Gov. J.B. Pritzker is expected to sign a measure to consolidate the state’s 649 suburban and downstate police and fire pension funds into two funds to maximize investment returns after the legislation passed the Senate on the final day of the fall veto session.
Pritzker pushed for the measure to be a focus during the six days of the fall session. Senate Bill 1300, as amended, passed the House, 96-14, on Wednesday. It passed the Senate, 42-12, on Thursday.
State Sen. Jason Barickman, R-Bloomington, voted against the measure. He said he opposed it because of changes to enhance Tier II benefits, which he said was unrelated to the consolidation proposal.
“It effectively undoes some of the reforms that were put in place in 2011,” Barickman said. “We don’t know how much it’s going to cost. We don’t know if it’s necessary. All that was suggested by the sponsor of the bill is that she thinks this is necessary to do today.”
Gov. J.B. Pritzker praised the consolidation. He said the Tier II enhancements were needed to meet federal requirements.
“But let’s be clear here, the cost of addressing the Tier II problem is relatively small compared to the significant reduction in fees and improved returns that these [consolidated] pension funds will realize,” the governor said.
The consolidation of the pension funds is expected to save up to $500 million across the state, but it doesn’t address the more than $12 billion in unfunded local public safety pension liabilities of the combined funds.
Pritzker said there will be a thorough vetting process to find the right pension fund managers for the consolidated funds. He said the consolidation measure was a win for taxpayers.
“Working together we have put hundreds of cities in Illinois on a path toward alleviating their massive property tax burdens,” Pritzker said.
Cities across the state have reported their share of local property taxes is used entirely to pay for public safety pensions, squeezing out money for other services.
State Rep. David McSweeney, R-Barrington Hills, said allowing taxpayers to vote to amend the state constitution’s pension-protection clause would be a win for taxpayers. However, he said he supported the consolidation measure.
“I voted for the consolidation bill yesterday even though I didn’t like the benefit increases,” McSweeney said. “There’ll be a lot of savings for taxpayers from consolidation to increase investment returns, but we need a constitutional amendment on pensions.”
Tier I pensions in the state come with a 3 percent compounded automatic annual increase, something that raises taxpayer costs higher each year. An amendment to allow for the reduction of pension benefits isn’t expected to advance at the statehouse anytime soon. Democrats have veto-proof majorities in both the House and Senate.