The only real way to fix the pension crisis once and for all and strike a balance between protecting taxpayers, retirees and vulnerable Illinoisans who rely on government services is with a constitutional amendment to allow for structural pension reform. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. Recently, the Firefighter Pension Investment Fund of Illinois ("FPIF") started the first wave of transfers from firefighters' pension funds on October 1, 2021, despite pending litigation. The Firefighters Pension Investment Fund applauded the court ruling, saying in a statement that it will continue to implement the transition process, which is required to be completed by June 30. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. Tier 2 applied to employees hired on or after January 1, 2011. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. The Civic Federations recently released Inventory of Local Governments in Illinois report identified a total of 8,923 units of local government in Illinois. Pritzker lawsuit. While the governors task force publicly stated the enhancements would cost $14 million to $19 million more per year, this number was not backed up by any public data or methodology to justify it. This is not a part of some grand principle, but tossed in as a miscellaneous item among the text of the oath of office, the authorization of state funding of public transportation, and the requirement of a supermajority for the authorization of branch banking by the General Assembly. Additionally, Tier 2 reduced the final average salary on which a pension is based from the average of the highest four of the last five years of service to the average of the highest eight of the last ten years of service. The quotation referencing $15 million plus interest is misleading, at best.. Protected by Google ReCAPTCHA. Illinois plans to consolidate its 650 police and fire pension funds in the suburbs and downstate. Police accounted for $7.5 billion of the total and firefighters for $5.5 billion, according to the most recent reportfrom the state legislatures Commission on Government Forecasting and Accountability. The Illinois Police Officers Pension Investment Fund said it completed its third tranche of asset transfers on May 2, and that to date 46 plans have transferred more than $1 billion worth of assets to the IPOPIF consolidated fund. Pritzker is certainly overselling the benefits, calling the move a huge bipartisan step, which is concerning given Illinois politicians long history of ignoring the root cause of the pension crisis. That provision compares the employees actual accrued pension benefit with the accrued benefit under a safe harbor formula. The consolidation of downstate police and fire pension fund investment assets continues in earnest. In other words, lawmakers responded to a problem they had not confirmed existed with changes they had not confirmed would fix the problem, without knowing how much the changes would cost. The legislation impairs the exclusivity and rights of the local funds to manage their funds locally and impairs and diminishes their ability to vote and to have their vote count, Daniel Konicek, of Konicek & Dillon which is representing the police funds, said in an interview. Please e-mail[emailprotected]with your query. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. Youre invited to comment at JaneTheActuary.com! Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. Illinois' consolidation of suburban and downstate police firefighter pension fund assets cleared a second legal hurdle but it could take a decision from the Illinois Supreme Court to clear the path for full participation in the plan. I dont 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, which is among the plaintiffs. Total downstate police and fire pension debt is only about 5% of Illinois total public pension debt. Illinois Illinois Police Officers' Pension Investment Fund; . Consolidation was also proposed in Pennsylvania in 2012 and 2018. The governing board is comprised of Mayors and Village Presidents. The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. Research indicates that consolidation can be a lose/win proposition. lawsuit filed by a handful of . InCarbondale, 290% of the citys property tax collections go to pensions. The report, prepared by Chicago-based Anderson Economic. Therefore, legislation that diminishes these benefits will usually be struck down. By collecting data from the largest public pension systems in the state and centralizing it into our new Illinois Public Pensions Database, the Better Government Association aims to bring greater clarity to . Ill. Const. "The Illinois Police Officers Pension Investment Fund (IPOPIF) is pleased that the court has indicated a date on which a written ruling will be issued. For more than a decade, the Civic Federation has strongly supported consolidation of hundreds of police and fire department pension funds across Illinois to improve investment returns and reduce administrative costs. The task force savings estimates of between $160 million and $288 million annually are almost certainly too optimistic. There, the plaintiff joined the pension fund in 1969. B. Pritzker, who signed the bill into law. The practical effect is that many employees will see a boost in their initial pension check on retirement, which serves as the basis for subsequent annual increases. The main distinction between the case at bar and the aforementioned cases, Villa writes, is that those cases involved traditional voters rights claims such as procedural due process, equal protection, constitutional vagueness, improper delegation of legislative authority, and other guarantees found in the United States and Illinois Constitutions.. The multiplier is the percentage of final average salary earned per year of service. 3) Increase final average salary. Illinois Police Officers Pension Investment Fund 1) Review and possible approval of IPOPIF Exhibit A Resolution . The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. Your email address will not be published. Link: https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/. While consolidation cuts down on duplicative administrative costs and pools investment assets for larger returns, downstate police and fire pension debt is only about 5% of total state obligations. If the legislation is upheld, the police funds are expected to move forward with the transfer process during the appeal. In 2019, the Illinois General Assemblypassed a billthat allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposesone for police and one for firefighters. Report of the Illinois Pension Laws Commission 272 (1917). Challenging the amendment directly, plaintiffs also argued it violates the state constitutions takings clause regarding public use of private property. Further updates will be provided as they become available. "The Illinois Police Officer's Pension Investment Fund is pleased that the Illinois Appellate Court . If funds who delayed their transfer wish to transfer after the May 20 court ruling, we will accommodate them as we are able, White said. By cutting down on duplicative administrative costs and. No Reproduction Without Prior Authorizations. With the litigation pending, many police funds have held off on moving their assets and the courts decision will come just a month ahead of the deadline, although funds dont face any punitive actions for missing the deadline. Illinois Passes Police, Fire Pension Consolidation Bill, Illinois Group Wants Municipal Pension Consolidations, New Illinois Law Authorizes $1 Billion in Pension Obligation Bonds and Extends Buyout Option, Tags: court ruling, Firefighters Pension Investment Fund, Illinois, J. The first thing that the Court makes clear in its decision is that the 1970 constitution bound Illinoisians to provide undiminished and unimpaired pensions to every state or local worker ever hired with such a promise, with no room for any changes whatsoever. A legal memo from the Illinois Municipal League had pointed to the pensionable salary cap as a particular area of concern for potential safe harbor violations, because the current salary cap of roughly $115,000 is less than the Social Security wage base of $132,900. In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposesone for police and one for firefighters. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. In December 2019, Gov. However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. This is via the pension protection clause, Article XIII, General Provisions, Section 5, Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.. J.B. Pritzker announced a plan to consolidate pension funds for suburban and downstate police officers and firefighters at the State of Illinois Building in Chicago on Oct. 10, 2019. 2021 CH 55 . B. Pritzker, Lawsuit, Pension Consolidation, Robert Villa, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 /. Shortly thereafter, a member of the Pension Laws Commission sent a follow-up letter to Delegate Green requesting that he read a statement into the convention record expressing the view that the new provision should not be interpreted as reflecting an intent to withdraw from the legislature the authority to make reasonable adjustments or modifications in respect to employee and employer rates of contribution, qualifying service and benefit conditions, and other changes designed to assure the financial stability of pension and retirement funds and that [i]f the provision is interpreted to preclude any legislative changes which may in some incidental way diminish or impair pension benefits it would unnecessarily interfere with a desirable measure of legislative discretion to adopt necessary amendments occasioned by changing economic conditions or other sound reasons. . v. Governor Jay Robert "J.B." Pritzker, et al. 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