Excerpts from Pekintimes.com:
Illinois lawmakers have resumed talks on a long-standing issue: merging the state’s 656 local downstate police and firefighter pension funds into one unified system. While the idea has been discussed for years, it is now gaining momentum, thanks in part to Democratic Governor JB Pritzker, who formed a task force in February to examine the matter more closely.
Beyond the task force, the Illinois Municipal League and a coalition of communities in the Chicago suburbs have been pushing for reform, presenting up to seven different proposals they believe could reduce costs for taxpayers and improve the financial health of these retirement systems.
Currently, there is one pension fund for non-uniformed municipal workers in downstate Illinois called the Illinois Municipal Retirement Fund (IMRF). However, communities outside of Chicago that operate full-time police and fire departments each maintain their own separate pension funds, complete with individual boards and administrative teams.
IMRF is currently in the best shape among all public pension funds in the state, with a funding ratio of 90%. This is largely due to state law, which requires local governments to make annual contributions—even if it means increasing property taxes or cutting other services.
Before recent changes, police and firefighter pension funds often faced underfunding during tough economic times. Additionally, these funds are restricted in the types of investments they can make, limiting their potential returns. As a result, downstate public safety pension funds are, on average, only about 55% funded.
Supporters argue that consolidating the funds could save local governments around $21 million annually in administrative costs, or roughly $1,000 per member. That money could be redirected into the pension pools instead. A larger, unified fund would also offer more investment flexibility, helping protect against economic downturns in specific sectors.
If the 69 public safety funds managed by the Northwest Municipal Conference had earned returns similar to IMRF over a 12-year period from 2003 to 2015, those funds might have grown by an additional $978 million. That could have cut their unfunded liabilities—estimated at $2 billion in 2016—by nearly half, bringing them down to just over $1 billion. The funding ratio could have improved from 61% to 80%, without raising taxes.
The Northwest Municipal Conference and the Illinois Municipal League have proposed several consolidation options. These include merging all funds into IMRF, creating a new statewide system, allowing local trustees to manage day-to-day operations, or setting up two separate plans—one for police and one for firefighters. Despite these options, many local fund officials and members remain skeptical about the move.
One major concern is the high cost of transitioning from 656 separate funds to one. Estimates suggest the process could cost as much as $150 million, a figure that could take up to a decade to repay. The president of the Illinois Public Pension Fund Association warned that this would be a significant burden for local governments.
For now, lawmakers are expected to wait for the findings and recommendations of Pritzker’s task force before taking any action. The report is expected later this year, and it may play a key role in shaping the future of Illinois’ pension system.
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