The state of Illinois has consolidated 649 downstate and suburban plans into two statewide funds.

Gov. JB Pritzker signed Senate Bill 1300 into law on Wednesday (Dec. 18, 2019). The new law goes into effect immediately.

The new pension funds will leverage their collective buying power of $15 billion in assets — $8.7 billion in the police fund and $6.3 billion in the fire fund — to increase investment returns and lower management costs.

State officials claim the consolidation will lower the pressure on local property taxes because of estimated increases in returns of $820 million to $2.5 billion over the next five years.

The Illinois Pension Consolidation Feasibility Task Force — led by co-chairs former CBOE Chairman and CEO Bill Brodsky, AFFI President Pat Devaney and former Senate Republican Leader Christine Radogno — recommended the legislation after months of deliberation.

Senate Bill 1300 passed in the fall veto session with strong bipartisan majorities and the support of the Associated Fire Fighters of Illinois, the Illinois Fraternal Order of Police, the Illinois Municipal League and the countless cities, towns and villages across the state they represent.

“The No. 1 budget issue legislators have been dealing with for decades is the pension crisis,” said Sen. Cristina Castro (D-Elgin), the Senate sponsor of the measure. “We got a victory today with this consolidation plan, but there’s still a lot of work to be done.”

Radogno said larger pooled investments enjoy lower fees and have more opportunity to invest in higher earning investments.

“Consolidation of Illinois’ 650 funds into two funds will allow the administrative and fee savings and better returns to be plowed back into the funds for the benefit of retirees and taxpayers,” she said.

Local pension boards will continue to administer pension benefits, and no assets or liabilities will be shifted from one local pension plan to another.

The new law also brings Tier 2 pensions into compliance to avoid future additional liabilities, which is estimated to cost $70 million to $95 million while projected investment gains can generate an additional $820 million to $2.5 billion.

SOURCE: state of Illinois news release