Illinois Governor J.B. Pritzker approved a plan Wednesday to pool the pension funds of nearly 650 downstate police and fire departments.
Pritzker says consolidating the funds has been talked about for decades, but state lawmakers were never able to get the idea over the finish line, until now.
“The reality is that so little has been done in the past, and this is a monumental accomplishment after 70 years of people trying," he told reporters before he signed the law in Chicago.
Over the next two years, local pension funds, except for those in Chicago, will be brought together into two statewide funds, one for police and the other for firefighters. Locals will still determine retirement benefits, but investment decisions will be made by the statewide funds. Pritzker and others estimate the consolidation will earn local departments an extra $2.5 billion in investment returns over the next five years.
The governor says consolidation will accomplish several goals.
“Working together, we are helping hundreds of cities across the state of Illinois to alleviate their spiraling property tax burdens, and just as importantly, we’re showing that Illinois can tackle its most intractable problems," Pritzker said.
First responders will make up a majority of both of the statewide pension boards. Consolidating the funds and setting up the boards is expected to take more than two years.
Pat Devaney of the Associated Fire Fighters of Illinois told reporters consolidation is a "win-win."
"It's a win for the firefighters and police officers who rely on these pensions as their sole source of retirement income," he said, "and it's certainly a win for taxpayers for the hundreds of millions of dollars in property tax savings that we're going to realize as a result of this effort."
State lawmakers called this a “first step” toward addressing a larger issue: the hundreds of billions Illinois owes to retirees of statewide pension systems, like those for teachers and state workers. All five of those pension systems are now offering a buyout program for retirees, which allows them to take a lump-sum annuity payment in exchange for long-term benefits like cost-of-living adjustments.
Officials believe at least 25 percent of those currently at retirement age will need to take the buyout in order for Illinois to see any savings from the program.