A proposal to consolidate the state’s 649 police and fire pension funds won't solve the state’s pension funding problems, a taxpayer advocacy group said Wednesday.
Last week, Gov. J.B. Pritzker unveiled a proposal to consolidate the state’s 649 public safety pension funds into two separate funds. The proposal would pool the tens of billions of dollars in assets from the funds to better capitalize on investment returns. The average funding ratio for the state’s suburban and downstate police pension funds was 55.1 percent. Downstate firefighter pension funds were 54.4 percent funded. The total unfunded liabilities for those funds was a combined $12.3 billion.
The proposal for consolidation does not address Chicago's pension funds or the five state-controlled pension funds. The state’s five pension systems have more than $135 billion in unfunded liabilities. The state's total pension debt exceeds $200 billion when retiree healthcare costs are factored in.
Supporters of consolidating the downstate police and firefighter pension funds have said it will cut down on administrative costs for local funds and increase investment return potential.
Taxpayer United of America President Jim Tobin said he wasn't convinced.
“I don’t see that will help the taxpayers and it won’t result in any significant savings for the pension funds either,” Tobin said. “The pension funds are doomed. They’re going to have to cut them sooner or later.”
Tobin has been touring the state with details of what he calls unsustainable and exorbitant local retiree pensions. In Springfield on Wednesday, he highlighted several pensioners with six-figure pensions set to get more than $4.6 million each.
Instead of consolidation, Tobin said lawmakers should move all public sector new hires into 401(k)-style plans and raise the retirement age to 65.
“That will show some sort of faith,” Tobin said. “It doesn’t resolve the problem either, it only begins to slow the bleeding.”
Tobin said the state should allow cities to go bankrupt.
“If they want to prove they want to do something for the problem we have here in Illinois allow local governments to declare bankruptcy,” Tobin said. “They are bankrupt. And since they cannot declare bankruptcy, they have to continue to push tax increases here, there and everywhere.”
Tobin also said lawmakers should put the question of allowing pension cuts to voters with a constitutional amendment to change the state's pension protection clause. Such an effort isn’t expected to advance at the statehouse.
Lawmakers are expected to take up a local public safety consolidation measure when they return to Springfield later this month.