Springfield nears pension deal for downstate cops, firefighters

May 21, 2014

File/Illinois.gov
State Sen. Terry Link, D-Waukegan

A key state lawmaker is verging on a deal aimed at stabilizing hundreds of troubled pension funds for police and firefighters across Illinois, though the plan would avoid the sort of money-saving retirement benefit cuts that many mayors have been clamoring for, WBEZ has learned.

After weeks of talks with police and fire pension fund representatives and municipal officials, State Sen. Terry Link, D-Waukegan, zeroed in this week on several key changes to the more than 600 police and firefighter pension funds in the suburbs and downstate, according to sources with direct knowledge of his proposals.

The changes would ease restrictions on how pension funds invest their money, and even out the makeup of their governing boards, but would not slash benefits, increase retirement ages or require cops and firefighters to contribute more toward their retirement, the sources say.

“Those have always been topics that have been there for a long time,” Link told WBEZ on Wednesday afternoon. “I think that we’re coming closer to resolving the little bit of differences that people have on it. So that’s probably what you’ll be seeing fairly soon.”

Link also wants a five-year moratorium on changes to the pension law without both parties’ consent, according to the sources. That could anger mayors and municipal groups, who for years have been asking for more sweeping reforms to reduce their state-mandated pension contributions for cops and firefighters outside of Chicago.

Link said suggested his proposals were not final, but he did not say whether he’d introduce a bill before the General Assembly adjourns its spring session at the end of next week.

Altogether, the pension funds for cops and firefighters outside of Chicago are projected to have just about half the money they’ll need to pay out to retirees, and some are already teetering on insolvency. As of 2012, they had an aggregate of about $8.4 billion in unfunded liabilities.

One proposal Link outlined during a closed-door meeting earlier this week would grant pension funds wider latitude in how they can invest their money. Illinois pension law currently restricts how much money pension funds can pour into certain types of investments - such as stocks - with smaller pension funds facing tighter restrictions, while larger ones are free to take more risks. Critics say this has hamstrung police and fire funds that might otherwise have seen bigger investment returns.

Another proposal would change the makeup of the hundreds of five-member boards that govern police and fire pension funds outside of Chicago. Right now, two members are appointed by each municipality, with two elected from the ranks of working cops and firefighters and one retiree. Municipal groups argue that leaves them in the minority during key pension fund votes. According to sources, Link wants to increase the boards to six members - three appointed by the municipality and three chosen by public safety workers - possibly with a seventh member chosen by the whole group.

A third idea would allow smaller pension funds to pool their assets and invest them together. This falls far short of the mayors’ call to consolidate Illinois’ hundreds of discrete pension fund into a single entity, similar to the fund for municipal workers around the state. But backers say it would provide more stability for funds with less money to invest.

Link’s proposed moratorium on further pension changes could be a tough sell. It would mean cops and firefighters wouldn’t be able to win the sort of benefit enhancements that mayors have blamed for their public safety pension woes. But it also means mayors and municipal groups wouldn’t be able to fight for more sweeping reforms - with bigger savings - in the near future.

A coalition of nearly 100 mayors and municipal interest groups is calling for a reduction in the annual retirement benefit increases downstate cops and firefighters currently receive. They also want to raise the retirement age, force workers to contribute more money and consolidate Illinois’ more than 600 funds to save on administration costs.

Mayors around Illinois have seen their pension costs steadily rise, while in many cases, the health of the funds has continued to decline. They blame what they call “pension sweeteners” - that is, benefit increases approved by state lawmakers - for rising costs that are squeezing municipal budgets around the state.

Police and fire unions, meanwhile, argue towns could have budgeted for the ballooning pension costs, thanks to a funding scheme approved by state lawmakers decades ago. And they only have to wait out the clock: Starting in 2015, the state can begin intercepting grant money from towns that don’t properly fund their pensions.

For his part, Link has suggested he will not impose the sort of scaled-back retirement benefits that lawmakers approved for employees of the state of Illinois and the city of Chicago. Unions argue those cuts violate a part of the state constitution that says benefits “shall not be diminished or impaired,” and the state pension bill has prompted several legal challenges.

“I think it will do the purpose that we’re all looking for, and that’s to give the stability in the system, plus to give [an] opportunity [for pension funds] to make a better investment and make more money on their return,” Link said Wednesday. “And I think that this is something that everybody agrees on.”

Tony Arnold contributed reporting from Springfield. Alex Keefe is political reporter at WBEZ. You can follow him on Twitter and Google+.