SPRINGFIELD — Gov. J.B Pritzker notched a big veto session win Thursday when the Illinois Senate cleared his touted pension consolidation plan that will combine roughly 650 suburban and downstate police and fire pension funds to try to increase efficiency and lower costs.
The governor unveiled the plan in October after a task force — led by Deputy Gov. Dan Hynes — recommended consolidating the pension plans under two new statewide funds: one for police and one for fire.
It’s one major piece of the puzzle to fix a statewide pension mess, which includes $134 billion in unfunded liabilities from five statewide public pension funds and Chicago’s $28 billion in four of the city’s own funds.
Pritzker said the consolidation could result in greater returns of $820 million to $2.5 billion over the next five years, and billions over the next 20 years.
“What we celebrate here is truly monumental,” Pritzker said after Senate passage. “One of the most critical long-term challenges that we face in Illinois is our underfunded pension liabilities and the surging property tax burdens that they create. This consolidation marks a vital step forward for our fiscal future.”
The consolidation plan was Pritzker’s number one priority during the fall veto session. And he credited bipartisanship as a reason lawmakers finally got it done after decades of others trying to do the same.
The measure hit a small bump this week when the Illinois Municipal League announced its opposition. But the very technical issue was removed and the Illinois House on Wednesday approved it on a 96-14 vote.
The Illinois Senate cleared the plan 42-12, and it will now head to Pritzker’s desk.
In forming the task force in February, the governor’s office argued that the $355 billion in accrued liabilities from the state’s pension funds are placing increased pressure on local governments and the state, driving up property taxes and crowding out funding for public services. Of the state’s 667 separate public pension funds, 656 are suburban and downstate police and fire pension funds regulated by the Illinois Pension Code.
The goal is to have the newly consolidated funds operational by July 1, 2023.
Cook County and Chicago pension plans, which number nine, have an average actuarial value of $3.5 billion per fund, but the 649 suburban and downstate plans only average $22 million, the task forced found in October.
Critics of the consolidation plan said it would be a cash cow for the first investment adviser who will be able to place $14 billion in funds. They also worry that the increase in benefits for the funds — mostly a higher pensionable salary — will offset any savings in investments. Others have argued there should be more local control and fewer restrictions on how the small pension funds invest.
