Take a firefighter with 20 years on the job and a retirement eligibility age of 50. Add annual increases to his or her pension check that outpace the cost of living. Toss in investment returns in the local firefighters pension fund that fall short of expectations. And consider: That pension fund might be supporting more retirees than it has active employees paying into it.
What do you get when you hit the “total” button? Relentless pressure on local taxpayers to keep that firefighter’s pension benefits flowing for several decades.
Gov. J.B. Pritzker is getting behind a proposal that could begin to ease pension pressure on property taxes. A Pritzker task force recommends consolidating the suburbs’ and downstate’s roughly 650 separate pension funds for firefighters and police into two main accounts. Pooling the assets of all those local funds would deliver greater annual investment returns, and perhaps reduce the expensive gaps taxpayers have to fill when investments fall short.
Pension problem solved? Not even close. But it’s a step toward bending the curve. Hundreds of municipalities face the pension monster that is gobbling up resources — and driving employers and other residents to flee Illinois. Pritzker says he’ll push lawmakers to pass legislation allowing for consolidation during the fall veto session, which begins Oct. 28. That’s ambitious.
How it would work: Local pension funds would remain autonomous in their day-to-day administration. The firefighter who retires at age 50 and collects benefits still would have a pension fund overseen by a local board. But the assets of most funds outside Chicago would be consolidated and invested. According to the Illinois Department of Insurance, more than $14 billion in suburban and downstate police and fire plans could generate an additional $820 million to $2.5 billion in investment returns during the next five years, if they are pooled. Any projection, of course, assumes market returns that may materialize — or not.
Get it done, Springfield. Illinois is behind already. Other populous states have far fewer pension funds. New York has nine. California has 86. Texas has 140. Illinois has more than 650 outside Chicago. Some 24 pension funds across Illinois have only one active participant, meaning one current employee, paying into them. Imagine the wasted overhead costs.
Opposition to Pritzker’s consolidation proposal has emerged from some police unions and from the cottage industry of financial advisers and investors who make money off the hyperlocal setup here. But that opposition should not derail a reasonable proposal to help taxpayers. Chicago’s police and fire funds are not included in proposals so far to consolidate; the task force says these large funds would not necessarily benefit.
A footnote, underlined: This plan does not address the unfunded liabilities already accrued, such as the state’s $134 billion in unfunded liabilities from its five funds, or Chicago’s $30 billion. Only more drastic reforms, such as amending the Illinois Constitution’s pension protection clause to slow the growth of benefits not yet earned, would begin to ease those huge burdens facing taxpayers
So onward, Governor. Go for consolidation. But let Illinoisans vote on the only meaningful fix for pensions long term — an amendment.
Editorials reflect the opinion of the Editorial Board, as determined by the members of the board, the editorial page editor and the publisher.
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