New Illinois fund set up to manage assets of suburban Chicago and downstate police pension funds would have an additional year to complete consolidation under legislation the fund is pursuing who says he can’t meet the June 30 deadline.
The Illinois Police Officers’ Retirement Investment Fund told lawmakers at a committee hearing that some individual funds resisted transferring their assets due to ongoing litigation challenging the constitutionality of the law. 2019 consolidation legislation.
Last year, a police fund group filed a lawsuit to block implementation, arguing that mandatory consolidation amounts to a benefit cut that violates the state constitution’s prohibition on cuts. benefits.
Governor JB Pritzker pushed for the pooling of the assets of more than 600 individual public safety accounts into a single police account and a single fire fund – the police and firefighter pension investment funds – to help reduce rising pension costs for municipalities. These governments have turned to service cuts, pension obligations and asset privatization to manage costs.
“Our chief investment officer, who has extensive experience in this area, wisely informed the directors that he could not meet the deadline of June 30, 2022,” IPOPIF government liaison Bukola told lawmakers. Bello, during a recent hearing before the House. Personnel and Pensions Committee on HB 4622, sponsored by Rep. Mike Halpin, D-Rock Island.
The Firefighters Fund is further along in the consolidation process and expects to meet the deadline, so it is not requesting an extension. The consolidation of firefighters enjoys wider support among the funds while some police funds and pension associations have opposed it.
The police fund expects the first tranches of transfers to begin on March 1. It started later than the fire and the litigation posed obstacles. If the fund cannot complete the consolidation within the current time frame, it would be in violation of the law, Bello warned.
Unfunded liabilities for suburban and lower Illinois public safety pensions hit $13 billion in the last year of compiled results reported to the state, soaring on a 29-year rise that highlights strong pressures on local government budgets.
Police accounted for $7.5 billion of the total and firefighters for $5.5 billion, according to a report by the Commission on Government Forecasting and Accountability of the state legislature.
“There are several concerns from individual police funds about the mechanisms that would be in place if the Supreme Court finds this law unconstitutional,” Bello told lawmakers. The police investment fund has no mechanism in place to manage assets if the courts side with litigants.
The case – Arlington Heights Police Pension Fund et al v. Jay Robert Pritzker et al – is pending before Kane County Circuit Court Judge Robert K. Villa, but any decision may be appealed before the Illinois Supreme Court, which will have the final say.
“We originally thought we would have a decision now, that we would have guidelines from the courts. We just don’t have that. We are awaiting a decision,” Bello said.
Brad Cole, president of the Municipal League of Illinois, who has advocated for consolidation and is a director of the new police fund board, told lawmakers he opposed the one-year deadline.
“The purpose of this underlying law is to consolidate funds for investment purposes so that funds can generate more returns on investment so that they can have better funded funds” which relieve pressures on local governments and their taxpayers, Cole said, warning the delay would cost millions in savings.
The measure passed the committee by a vote of six to two, sending it to the House floor.
Governor JB Pritzker won legislative approval in November 2019 for the consolidation proposal with the goal of reducing administrative costs and increasing investment returns. Benefits continue to be managed by individual local councils.
Under the law, local credit unions must transfer all their securities, assets and money to the newly created credit unions by July 1, 2022, the deadline.
The benefits of consolidation are limited, but rating agencies have said it’s a positive step.
The police plaintiffs argue that their benefits are damaged because the law “deprives plaintiffs of their autonomy and authority.” The lawsuit further argues that pension plan members’ benefits are compromised because transition costs are covered by loans through the Illinois Finance Authority that the two new consolidated funds must repay.
The litigants are asking the court to declare the law unconstitutional and are seeking class-action status, which, if approved, would impact all funds subject to consolidation.
The state’s attorney general countered that constitutional protections were limited to member benefits, not the management of funds.
The committee also heard testimony about HB308, backed by MLI and sponsored by Rep. Maurice West, D-Rockford, which would give local governments more leeway to achieve a mandatory 90% funding ratio. It extends the amortization period by 10 years to 2050. No action was taken during the hearing on the matter.
“The pension crisis for municipalities across the state of Illinois is incredibly real and has serious consequences if no action is taken” and that includes service cuts and layoffs of police and firefighters, a warned Rockford Mayor Thomas McNamara.
Opponents have called the measure a short-term fix that gets things done and could bring some weak funded systems closer to insolvency.
The financial health of public safety pension funds has deteriorated over the years. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. Police funds ended 2019 at 54.98% and firefighters at 54.35%. The health of some individual funds, however, is much weaker with ratios only among teenagers.
The committee advanced another bill HB1859 that would revamp the statutes governing pension contributions to the Cook County Forest Preserve beginning in the 2023 levy year. This would allow the district to move to an actuarial contribution that would remove the funds from its current course headed toward insolvency and fully fund it in the decades to come.
The district carries an unfunded tab of $145.4 million and is 59% funded with a projected insolvency date of 2041. Similar legislation SB3909 is pending before a Senate committee.
The district is banking on voter approval of a referendum scheduled for the November ballot that would raise its property tax rate, allowing it to both fund land acquisition and improvements, stabilize its finances and to increase pension contributions, but the legislation also allows for increased payments if the ballot measure fails.
“The additional fiscal support provided with the passing of the referendum would put forest reserves on a sustainable fiscal path,” reads the referendum resolution.