Pension consolidation bill gets tentative OK in House committee

A plan to consolidate 649 downstate municipal police and firefighter pension funds into just two unified systems hit an unexpected snag Tuesday, but officials on both sides of the disagreement vowed to continue talking in hopes of reaching an agreement.

Just hours before the bill was scheduled for a hearing in a House committee, the Illinois Municipal League, which has long supported pension fund consolidation, issued a statement saying a last-minute change to the bill forced that organization to withdraw its support.

“I would say we have an agreed bill. It is not this bill,” IML Executive Director Brad Cole told the Personnel and Pensions Committee, using a legislative term that refers to a bill on which all affected parties have agreed.

The bill, Senate Bill 1300, is intended to boost the financial security of the largely-underfunded pension systems. Currently, each one is a separate fund with its own board of trustees and its own administrative staff, including investment managers.

By consolidating them into two funds, supporters say the funds could generate upwards of $1 billion a year in additional earnings because they would have the flexibility to diversify their investments and to invest in more kinds of instruments. Consolidation would also greatly reduce the funds’ combined administrative costs, potentially saving local taxpayers millions of dollars per year.

At issue, Cole said, are four words that were inserted in two places in the 200-page bill dealing with administrative hearings that are held to consider someone’s application for retirement, disability or death benefits – hearings that typically involve the applicant and the board that manages pension benefits.

Where the original bill prohibited either of the two new investment boards from intervening or reviewing actions from those administrative hearings, a last-minute change was made to insert the words, “A third party, including” the investment board, “shall not have the authority to control, alter, or modify, or the ability to review or intervene in” the proceedings or decisions.

According to Cole, “a third party” would include the very municipal government that employed the police officer or firefighter.

“We support pension fund investment consolidation. We support providing relief to taxpayers and their municipal governments who have the liability to fund pension benefits,” Cole said. “However, not frivolously, we do not support excluding taxpayers and their municipal governments from activity at the local level.”

Cole said that with those four words, a city or other municipality that wanted to contest whether someone was entitled to a benefit, or how large the benefit should be, would be barred from taking part in the hearing or even reviewing how the administrative hearing was made.

Rep. Jay Hoffman, D-Swansea, one of the chief co-sponsors of the bill, appeared surprised the controversy had erupted, and he vowed to continue working to reach an agreement.

“It’s a 200-page bill. We’re four words away,” Hoffman said. “I’m confident that we can come together and come to an agreement.”

Dep. Gov. Dan Hynes, who helped negotiate the bill on behalf of Gov. J.B. Pritzker, urged the panel not to delay the bill over a last-minute disagreement.

“This kind of monumental progress cannot and should not be stalled as we continue to work through those remaining issues with various stakeholders,” he said.

“This effort should not be stalled because of this disagreement, I absolutely agree,” Cole replied. “I would only add that it should also not be abused.”

The committee voted 7-3 to advance the bill to the full House. Those who voted no indicated they could not support the bill until the differences are ironed out, and even some who voted yes said they would not support it on final action unless all sides come to an agreement.

The language on consolidation is actually an amendment to a bill that passed previously out of the Senate. That means if it passes the House, it would need only a single vote to concur by the Senate for it to be sent to Pritzker’s desk.