820 million to $2.5 billion over the next five years.

The pension consolidation plan is evidence Illinois can “tackle its most intractable problems,” Pritzker said.

The Illinois Municipal League has long pushed for pension fund consolidation, and IML Executive Director Brad Cole called the public safety pension fund consolidation “an important first step in solving the ongoing pension funding crisis,” in a statement on Wednesday.

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