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Local pension fiefdoms still fighting for survival

Friday, Dec 3, 2021

* Shruti Singh at Bloomberg

Police and fire pension costs for DeKalb, Illinois, use up about 20% of general fund revenue, up from 10% in 2014, city manager Bill Nicklas said in an interview. The entire property tax levy for the city’s proposed 2022 budget will go toward the two pension funds and some more revenue from sales taxes may be tapped for the retirement system payments, he said.

“Of the options that are out there, consolidation seems to be a good place to begin,” Nicklas said.

But underscoring how difficult this shift is, the DeKalb Police Pension Fund doesn’t agree with city officials and is listed as one of the plaintiffs in the lawsuit.

“I don’t think many of us trust the government of Illinois to handle our money given their history,” said Jim Kayes, president of the DeKalb Police Pension Fund board, in an interview.

Yeah, OK. The reason they’re paying such higher pension costs in DeKalb now is because they let their unfunded liability get to 53 percent.

Also, the above-mentioned lawsuit filed by a handful of local pension fiefdoms against the state’s massive consolidation law seems a bit off

The lawsuit claims that the law takes away the plaintiffs’ local authority and “diminishes and impairs the pension benefits” to which they are entitled. Illinois’ constitution bans any reduction in worker retirement benefits. […]

The state said in a filing in reply that Illinois’s constitution protects the payments that retirees are entitled to, but that doesn’t extend to areas like choosing the entity that manages the retirement plan.

I suppose we’ll see.

- Posted by Rich Miller        

  1. - Dan Johnson - Friday, Dec 3, 21 @ 10:55 am:

    If the state constitution is interpreted to mean retirees are forced to pay higher fees (and get less money ultimately) because it requires every single municipality to run their own tiny pension fund — sorry, two pension funds per municipality each paying their own fees for a tiny pool of retirees - then we really will need to amend the constitution.

    Municipal pension administration consolidation is big progress for retirees and solvency. The state constitution can’t mean that isn’t allowed. The point is to protect pensioneers not rip them off with inflated and unnecessary admin costs.

  2. - ddp76 - Friday, Dec 3, 21 @ 10:57 am:

    I don’t see the lawsuit prevailing given that benefits aren’t being changed. But I don’t disagree that Illinois’ track record for managing (funding) hasn’t been very good. From what I do hear though, the new set up is much more like IMRF where funding is required.

  3. - Flyin' Elvis'-Utah Chapter - Friday, Dec 3, 21 @ 10:58 am:

    If there is a word that strikes more fear and anger in localities than “consolidation”, I haven’t heard it.

  4. - northernwatersports - Friday, Dec 3, 21 @ 11:02 am:

    Seems the local police pension board is as guilty as the State in UNDERFUNDING the pension costs.
    Clearly, local control didn’t help properly manage the funds, or fight the city for the proper funding in past….
    The credit card now needs to be paid, and if you have to tap your reserves, it just means you waited too long to pay the bill.
    Pay now.

  5. - Roman - Friday, Dec 3, 21 @ 11:06 am:

    “Local pension fiefdoms still fighting for survival”

    Yes, that a much better headline than the one Bloomberg went with.

    “We think the state will screw this up” is not a legal argument, it is a political/policy one. The court should toss this posthaste.

  6. - VerySmallRocks - Friday, Dec 3, 21 @ 11:12 am:

    Everyone hates all these local government units in Illinois, but love their own local government unit, especially a whole sacher torte of fiefdoms in one contiguous district (“But I love my local road commission…”)

  7. - Dance Band on the Titanic - Friday, Dec 3, 21 @ 11:12 am:

    I believe the issue of the actual funding of the pensions (which includes the investment of assets) not constituting a diminishment of benefits was settled by the ILSC 25 years ago in McNamee v State.

  8. - Donnie Elgin - Friday, Dec 3, 21 @ 11:14 am:

    Just protectin’ their turf. The local police/fire pensions are often run by investment advisors that have a family or personal relationship with the Board members and fees are an afterthought. Creating an IMRF type fund with billions of Assets under management will drastically reduce fees. It also will satisfy the fiduciary rule that the Boards need to meet.

  9. - Unconventionalwisdom - Friday, Dec 3, 21 @ 11:14 am:

    =Yeah, OK. The reason they’re paying such higher pension costs in DeKalb now is because they let their unfunded liability get to 53 percent.=

    That sums it up. Unfortunately, future taxpayers get the bill. True with pension funds across the nation. SS has its won problems and very soon. And Medicate already has 46% of its money from general funds- the myth of it being self supporting long over.

  10. - Back to the Future - Friday, Dec 3, 21 @ 11:23 am:

    The local control option that was in place has resulted in the downstate public safety workers overall funding being better funded that all of the other public pension systems except for one system.
    As to the current consolidated funds, I think it is fair to look at the effect that the Brad Cole/Pritzker designed approach had on the representation of public safety folks and taxpayers.
    In the past local boards across the state had lots of black, Latino snd women members.
    Looking at the “outcome” of the process Pritzker developed we find we have two boards with 18 total members. The Fire Board has no blacks. Latinos or Women. The Police Board has no Blacks, Latinos and one women.
    Diversity is important to success in a State like Illinois and frankly, in 2021, their is something really wrong with a culture and process that creates Boards that will have oversight over billions of taxpayer and employee dollars that excludes Bjscks, Latinos and Women.

  11. - NIU Grad - Friday, Dec 3, 21 @ 11:28 am:

    Good to see DeKalb getting some attention!

    Maybe one day we’ll have good news to share…

  12. - Anyone Remember - Friday, Dec 3, 21 @ 11:34 am:

    ===If there is a word that strikes more fear and anger in localities than “consolidation”, I haven’t heard it.===

    The only thing to surpass it is when you add two words and get the phrase “school district consolidation” …

  13. - NonAFSCMEStateEmployeeFromChatham - Friday, Dec 3, 21 @ 11:38 am:

    ==love their own local government unit, especially a whole sacher torte of fiefdoms in one contiguous district==

    Or in Springfield, your donut hole communities within city limits (Grandview, Jerome, Leland Grove, Southern View).

  14. - Back to the Future - Friday, Dec 3, 21 @ 12:25 pm:

    Not surprised that not one dime has been transferred to the State Board by locally operating Police Pension Funds.
    As to the merits of the lawsuit, based on the diminished value of each police officers vote in making decisions on their contributions, I would think the law change would be found to be unconstitutional at the circuit court level before the end of the year.

  15. - ddp76 - Friday, Dec 3, 21 @ 12:27 pm:

    “I believe the issue of the actual funding of the pensions (which includes the investment of assets) not constituting a diminishment of benefits was settled by the ILSC 25 years ago in McNamee v State.”

    McNamee lost that case, but he wasn’t wrong. He was just ahead of his time?

  16. - Back to the Future - Friday, Dec 3, 21 @ 12:43 pm:

    A motion to Dismiss by Pritzker arguing the “benefit” point was denied by the Circuit Court Judge.
    They currently have a right to vote on controlling their local investments. It seems the right to vote is a benefit that they currently have and the issue of diminishing benefits regarding public pension funds has already been ruled on by our Supreme Court.
    The amount of the tax levied for pensions is set by elected local units of government after a recommendation of the local police pension fund trustees consistent with investment projections, disability and retirement projections made by an actuary- - that tax levy determination has been moved to the state boards. The right to vote on tax levies to fund the pension trust a benefit is also an interesting question.
    Perhaps some may say the right to vote is not a benefit, but again the Judge in the case denied a Motion to Dismiss based on that idea.

  17. - here we go - Friday, Dec 3, 21 @ 1:04 pm:

    Enough already! Please let the 2019 Pritzker bill move forward asap.
    Municipal governments are bleeding pension money, unable to pay for current public safety bills. As a Democrat I’m for reform and support moving forward with consolidating the funds. It’s an important first step.

  18. - Homebody - Friday, Dec 3, 21 @ 1:52 pm:

    Illinois’ biggest problem as far as I can tell is how fractured it is into a million little fiefdoms. Too many pension funds, too many governing bodies, too many taxing entities.

    It is all wildly inefficient, and gives too many opportunities for a single person or group to prevent progress in any way.

    At a micro level, it is like the aldermanic prerogative stuff in Chicago. Everything is cut up so small, there are a million of hoops to jump through and numerous palms to grease.

  19. - cover - Friday, Dec 3, 21 @ 2:25 pm:

    This upcoming spring, the General Assembly should do what I was hoping it would have done when the police/fire pension consolidation bill was passed - also abolish the local boards.

    Changing what entity is in charge of investments has absolutely no bearing on the pension benefit structure. A police officer or firefighter still qualifies for the exact same benefits whether it’s a local board or a state board running the show.

  20. - Vader - Friday, Dec 3, 21 @ 2:30 pm:

    Rhetorical question - Do any of the people opposing investment consolidation invest their own money in mutual funds? This is basically the same thing. You can earn much better returns with much lower fees by having a bigger pool of money to invest. Those opposing this common sense improvement are only trying to protect the perks from their pals the investment advisors. The lawsuit is ridiculous since their pension benefits are not affected by this change. They are still guaranteed the same benefits they had before the law was passed. And since their employee contribution doesn’t go up if returns don’t meet expectations, the argument that their benefits have been diminished has no weight.

  21. - Annonin' - Friday, Dec 3, 21 @ 2:40 pm:

    Mr.Ms DonJohnson
    “then we really will need to amend the constitution.”
    To do what? If a court rules this is an impairment what does a constitution for the existing workforce, retirees, etc. Perhaps you get something on new hires, but that is microscopic.
    All hands should remember this probably was the simplest change to make, took ten+ year. Now it appears to be teetering.

  22. - Back to the Future - Friday, Dec 3, 21 @ 2:57 pm:

    Thinking maybe we might be a bit too hard on DeKalb.
    Looking at the City of Dekalk Illinois Municipal Compliance report on page 2 you will see a funding level of 48.04%. The appointed Pritzker Fire Board hired the Former Director and Consultant of the State Board of Investments that had a significantly lower funding level.
    If you skip the Pritzker spin and look at the facts, no one should be surprised that the Dekalb Firefighters don’t want the Pritzker appointed Fire Board being in control of their money.

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