Illinois has 628 separate police and fire pension funds, each with administrative costs. Ohio, by contrast, has one Ohio Police and Fire Pension Fund.
At a recent talk in Peoria, Sen. Daniel Biss, D-Evanston and gubernatorial candidate, said merging multiple funds would reduce administrative costs and those savings could be translated into higher earnings.
Trustees for these 628 separate funds are required to enroll in training programs. If the number of trustees is reduced, that would mean dramatically fewer training sessions and dramatically lower cost for training paid by each individual fund, Biss said, noting that some of the opposition for merging funds comes from the training organization, the Illinois Public Pension Fund Association.
A spokesman for the association, Dan Ryan, said there are costs for consolidation, estimated at $109 million in 2012 by the Illinois Commission on Government Forecasting & Accountability for rebalancing the combined funds’ investments.
Ryan also said a comparison of fund payouts for disability payments shows that keeping decisions on a local level might produce better control of costs. In Illinois, with more than 600 individually controlled funds, 13.1 percent of payments are for disability while the single merged fund in Ohio has a 28.8 percent payout for disability.
Also skeptical of merging the funds is Pat Devaney, president of the Associated Fire Fighters of Illinois. Devaney said the idea of merging money currently in all the separate funds into one fund and eliminating local control is a no-starter.
“We oppose forfeiture of assets and no input into management” of the merged funds, he said. “If there are ways to maximize investment return and reduce fees to increase revenues, absolutely we’ll talk.”
The Illinois Municipal League recently distributed a position paper putting forth five separate models for consolidating funds.
Devaney said Illinois is not delinquent in payments to police and fire pension funds. The local funds have not been mismanaged, he said. By contrast, the state has mismanaged its responsibility by failing to make contributions to AFSCME, the American Federation of State, County & Municipal Employees pension fund. The unfunded liability is about $130 billion.