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Old 10-15-2019, 04:59 PM
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Mary Pat Campbell
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OPEBs

https://www.manhattan-institute.org/...-opeb-ny-ct-nj

Quote:
REPORT
Post-Employment Benefits in New York, New Jersey, and Connecticut: The Case for Reform

EXECUTIVE SUMMARY
Governments at all levels offer their retired employees a wide range of benefits apart from pensions. These other post-employment benefits, or OPEB, typically include medical insurance. Depending on the type of benefits offered, how they are financed, and whether they cease when the retiree becomes eligible for Medicare, a government can accrue millions of dollars of unfunded OPEB liabilities a year or none at all.

Because OPEB liabilities are usually lower than pension liabilities, they are considered less of a concern. They are, however, politically difficult to reform, and, more importantly, they are often far more difficult to estimate than a pension liability. This makes OPEB liabilities a riskier type of obligation.

Actuaries attempt to quantify the future cost of OPEB plans by applying assumptions that, hopefully, account for future conditions. However, as liabilities increase in complexity, the ability to produce accurate assumptions declines. Moreover, the difficulty associated with predicting complex liabilities increases with time. For example, a life-insurance plan is primarily concerned with mortality rates, investment rate of return, and payroll growth. A health-insurance plan must consider mortality, health-care cost increases, inflation, demographics, health-care regulations, payroll growth, and, in cases where the employer is prefunding, the investment rate of return.

This report explores the complexities of OPEB, particularly in New York State, New York City, Connecticut, and New Jersey. It also considers measures that governments can take to limit their OPEB risks—ranging from providing inflation-indexed, health-care premium subsidies to switching to a subsidy-free OPEB plan. These kinds of reforms are like switching from a defined-benefit pension plan to a cash-balance plan. They mitigate risk to the employer while protecting the employer’s ability to offer employee benefits without, in the case of the public sector, threatening core public services.
https://media4.manhattan-institute.o...-CT-Powers.pdf
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Old 10-17-2019, 11:38 AM
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MICHIGAN

https://www.ai-cio.com/news/ken-fish...paign=CIOAlert
Quote:
Ken Fisher’s Lewd Comments Cost Him a Big Client
The State of Michigan Retirement Fund has severed ties with billionaire asset manager’s firm, yanking $600 million investment.
Spoiler:
Due to sexist comments at a public forum, billionaire Ken Fisher, CEO of Fisher Investments, has lost a major client. The $70 billion State of Michigan Retirement Fund pulled $600 million of its pension fund from Fisher’s firm.

Fisher made the inappropriate comments during a keynote discussion at the Tiburon CEO Summit at the Ritz Carlton in San Francisco last week. During a moderated talk on Tuesday with Chip Roame, managing partner at Tiburon Strategic Advisors, Fisher, 68, claimed that gaining a client’s trust was like “trying to get into a girl’s pants,” according to interviews with summit attendees who broke non-disclosure agreements to report the remarks.

“I don’t want you to confuse me with Epstein,” Fisher reportedly added, referring to disgraced financier Jeffrey Epstein, who was indicted on federal sex trafficking charges before committing suicide in prison.

Two days later, Fisher apologized. “Some of the words and phrases I used during a recent conference to make certain points were clearly wrong and I shouldn’t have made them,” Fisher said in a statement. “I realize this kind of language has no place in our company or industry. I sincerely apologize.”

Roame said in a statement on Thursday that he was “extremely disappointed” and barred Fisher from future events.

Michigan Chief Investment Officer Jon Braeutigam wrote in a letter on October 10 to the state’s investment board that its bureau of investments, part of the state Treasury Department, canceled the contract because of Fisher’s lewd comments. The state has been a Fisher client for 15 years.

“There is no excuse not to treat everyone with dignity and respect,” Braeutigam wrote. “We have high expectations of our managers (and staff) not just with regards to returns but also in how they exhibit integrity and respect to all individuals.”

Other funds took note. Shawna Lode, a spokeswoman for Iowa Public Employees’ Retirement System, told Bloomberg News in an email that “Fisher’s remarks are obviously concerning.” She continued: “Although our investment management contracts do not include a conduct policy, we hold our partners to the highest standards and reserve the right to amend or sever any contract at our discretion.” Fisher reportedly manages $386 million of the pension’s $34 billion fund.

Fisher established his Camas, Washington, firm in 1979. Fisher, who manages about $112 billion, boasts more than 175 large institutions as clients, including state pension plans and company 401(k)s, as well as 65,000 high-net-worth individuals. He is a frequent speaker at conferences and other public events. About 15 women were at the Tiburon event, which had about 220 attendees.

Women have been marginalized in the investment industry for years. According to the Harvard Business Review, gender equity in the business is lacking. Women control between 1% and 3.5% of assets under management and female portfolio managers manage only 2% of mutual funds. Only 4% of portfolio managers are women. Research has shown that gender diversity brings higher returns.
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Old 10-17-2019, 05:37 PM
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ILLINOIS

https://www.chicagobusiness.com/opin...unds-good-idea
Quote:
Is consolidating the assets of Illinois' public pension funds a good idea?
We don't have enough information to say for certain whether the Pritzker task force recommendations are prudent policy.
Spoiler:
On Oct. 10, 2019, the Illinois Pension Consolidation Feasibility Task Force released its report to Gov. J.B. Pritzker. The Task Force was charged with studying the possibility of consolidating some of Illinois’ hundreds of public pension funds and providing recommendations to the governor. The main focus was Illinois’ public safety pension funds — there are over 600 individual funds for police officers and firefighters throughout the state.

The public safety funds range significantly in size and financial condition, and each one currently operates independently with its own board of trustees. Most, however, are underfunded, and the financial health of the funds has long been a concern. This is, in part, because municipalities’ annual pension payments are linked to the finances of the pension funds — as a pension fund’s finances deteriorate, the municipality’s payments should increase. State law requires municipalities’ contributions to be sufficient so that each public safety fund is 90% funded by 2040 (meaning 90% of the liabilities are matched with assets). Because most public safety pension funds are underfunded, municipalities’ contributions are projected to increase significantly over time. The increasing pension contributions are a growing fiscal pressure for municipalities.

Unfunded liabilities for all public safety funds totaled $11 billion as of fiscal year 2017, and between 2012 and 2017 the median increase in unfunded liabilities from year-to-year was nearly $400 million. A policy change that boosts the finances of the pension funds—like consolidation—could reduce municipalities’ required contributions. However, consolidation should not be thought of as something that will resolve the challenge of unfunded pension liabilities or municipalities’ increasing pension contributions.

As part of my work for the Government Finance Research Center, I’ve been studying the public safety funds. My work has focused on municipalities’ annual pension payments and a state law meant to enforce those payments. Trying to assess whether the enforcement law is working is difficult because the 600+ public safety funds operate separately, and no central authority monitors the pension payments. Because of the challenges I’ve encountered that stem from there being hundreds of funds, I was keen to read the Task Force’s report. Below is my summary of it and some important issues that were largely left out of the report. My big takeaway is the report itself is too thin on details to say for certain whether the recommendations are good or bad ideas, or what impact they’ll have at the local level in the short-term.


WHAT DID THE TASK FORCE RECOMMEND?
The Task Force has two main recommendations:

Consolidate the assets of the public safety funds (excluding Chicago and Cook County). More specifically, the Task Force recommends that rather than having hundreds of funds managing their own investments, this should be centralized under two new, statewide bodies (one for police officers and one for firefighters). Importantly, this would be a form of partial consolidation. While the investments would be centrally managed, each fund would continue to maintain an accounting of its own assets and liabilities. The administration of benefits would also still be managed by the 600+ individual public safety pension boards. The Task Force does, however, recommend studying full consolidation further.
Increase the Tier-2 benefit. Tier-2 is the reduced benefit level for any public employee hired on or after January 1, 2011. The Tier-2 benefit is believed to provide a pension that falls below a minimum threshold required under federal law. To remedy this issue, the Task Force recommends boosting the Tier-2 benefit, specifically by increasing the amount of salary that can count towards a pension benefit and changing how the final average salary (which is used to determine the pension) is calculated. The Task Force also makes recommendations for changing benefits for surviving spouses.
WHAT'S THE FINANCIAL IMPACT? ARE THE ESTIMATES ACCURATE?
The Task Force writes that consolidation is “the single most impactful step that the State can take to address the underfunding of downstate and suburban police and fire pension funds.” The rationale for consolidating the assets is that doing so would result in better investment returns, which would boost the overall finances of the pension funds. While consolidating the assets is believed to generate savings, increasing the Tier-2 benefit would add costs. In the end, the Task Force believes the savings will outweigh the costs.

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The group estimates that asset consolidation would generate an additional $820 million to $2.5 billion in investment returns over the next five years. The savings, according to the report, “could save taxpayers in excess of $160 million on an annual basis.” While any increase in assets will help, the upfront costs of consolidation could be more than additional investment returns in the short-term.

The savings estimate assumes the increased investment returns generate a 1-to-1 reduction in municipalities’ required pension payments. Investment returns are just one component in determining municipalities’ annual pension payments, and there are many other factors and even aspects of consolidation itself that could drive costs up or down. Reduced administrative costs, for example, might also generate savings, but this wasn’t calculated in the report. The Task Force estimates that the Tier 2 benefit changes would cost between $70 million and $95 million per year; however, no information was included as to how that estimate was calculated. Last, whether the recommendations ultimately saves municipalities and taxpayers money will vary on a case-by-case basis, and depends on a variety of factors, including the investment rate assumption, discussed below.

A key reason consolidation is thought to enhance investment performance is that under current state law, there are restrictions on what kinds of investments pension funds can make, depending on their size (see 40 ILCS 5/1‑113 through 113.4). Smaller funds have the least investment discretion and have to have a more conservative investment strategy, and these restrictions can translate into lower investment returns. Under the Task Force’s consolidation recommendation, the restrictions would be lifted, which is believed to result in a higher investment performance. In theory, higher returns could also be achieved without consolidation by simply lifting the restrictions. Importantly though, achieving higher returns hinges on taking on more investment risk and volatility. For example, one of the largest public safety funds, the Joliet Police Pension Fund, had an investment loss of 0.6% in 2015 and a positive return of 12.9% in 2017.

The estimate itself was calculated using the Illinois Municipal Retirement Fund’s and Illinois State Board of Investment’s average rates of return from 2004-2013, both of which were higher than the public safety funds’ average return. This is a rather simple way to estimate the impact of consolidation, and it does not take into account a variety of factors.

One issue is that there are transition costs to consolidating the assets. While the report acknowledges transition costs, no estimate was included. A 2012 report also evaluated the possibility of consolidating the public safety funds’ assets. That report discusses transition costs, and includes more detailed cost and saving estimates. Importantly, transition costs are immediate expenses, while savings occur over the long term. The analysis from 2012 found that under the most likely scenario, “it would take 11 years to break even and begin realizing any cost savings in excess of transition costs” from consolidating the assets of all public safety pension funds. (The Anderson Economic Group released a report on its study of consolidation for the Illinois Public Pension Fund Association in 2018).

HOW WOULD CONSOLIDATION AFFECT ACTUARIAL ASSUMPTIONS?
Consolidating assets has implications for actuarial assumptions, and assumptions play a vital role in determining a pension fund’s finances and municipalities’ annual payments. According to the Task Force, one of the benefits of consolidation is that it would, “Enhance uniformity in setting investment and other actuarial assumptions.” The report is thin on details about this aspect of consolidation, and it’s important to learn more about it to understand how municipalities will be impacted in both the short-term and long-term.


In determining the long-term finances of the pension systems, actuaries use an investment rate assumption. Right now each of the 600+ public safety funds have their own investment rate assumption, and the assumption rates vary from around 5% up to 8%. Moving to a single investment rate assumption will mean some funds’ assumptions will be lowered, while others will be increased.

Changing the investment rate assumption has an immediate and direct impact on unfunded liabilities. Increasing the assumption will decrease unfunded liabilities, while reducing the assumption increases unfunded liabilities. The Chicago Tribune highlighted that the biggest driver behind increases in Chicago’s unfunded pension liabilities in recent years has been actuarial assumption changes. Since municipalities’ annual pension payments are linked to the unfunded liabilities reducing the investment rate assumption increases the required contribution (and vice-versa). When the Teachers’ Retirement System lowered its investment rate assumption the state’s required pension contribution for one year increased by hundreds of millions of dollars. Lowering the investment rate assumption a quarter of a percentage point (from 6.75% to 6.5%) was estimated to increase municipalities’ contributions for representative public safety funds by between 16% and 22% (see 2017 GRS Experience Report, available here) .

The financial implications of changing the investment rate assumption are not detailed in the Task Force report. Figuring out how switching to a uniform investment rate assumption will impact contributions should be carefully studied, and would need to be done for each fund as the impact depends on their individual investment rate assumptions.

WHO WILL DETERMINE MUNICIPALITIES' REQUIRED CONTRIBUTIONS? WHO WILL TRIGGER THE INTERCEPT?
In addition to the financial impact of consolidation, it’s also important to understand how the Task Force’s recommendations will impact pension governance more broadly. As previously mentioned, most public safety funds are currently underfunded. State law requires each municipality to pay enough money to its public safety pension funds annually so that each one is 90% funded by the end of 2040. As of 2017, the funds were only 55% funded. Shoring up their finances requires municipalities’ annual pension payments to increase over time.

If a municipality fails to make that payment the pension board can request the Illinois Comptroller to intercept state-sharing revenue and redirect it from the municipality to the pension fund to make up for the shortfall. But municipalities have some discretion in determining the required payment.

Under current rules, municipalities can use one of three different actuaries to determine the payment: 1) one hired by the Illinois Department of Insurance, 2) one hired by the municipality, or 3) one hired by the pension fund. These three actuaries can use different assumptions, leading to three different figures as to what the municipality needs to pay. It is ultimately up to the municipality to choose which of the three numbers to pay. This has led to concern that municipalities can shop for the lowest number, and thereby undermine the long-term finances of the pension funds. The report doesn’t explicitly address whether duties related to determining the required contributions and triggering the intercept would shift to the statewide bodies that would be formed under the Task Force’s recommendation.


SO WHAT'S THE TAKEAWAY?
The Task Force’s two big ideas — consolidating assets and fixing Tier-2 — each have merit, and as general ideas make a lot of sense. But the report doesn’t have enough information to say for certain whether the Task Force’s recommendations are prudent policy, or how individual pension funds and municipalities will likely be impacted. Legislation based on the recommendations has yet to be introduced, but once it is, more details should emerge that will allow for more in-depth evaluation. When a more detailed proposal is introduced, it will be important to have a thorough analysis of the estimated costs and savings, and their respective time horizons.

Amanda Kass is a doctoral candidate in Urban Planning and Policy at the University of Illinois at Chicago. She is also associate director of the Government Finance Research Center at UIC’s College of Urban Planning and Public Affairs.

http://www.wjbc.com/2019/10/16/illin...-fall-session/
Quote:
Illinois lawmakers hope to pass pension consolidation measure during fall session
Spoiler:
SPRINGFIELD -Some Illinois lawmakers want the upcoming veto session this fall to focus on a task force recommendation to consolidate 649 downstate local police and firefighter pension funds into two funds.

Two lawmakers said the plan was a small reform to address the state’s high property taxes and underfunded pensions.

Gov. J.B. Pritzker unveiled a plan proposed by the Pension Consolidation Feasibility Task Force last week to combine 649 suburban and downstate police and fire pension funds into two separate funds, one for police and another for firefighters. The plan does not include the city of Chicago or the state’s five pension funds for university employees, state employees, lawmakers, judges and teachers.

Before Pritzker announced the plan, the Illinois Department of Insurance released its biennial report on public pensions. It showed in 2018 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.

State Sen. Robert Martwick, D-Chicago, said some local public pension funds were 80 percent funded while others are woefully underfunded. Consolidating them won’t be an immediate fix.

“An 11 percent funded local pension fund after this consolidation is still only 11 percent funded,” he said.

However, Marwick said consolidation would give smaller funds the ability to access investment opportunities with greater returns.

State Rep. Mark Batinick, R-Plainfield, said he likes the overall proposal because it would lower costs and increase investment returns, even if it doesn’t deal with the state’s $135 billion in unfunded liabilities.

“But if you’re in the burbs or downstate this is a big issue with your property taxes,” Batnick said. “And some of this snowballs.”

There aren’t many vetoes to consider when lawmakers return later this month and Batnick said he hoped to see the consolidation plan pass before the end of the session.

“It would actually be nice to focus on something that is important, that directly affects property taxes so I’m kind of hopeful that all the air is taken out [of the room] with this,” Batinick said.

Many communities across the state report local police and firefighter pension funds are taking up more and more of their operating budgets and share of property taxes.

Martwick said he expects thorough hearings of the governor’s pension consolidation proposal.

“All of this was done behind closed doors and so I’m looking forward to some public hearings where I can hear the people in support of it say why they support it and I want to hear what those who are opposed to it say why they are opposed to it,” Martwick said.

A state firefighter association has come out in support of the proposal. A state police association has raised concerns.

Batinick warned against muddying up the idea, something he said could be a greater risk if lawmakers wait until the Spring to take the issue on.

“Springfield can screw up a one-car funeral,” Batinick said. “People could throw anything at it … people with other agendas that may want to attach something else to any bill that’s passed.”

Lawmakers return to Springfield for three days beginning Oct. 28 and three days beginning Nov. 12. It’s still unclear who the governor will pick to take the lead on the pension consolidation plan.


https://www.chicagotribune.com/opini...iqe-story.html
Quote:
Editorial: Gov. J.B. Pritzker’s pension suture can be one step toward a full healing

Spoiler:
Take a firefighter with 20 years on the job and a retirement eligibility age of 50. Add annual increases to his or her pension check that outpace the cost of living. Toss in investment returns in the local firefighters pension fund that fall short of expectations. And consider: That pension fund might be supporting more retirees than it has active employees paying into it.

What do you get when you hit the “total” button? Relentless pressure on local taxpayers to keep that firefighter’s pension benefits flowing for several decades.

Gov. J.B. Pritzker is getting behind a proposal that could begin to ease pension pressure on property taxes. A Pritzker task force recommends consolidating the suburbs’ and downstate’s roughly 650 separate pension funds for firefighters and police into two main accounts. Pooling the assets of all those local funds would deliver greater annual investment returns, and perhaps reduce the expensive gaps taxpayers have to fill when investments fall short.

Pension problem solved? Not even close. But it’s a step toward bending the curve. Hundreds of municipalities face the pension monster that is gobbling up resources — and driving employers and other residents to flee Illinois. Pritzker says he’ll push lawmakers to pass legislation allowing for consolidation during the fall veto session, which begins Oct. 28. That’s ambitious.

How it would work: Local pension funds would remain autonomous in their day-to-day administration. The firefighter who retires at age 50 and collects benefits still would have a pension fund overseen by a local board. But the assets of most funds outside Chicago would be consolidated and invested. According to the Illinois Department of Insurance, more than $14 billion in suburban and downstate police and fire plans could generate an additional $820 million to $2.5 billion in investment returns during the next five years, if they are pooled. Any projection, of course, assumes market returns that may materialize — or not.

[Most read] CPS strike is officially on as teachers union, Chicago mayor fail to reach a last-minute deal
Get it done, Springfield. Illinois is behind already. Other populous states have far fewer pension funds. New York has nine. California has 86. Texas has 140. Illinois has more than 650 outside Chicago. Some 24 pension funds across Illinois have only one active participant, meaning one current employee, paying into them. Imagine the wasted overhead costs.

Opposition to Pritzker’s consolidation proposal has emerged from some police unions and from the cottage industry of financial advisers and investors who make money off the hyperlocal setup here. But that opposition should not derail a reasonable proposal to help taxpayers. Chicago’s police and fire funds are not included in proposals so far to consolidate; the task force says these large funds would not necessarily benefit.

A footnote, underlined: This plan does not address the unfunded liabilities already accrued, such as the state’s $134 billion in unfunded liabilities from its five funds, or Chicago’s $30 billion. Only more drastic reforms, such as amending the Illinois Constitution’s pension protection clause to slow the growth of benefits not yet earned, would begin to ease those huge burdens facing taxpayers

So onward, Governor. Go for consolidation. But let Illinoisans vote on the only meaningful fix for pensions long term — an amendment.
http://digitaledition.chicagotribune...f-333567d59616
Quote:
Don’t let pension plan be a bailout
Spoiler:
I hope Gov. J.B. Pritzker’s plan to consolidate pensions for suburban and downstate police officers and firefighters into two funds benefits plan participants, but I don’t want it to lead to a statewide bailout. Some painful municipal bankruptcies and benefit cuts will accelerate pension reform.

Bailouts (and guarantees) create problems. Union leaders don’t enforce funding. Politicians trade (unfunded) promises for votes, and workers turn a blind eye to abuse. Guarantees encourage fraud.

Significant gains will come only by minimizing political input. Our current financial problems are proof.

Our governor and legislators must significantly raise taxes. But most of the new tax revenue will not build new schools and hospitals or fix our ailing water system; it will not help struggling families or rebuild failing communities. No, most new tax revenue will go to members of politically powerful unions.

Retiring at 50 is absurd, but other programs have problems too. Recent legislation renewed pension spiking programs for teachers. You’d hope that legislators would know better. They obviously don’t, and nor does our governor.

Public safety pensions are outlandish. We certainly owe special thanks to those who protect us, but the payout should not be extraordinary pension benefits funded by taxpayers who must work to age 65 or 70 to build sufficient retirement savings. And whatever we do, our promises should not financially enslave our grandchildren.

I believe the ultimate solution is to align public and private sector benefits. Promising public sector workers extraordinary benefits is elitist and dangerous. It’s a common fault of failed economies.

Public sector workers should be enrolled in Social Security, Medicare and a savings plan. They should not be in programs that foster abuse and shift the financial burden to future generations.

— Bob Ruffatto, Arlington Heights

Illinois taxpayers need quid pro quo

I would be willing to vote yes to the fair tax amendment, providing that Gov. J.B. Pritzker promote consolidating school districts to save taxpayer money, promote the fair map amendment and amend the state constitution to permit new employees access to a 401(k) type of retirement plan, or better yet amend the constitution to allow elimination of the annual 3% increase in public pension benefits. Let’s see some positive action in Springfield.

— Wayne Spaeth, Bloomingdale, Illinois

Dysfunctional setup,

to say the least

Regarding the editorial on Gov. J.B. Pritzker’s so-called “pension suture” (“Pritzker’s pension suture can be one step toward a full healing,” Oct. 13): The real issue is that a firefighter (or any public employee, for that matter) can retire with a full pension at age 50 with cost-of-living increases for the next 30 years.

Illinois taxpayers are chumps.

— Joe Piombino, Wheaton


https://www.lincolncourier.com/opini...tical-proposal
Quote:
Ralph Martire: A refreshingly un-political proposal

Spoiler:
Not including Chicago, there are 649 local pension plans for police officers and firefighters serving municipalities across Illinois. And while a small minority of these plans are very well funded, when considered together, they have an aggregate “funded ratio” of only 55 percent, meaning they have just over half of the financial assets they need to cover the benefits they’re obligated to pay. That’s problematic, considering that to qualify as financially healthy, the Congressional Budget Office has determined public pension plans should be at least 80 percent funded.

To date, there have been a paucity of viable proposals introduced to get these 649 police and fire funds fiscally healthy. The reasons for this failure have been primarily two-fold. First, elected officials have focused most of their legislative efforts on cutting pension benefit levels for the workers who put their lives on the line to keep us all safe. That was never going to work, given the data have consistently shown that benefit levels have not been the primary driver of the unfunded liability. Instead, the main culprit has always been a statutory funding scheme that permitted municipalities to underfund the contributions they owed to these pension systems for decades.

Meanwhile, in their misdirected fervor to save a little money by cutting pensions for police officers and firefighters, state lawmakers created a “Tier 2” benefit level in 2011 that’s so low, it will eventually violate the safe harbor which allows local governments to be exempt from paying into Social Security — but only for so long as the benefits in the exempt plan are at least equal to what a worker would earn under Social Security. That means even though Tier 2 reduces the contributions required of municipalities in the short term, when it blows by the safe harbor in a few years, municipalities will face the huge new cost of either paying for Social Security, or bumping Tier 2 benefits up to at least equal what pertains under Social Security.

Which is the perfect segue into the second reason public pensions are so underfunded in Illinois: Political systems have great difficulty dealing with long-term fiscal problems responsibly. Think about it: In the highly partisan and frequently toxic environment in which politics operate, elected officials are rewarded for getting through the current budget year or election cycle. If that short-term political reward comes with a long-term cost so be it.

Which in turn is why the recent report by Gov. J.B. Pritzker’s Pension Consolidation Task Force is such a breath of fresh air. For once, it doesn’t try to eke some short-term savings from cutting benefits for public safety workers — benefits which the data show did not cause the problem to begin with. Instead, it focuses on generating viable, long-term funding enhancements, that can reasonably be projected to flow from consolidating the investment assets of the 649 local police and fire pension funds that exist today, into one large statewide fund for police, and another for fire. Based on anticipated reductions in administrative, asset manager, and investment charges, and access to a greater variety of investment vehicles, the Illinois Department of Insurance projects such a consolidation would generate anywhere from $820 million to $2.5 billion more in asset growth over the next five years than if these funds remained segregated in 649 smaller, local plans as they are now. Heck, the report even recognizes the long-term costs coming our way when Tier 2 runs afoul of the Social Security safe harbor, and proposes some rational benefit increases for police officers and firefighters to avert that costly eventuality.

Sure, there will be transition costs that have to be fleshed-out, which the report acknowledges, and some start-up costs for the two new larger funds. But long term, the benefits can be expected to outweigh the costs. You read that right. The proposal recognizes the need to incur short-term costs to generate long-term gains. How refreshingly un-political.

Ralph Martire is executive director of the Center for Tax and Budget Accountability, a bipartisan fiscal policy think tank, and the Arthur Rubloff Professor of Public Policy at Roosevelt University. rmartire@ctbaonline.org


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Last edited by campbell; 10-17-2019 at 05:50 PM..
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Old 10-17-2019, 05:38 PM
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Mary Pat Campbell
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Favorite beer: Murphy's Irish Stout
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CONNECTICUT

https://www.courant.com/politics/cap...tuy-story.html
Quote:
Study says teachers pension problems still not solved

Spoiler:
A new study by the conservative Yankee Institute says that the state’s teachers’ pension fund is still troubled - even after changes made by the legislature.

The 25-page study says the current pension system is not working "and it has the potential to fail current and future retirees if it is not equitably and carefully reformed - soon.''


inRead invented by Teads

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The study states that "the state has only 52 cents for every dollar needed to fund the retirement system,'' and "the pension debt has grown by five times since 2000, after netting out the effects of inflation.''

Recognizing the long-running problem, Gov. Ned Lamont’s administration and the state legislature took steps to make the system more stable by lowering the payments and adjusting the payment schedule.

To begin to address the underfunding of the teachers’ pension fund in 2017, the legislature increased the percentage that teachers contribute toward their pensions from 6 percent to 7 percent. While towns pay teachers’ salaries and health care, the state administers teacher pensions. The average annual pension for teachers retiring two years ago was $51,657, according to the state Teachers’ Retirement Board.

The plan for teachers’ pensions called for extending the payments over 17 additional years — in much the same way that the state legislature resolved an underfunded plan for state employees in 2016. The concept is similar to refinancing a mortgage by adding extra years to pay it off, which eventually costs more overall in the end.

Lawmakers, though, said they needed to smooth out the pension payments so that they would be more affordable for the state in the short term through 2032 and then for the following 17 years until 2049.

Senate President Pro Tem Martin Looney, a New Haven Democrat, blasted the report.

"The Republican Yankee Institute is funded through the State Policy Network, which funnels tens of millions of dollars from Koch Industries, tobacco companies, and the pharmaceutical industry to organizations that masquerade as non-partisan think tanks,'' Looney said Wednesday. "In reality, the Republican Yankee Institute, like other members of the State Policy Network, creates highly inaccurate and misleading reports to serve the anti-worker, anti-family policies of their Republican billionaire and corporate donors. Every report from this partisan organization should come with the disclaimer “Paid for by Friends and Supporters of Donald Trump.”

Chris McClure, a spokesman for Lamont’s budget office said, “It is abundantly clear Connecticut’s unfunded pension liabilities, which result from decades of under-funding and poor planning, are a strain on our budget and an impediment to economic growth. That is why actions have been taken in recent years to address growth in the unfunded liability by adopting more realistic assumptions for the return on investment and the actuarial methodology, and smooth the payment schedule by altering the amortization schedule and introducing laddered amortization to prevent market shocks in both the State Employees Retirement System and the Teachers Retirement System.''

He added, "Thanks to these changes, we have improved the sustainability of our pension systems and stabilized expenditures in the near term.”


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Old 10-17-2019, 05:48 PM
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CHICAGO, ILLINOIS

https://www.fox32chicago.com/news/em...double-pension
Quote:
Embattled former alderman uses loophole to double pension

Spoiler:
CHICAGO - He's at the center of a growing federal corruption investigation, but former Chicago Ald. Danny Solis has just started collecting a pension of nearly $100,000.

Now, a FOX 32 investigation has found Solis was able to more than double his pension payout by taking advantage of a little-known loophole when he suddenly resigned from office earlier this year.

It’s been months since anybody has seen the former alderman in the 25th ward. The new alderman's name is literally taped over Solis' name at his old ward office.

"The mess that was left for us here in the 25th ward, there's got to be justice,” said Ald. Byron Sigcho-Lopez.

Solis disappeared after it was learned earlier this year that he had been ensnared in a federal corruption investigation and had been secretly cooperating with the FBI for at least two years, possibly wearing a wire.

Federal documents show Solis flipped after the feds caught him trading political favors for campaign contributions, Viagra and trips to a massage parlor.

However, it turns out Solis' biggest political payday is perfectly legal.

We showed pension expert Bill Zettler what we had found. In a letter to then-alderman Solis last year, the municipal employee's annuity and benefit fund informed Solis that if he retired in May he could expect a pension of about $3,600 a month, or $44,000 a year.

However, they also informed Solis of a sweetener only available to elected officials in Chicago, allowing them to purchase pension credits retroactively.

So in January, Solis wrote two checks to the pension fund totaling a little more than $128,000. That allowed Solis to more than double his pension payout to $7,900 a month and $94,000 a year.

Zettler says Solis’ pension boost will pay off that $128,000 investment in just two and a half years, and also put another $1.3 million in Solis’ pocket if he lives another 15 years, which is 10 times the initial investment.

“It's a can't-lose situation for the people involved,” said Zettler.

Amazingly, Solis was able to buy retroactive pension credits for his three-month stint working for the Chicago Public Library in the 1960s when he was 17 and have it paid out based on his six-figure aldermanic salary.

Solis's replacement says what's frustrating is that despite the corruption scandal, Solis will be able to keep his aldermanic pension if he's not convicted, and because he's cooperating with the feds, he may never be charged.

“He seems to be very astute when it comes to playing the system and taking advantage of loopholes. Not so much about thinking about the public good,” said Ald. Sigcho-Lopez.

The pension loophole benefitting elected officials was done away with by the legislature several years ago, but still applies to anyone who held office before 2011.

The city pension fund that's paying Solis is only 25 percent funded and in danger of going broke.


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CAHOKIA, ILLINOIS

https://madisonrecord.com/stories/51...ration#new_tab
Quote:
Audit of Cahokia police pension fund finds less than professional operation

Spoiler:
SPRINGFIELD – Trustees of Cahokia village and its police pension fund improperly increased benefits for St. Clair County Sheriff Rick Watson by raising his salary as he retired in 2011, Department of Insurance examiners found in July.

Village trustees hiked Watson’s salary from $95,163.60 to $127,462.40, so his 75 percent pension would yield about 100 percent of his contract salary.

Examination supervisor Antoaneta Kovacheva wrote in a draft report that pension trustees who approved the greater amount didn’t follow pension code.

Watson, as a pension trustee in 2011, abstained from voting on his benefits.

In the draft report, Kovacheva found trustees more recently approved improper salary increases of $18,952 for Lawrence Purnell and $8,174 for James Jones.

It also states that benefit calculations for Watson, Purnell and Jones incorrectly included cash value of unused vacation, personal days, or sick time.

“The department has concluded that increasing ‘salary’ to inflate pensions and induce retirement is contrary to the Illinois pension code,” Kovacheva wrote. “Such compensation is not commensurate with salary and contribution history and artificially increases pension fund liabilities in an actuarially unsound manner.”

Cahokia pension fund trustees were given a chance to disagree.

“If we receive sufficient documentation and explanation, we will revise the final report,” Kovacheva wrote.

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Pension board counsel Dennis Orsey, in an interview on Oct. 14, said trustees approved a response to the draft in September.

He said they included three options for responding to alleged overpayments.

“They have not fully made their determination on how they will proceed with that,” Orsey said.

He said a beneficiary could request a hearing on any change in benefits.

Trustees plan to discuss the options in a meeting on Oct. 16, at 11 a.m.

Kovacheva examined the fund from 2008 to 2018, and found dozens of violations, mistakes, and lapses.

In fiscal year 2018, she found the trustees lost $407,644 on investments.

According to Kovacheva’s report, trustees should have liquidated three corporate bonds they acquired in 2016 and 2017, because the bonds were no longer rated as investment grade.

She did not find documentation and approval of investments, or documentation on many items she should have found it on.

Her report overall portrayed a less than professional operation.

She found two members joined the fund with no documentation or approval; 25 received refunds without documentation or approval; trustees accepted ten members without hiring dates; no documents for three of seven factors in Watson’s pension calculation; trustees granted four other pensions without all necessary documents; trustees incorrectly assessed contributions on lump sum payouts of accumulated benefit time; they incorrectly deducted insurance before assessing contributions; they didn’t prorate contributions for employees who didn’t work for an entire pay period and a member received duplicate refunds in violation of code.

Kovacheva corrected six accounting errors in annual statements, including the reporting of a member as a Tier One participant.

Legislators created a second tier offering lesser benefits to some new employees in 2014, as part of a package of reforms.

Kovacheva found that annual reports initially reported five employees as Tier One but later changed them to Tier Two.

She found corrections of two entry dates in the 2018 annual statement.

She found Watson, Jones, and Heine didn’t complete training on open meetings.

She found trustee Francella Jackson didn’t complete 16 hours of required training in 2016.

In minutes of board meetings, she found no signatures of president or secretary.

She found trustees didn’t approve minutes four times in 2010 and twice in 2013.

She found no documentation of election results for trustee David Heine and former trustee Gary Brewer.

She found no mention in the minutes of expiration dates for officers.

She wrote that trustees should record the clerk’s salary under salaries and wages in the annual report, not under other expenses.

“On five separate occasions the board used pension fund money to purchase flowers,” Kovacheva wrote.

“The purchase of flowers is not considered an expense necessary for the operation of the fund.”

Her criticism extended to village trustees, for holding tax levies they should have forwarded to the pension fund.

She wrote that state law requires a county to forward taxes to a pension board within 30 days of receipt, but the village held taxes as long as six months.

As of April 30, 2018, the fund held assets with actuarial value of $15,425,256.

Its accrued liability stood at $26,626,951.

Watson’s pension grows each year and currently stands at $121,110.20.


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Old 10-17-2019, 05:58 PM
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EAST ST. LOUIS, ILLINOIS

https://www.illinoispolicy.org/pensi...east-st-louis/
Quote:
PENSION CRISIS FORCES FIREHOUSE CLOSURE, 9 FIREFIGHTER LAYOFFS IN EAST ST. LOUIS
East St. Louis is short $9.5 million between a budget deficit and back payments owed to its fire and police pensions. As a result, city leaders are closing a firehouse and laying off nine firefighters.
Spoiler:
Nine firefighters have been asked to hand in their gear and their fire station will temporarily close as East St. Louis, Illinois, faces a $5.5 million budget deficit and interception of nearly $4 million in state funding for debts owed to its police and fire pensions.

City Manager Brooke Smith notified the firefighters of the layoffs Oct. 15 in a letter stating they would end work at the end of the month.

“Unfortunately, with 100% of the City’s state revenues being redirected to the police and fire pensions, we are faced with the difficult task of strategically reducing some services in order to continue to meet our financial obligations for the next few months,” she wrote.

The city’s firefighters pension board on Sept. 17 notified Illinois Comptroller Susana Mendoza requesting an interception of the city’s state funding until it receives $2.2 million the city owes the fund. The city’s police pension board made the same request on Sept. 27, seeking $1.79 million the city still owes. The state funding has since halted and the city has 60 days after those dates to appeal, Mendoza’s spokesman Abdon Pallasch said.

Besides the loss of state funding, Smith also cited the city’s budget deficit.

“As you are aware the City of East St. Louis has been forced to make some difficult financial decisions to meet its budgetary obligations. According to the 2019 budget, there is a $5.5 million deficit and the city is now proposing lay-offs in the Fire Department,” she wrote in the layoff notice.

The firefighters pension was only 9% funded at the end of 2018, with an unfunded liability of $65.2 million, according to data from the Illinois Department of Insurance. The police pension was healthier, but still had only 31% of its needed funds and a total pension debt of $39 million.

Rob Schield retired from the city’s fire department last month. He said he’s glad to be out but feeling bad for his former colleagues. He said there were alternatives to cutting firefighters.

“No police or non-essential employees got cut at City Hall,” he said. “Thanks for cutting more hard-working jobs and putting the citizens and the remaining firefighters in even more danger.”

The firehouse to be shuttered at 1700 Central Ave. protects four of the city’s public housing projects. He said only two firefighters were there one recent evening, plus two at another station and three at the third.

He said the city once had nine stations and 120 firefighters. By Nov. 1 there will be two firehouses and 28 firefighters, he said.

He had harsh words for the city government, citing repeated federal prosecutions of corrupt city leaders and decades of fiscal mismanagement leading to inadequate fire equipment and manpower, plus failure to fund pensions. East St. Louis was given a riverboat casino license to rescue it from bankruptcy in the 1990s, along with decades of state financial oversight to control its spending.

East St. Louis has seen decades of population loss and now has over 26,000 residents, with 43% of them living below the poverty line. It has the highest murder rate of any U.S. city.

East St. Louis is the fourth Illinois city to face state funding interception since pension systems were first allowed to seek that remedy in 2018, Pallasch said. The others are Harvey, North Chicago and Chicago.

Illinois has more than $11 billion in pension debt across more than 640 local police and firefighter pension funds outside of Chicago, each with its own local board. Gov. J.B. Pritzker’s task force on pension consolidation recently recommended merging their assets, but not their administration and overhead. Full consolidation of assets and administration could save $21 million a year.

Tally the shortfall for all local systems, including Chicago, and taxpayers are liable for $63 billion in local government pension debt.

Then there is the state pension debt. While the combined pension debt for Illinois’ five statewide funds is officially estimated at nearly $137 billion, Moody’s Investors Service just pegged the debt at $241 billion, using less rosy estimates of future investment returns. That means despite a healthy stock market, each Illinois resident is on the hook for $18,896 in pension debt.

Since 2000, Illinois’ growth in state spending on pensions has led the nation at 501%, while spending on core services that residents value has dropped by one-third. Despite spending more than 25% of the state budget on pensions, they remain only 40% funded — a mark experts see as a point of no return from which the pensions cannot recover without structural changes.

Springfield must make those changes by leading the state toward constitutional pension reform that protects earned benefits while allowing reasonable adjustments to the growth of future, unearned benefits. Short of that, state leaders will keep generating creative schemes to raise taxes, local property taxes will continue to grow as cities cut services and lawyers will send out more letters trying to force cities to pay what their pension funds are owed.
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PEORIA, ILLINOIS

https://www.centralillinoisproud.com...udget/#new_tab
Quote:
Peoria leaders to discuss raising taxes for public safety pensions

Spoiler:
PEORIA, Ill. — Peoria police and fire pension boards are asking the city council to raise property taxes.

In 2019 the fire department received $0.39 for every $100 of property Peorians own; for police, that number was $0.43. Peoria City Manager Patrick Urich says under that budget, the fire department brought in $8,961,479; the police department brought in $8,022,190.

The pension boards will ask the city to raise those numbers on Tuesday. Leaders there hope to bring $11,680,317 into the fire department and $12,741,607 to the police department. By the pension board’s math, that means increasing taxes by a combined $0.19 per $100 of property value.

Urich explains under current law, police, and fire pension funds have to be 90% funded by 2040. If the council approves the pension board’s proposals, a combined $4 million needs to be raised.

Urich says the approval would come down to bringing in the money by raising taxes or cutting $4 million from the budget proposal.

Council members will consider the proposal on Tuesday.


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ILLINOIS

https://www.forbes.com/sites/ebauer/.../#70c334857978
Quote:
Why Does Local Police And Fire Pension Consolidation Matter For Illinois?
Spoiler:
Last week Thursday, the Illinois Pension Consolidation Feasibility Task Force released its report recommending the consolidation of the investment funds for the 650-odd local police and fire pension plans, but declining to propose consolidation of the administration of these plans, merely suggesting that this might be a topic for future consideration, and justifying the retention of local administration by local administrators’ “more nuanced information guiding the prevailing decision to offer certain benefits in unique cases.” More skeptical voices, however, believe the silence on administrative consolidation is to avoid conflict with the folks who make money off the 650 plans, for example, those who profit off of the training of all those administrators.

And, indeed, the local news outlet WCIA reports that

“According to an email leaked to WCIA, a former board member at the Illinois Public Pension Fund Association (IPPFA) is working to raise nearly half a million dollars to hire lobbyists to kill the pension proposal during the fall veto session at the statehouse.”

Today In: Money
And, indeed, the IPPFA’s website includes a call to “Say NO to Illinois Pension Fund Consolidation,” claims that the consolidation plan would cost “$155 million in administrative and legal fees,” and proposes that the state instead should free small pension funds from their existing investment restrictions, a move they say would boost returns by $418 million over 20 years – which, as it turns out, is much smaller than the Task Force’s estimate of $160 million in annual additional returns due to consolidation. What’s more, they claim, by means of developing a worst-case scenario, that a transition to a consolidated pension fund would cost as much as $155 million, assuming at all assets must be liquidated in order to implement the new fund (a questionable claim in the first place), and that market volatility could hypothetically result in losses due to the timing of the sales and the new asset purchases. But the $155 million cost is based on explicit transition costs of $7 - $12 million, and implicit costs in a worst-case scenario of as high as $142 million; the report fails to mention except via a graph, that there is a similar potential of gains due to market volatility. In a bell-curve-shaped fashion, at one end of the curve with 95% likelihood is a transition cost of $155 million, and at the other end is a gain of $125 million. Within a more narrow range of probability, there is a 68% likelihood that transition costs would be between a cost of $85 and a gain of $55 million.

Now, whether the IPPFA turns out to have the necessary political power to put a halt to the pension consolidation, I can’t predict, but, readers, it is a sign of the brokenness of the state of Illinois that local pension funds need to be compelled to take this action, rather than seeking out ways to be better stewards of their taxpayers’ money, in the first place. Not only should this have been a no-brainer, but it should not have taken any sort of state mandate. Why did municipalities and fire protection districts trying to manage their pension costs not seek consolidation years ago?

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Consider the city of Peoria, where it was reproted back in September that property owners would be charged an additional tax specifically to fund pensions. According to the Illinois Policy Institute,

“Over the last decade, Peoria has seen its annual public safety pension costs double to $20 million from $10 million, according to the State-Journal Register. Peoria residents see 95 cents of every property tax dollar for police captured by police pensions, which is projected to increase to 100% of property tax collections next year. Firefighter pensions already capture every property tax dollar intended for fire services.”

And, of course, it should also go without saying this consolidation plan has no impact on the fiscal health of the State of Illinois. Its pension plans continue to be at the bottom of the barrel in terms of funding levels and whatever improvements these local pensions experience, will not impact the state’s balance sheet. However much municipalities and fire protection districts have failed over the years to seek to serve their residents by better-managing their pension funds via consolidation, Gov. Pritzker should hardly receive credit for mandating that they do so when he is not willing to expend political capital to improve funding for those plans which are the state’s, and therefore his responsibility.


https://www.centralillinoisproud.com...lidation-plan/
Quote:
Pension fund managers seek $480k to hire lobbyists to kill pension consolidation plan
Spoiler:
SPRINGFIELD, Ill. (WCIA) — Money managers who invest retirement savings for 649 local police and fire pension funds in cities and towns across the state are mounting a fundraising effort to try and defeat Governor J.B. Pritzker’s proposal to consolidate their smaller funds into two combined funds.

According to an email leaked to WCIA, a former board member at the Illinois Public Pension Fund Association (IPPFA) is working to raise nearly half a million dollars to hire lobbyists to kill the pension proposal during the fall veto session at the statehouse.

“The retention of two or three lobbyist (sic) would be beneficial,” the email said, adding that the estimated “costs for a 12-month engagement would be approximately $480,000.”

Retired Addison police detective Dave Wall sent the fundraising email out to other IPPFA members and investment fund managers with a deadline for them to respond with a commitment to spend on lobbying by this Friday.

Wall founded the Wall Capital Group, an investment firm with locations in Hinsdale and Phoenix that manages more than one billion dollars in public safety pension funds. His firm’s Vice President is Bill Galgan, who is also the Treasurer for the IPPFA’s Board of Directors.

A front page ad on IPPFA’s website warns to “Say NO to Illinois Pension Fund Consolidation,” because it “flushes money down the drain.”

Pritzker predicted consolidation could reap much higher investment returns, citing a Department of Insurance report to claim pooling assets together could yield as much as $2.5 billion in higher returns over the next five years.

“Under the current arrangement, Illinois’ suburban and downstate police and firefighter pension funds are under-performing by nearly one million dollars per day,” Pritzker said. “That’s not just a missed opportunity – that’s a hole these funds are digging deeper every year – and then municipalities have to ask taxpayers to fill the hole.”

WCIA previously cited a report from the Illinois Municipal League that estimated the cost of event and annual training events like it could pile up to eight million dollars. To date, IPPFA has not yet responded to questions about the total cost of admission to their Grand Geneva event, which included a charity golf outing.

Pritzker dismissed the IPPFA as a “special interest” during a news conference last week, saying, “These are the folks who run the junkets.”

“The recent one cost about eight million dollars to the taxpayers to send people to Lake Geneva on a retreat,” Pritzker said. “I realize that this is going to disrupt their business model, but frankly, we have to do what’s best for the taxpayers of the state.”

Last week, during a press conference from Chicago, Pritzker called for organizing the scattered pension funds — each with their own board, trustees, administrative expenses, fees and training costs — into two funds, one for downstate and suburban firefighters and another for downstate and suburban police officers. Put simply, under Pritzker’s plan, the IPPFA would no longer exist.

It’s unclear which lobbyist the fund managers intend to hire to fight back against Pritzker’s plan, but one of the first names on their list could be one of House Speaker Michael Madigan’s closest allies.

State records list Mike Kasper’s law firm, Kasper and Nottage, P.C., among IPPFA’s contract lobbyists. Kasper doubles as Madigan’s election attorney and represents him in several cases.

Reached by phone Thursday afternoon and asked about the lobbying effort to oppose consolidation, Kasper said, “I have no knowledge of that.”

Madigan’s spokesman Steve Brown said Governor Pritzker’s proposal to consolidate the pension plans is “under review right now,” but the Speaker is “waiting to see if all the interested parties can be brought on board.”

Brown acknowledged the IPPFA and police unions are among the interested parties. Both groups have expressed concerns about consolidation. Brown said the speaker “had supported the idea for several years.”

For his part, Governor Pritzker seemed to have some understanding of the thorny history of trying to pass consolidation efforts in a statehouse run by Speaker Madigan.

“For years, Illinoisans have watched their leaders bicker and battle over the prospect of pension consolidation,” Pritzker said last week. “And for years, what little reform came to fruition was eventually thwarted by the money managers, by the luxury out-of-state conferences, the throngs of lobbyists who profit off of taxpayers, and it’s the taxpayers who are forced to pick up the tab.”

David Wall and Wall Capital Group did not immediately respond to requests for comment.


http://ippfa.org/wp-content/uploads/...ation-Ad-1.pdf

https://ippfa.org/new-studies-show-s...-source-ippfa/
Quote:
New studies show simple way to improve local pension funds and warn of consolidation pitfalls
Source: IPPFA
Spoiler:
CHICAGO – Two new studies focusing on police and fire pension systems in Illinois have shown that much is to be gained by easing a key pension system restriction. The studies, performed for the Illinois Public Pension Fund Association (IPPFA), also show that the consolidation of local funds into one large state entity is risky and offers no real benefit to taxpayers.

“These studies tell us that when you ease a single arbitrary restriction on local pension systems, you get the best bang for the buck for taxpayers and retired police and firefighters,” said IPPFA President James McNamee. “They also demonstrate that bigger isn’t always better, and that consolidating local pension funds is risky, may not generate the expected cost savings, and may harm local economies.”

The studies, performed by Anderson Economic Group, LLC of Chicago, examined what would happen if the Illinois General Assembly voted to ease the investment restrictions on local pension funds with less than $10 million in assets. The studies showed that gains for these approximately 228 smallest funds in Illinois would average as much as 1.8 percentage points per year if the restrictions were eased, and this action would increase average annual pension fund returns statewide by at least $418 million over 20 years.

“Higher returns means it won’t cost taxpayers extra to keep these pension funds healthy,” McNamee said. “Expanded investment authority is the least cumbersome and most effective way to ease the local contribution responsibility.”

The easing of investment restrictions will result in near-certain higher returns even when taking into account the higher volatility of riskier assets, the studies said.

The studies also concluded that any move to consolidate all 641 downstate Illinois police and firefighter pension funds into one massive state pension system would be expensive and fraught with risk. Such a consolidation would require that almost all assets from each local fund be liquidated and then re-invested in the larger fund. This move could generate a one-time cost of up to $155 million in commissions, taxes, fees and potential market losses, which would increase the pension funds’ unfunded liability by that amount as well. It would take many years to recoup that cost in the minor administrative savings realized by consolidation.

Consolidation poses a particularly high risk if the transfer occurs during a period of stock market growth and the local pension funds miss out on the resulting gains from their existing investments, the studies found. In addition, economies may suffer when the local banks and asset managers who handle individual pension funds are set aside in favor of larger, out-of-state investment firms that would likely handle the consolidated pension fund.

“There’s also the issue of local control,” McNamee said. “A consolidated fund means community residents have much less input on how their tax dollars are spent.”

Retirement benefits are provided to police officers and firefighters through local pension funds in Illinois. The funds are regulated by state law, but they are managed by local boards of trustees. There are 643 pension funds for police officers and firefighters in Illinois, 641 of them downstate and two in Chicago.

The IPPFA was founded in 1985 as a not-for-profit organization whose mandate was to educate public pension fund trustees. In 2009 the IPPFA became the primary education provider for public pension fund trustees in the state of Illinois, and its members manage more than $18 billion in pension assets.


https://ippfa.org/wp-content/uploads...strictions.pdf

https://ippfa.org/wp-content/uploads...solidation.pdf
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