I’m a trustee of a “downstate” police fund in Illinois which is not part of the recently approved (but not signed) legislation that improves Chicago Police and Fire pensions. I’m torn on whether or not this legislation is a good idea. Yes, there are costs, and the two Chicago public safety funds are among the worst funded in the country. But the mess Illinois has created by having separate pension Articles for public safety employees is the root of the problem. Articles 3-4-5-6 cover in reverse order Chicago Fire, Chicago Police, non-Chicago municipal fire and non-Chicago municipal police. Under Tier 1 the non-Chicago benefits have always been better. Explain that!
Under Tier 2 adopted in 2011 the benefits were the same. Then in 2019, to gain support from the unions for the plan to consolidate investment management for the small non-Chicago funds (a good idea that has worked well), the Article 3-4 groups got Tier 2 improvements, leaving Chicago Police and Fire behind. The new legislation essentially catches them up to their non-Chicago cohorts.
Hi Dan -- I assume the non-Chicago benefits have been better because the non-Chicago places have actually been up to contributing to support those benefits. It's like asking why those of us in Northern Westchester County have higher tax revenue per resident than the Bronx does. Uh, we're richer. Duh.
(I don't know this for sure, of course -- but perhaps in the hobnobbing amongst the politicians and the public union leaders, they decided they wanted more money up front, and traded for that and less money for later in the pensions... definitely with MEABF, they weren't contributing like they cared that pensions would get paid later.)
Here is the most recent report I could find from the CGFA:
The funded ratio from the downstate plans in aggregate was approximately 65% for the most recent reporting date, but the report reveals that the distribution of funded ratios differs significantly by plan size — I find that unsurprising.
Some of that was due to investment performance variability (the smaller funds tended to be more conservative, and had lower, less volatile returns). But I wonder that some had lower contribution rates, from a variety of reasons... not recently, but in the past.
Trying to climb out of a pension debt hole is much easier from a 65% fundedness than from a 20% fundedness (and it will be a lower percentage once the liability grows with the benefit boost.)
"They're like a virus, infecting a host, moving to a healthy one, then infecting that one." This is what my sister in Florida has been complaining about!
Mary Pat:
I’m a trustee of a “downstate” police fund in Illinois which is not part of the recently approved (but not signed) legislation that improves Chicago Police and Fire pensions. I’m torn on whether or not this legislation is a good idea. Yes, there are costs, and the two Chicago public safety funds are among the worst funded in the country. But the mess Illinois has created by having separate pension Articles for public safety employees is the root of the problem. Articles 3-4-5-6 cover in reverse order Chicago Fire, Chicago Police, non-Chicago municipal fire and non-Chicago municipal police. Under Tier 1 the non-Chicago benefits have always been better. Explain that!
Under Tier 2 adopted in 2011 the benefits were the same. Then in 2019, to gain support from the unions for the plan to consolidate investment management for the small non-Chicago funds (a good idea that has worked well), the Article 3-4 groups got Tier 2 improvements, leaving Chicago Police and Fire behind. The new legislation essentially catches them up to their non-Chicago cohorts.
So that’s the environment we are in. A mess.
Thanks. Dan,
Hi Dan -- I assume the non-Chicago benefits have been better because the non-Chicago places have actually been up to contributing to support those benefits. It's like asking why those of us in Northern Westchester County have higher tax revenue per resident than the Bronx does. Uh, we're richer. Duh.
(I don't know this for sure, of course -- but perhaps in the hobnobbing amongst the politicians and the public union leaders, they decided they wanted more money up front, and traded for that and less money for later in the pensions... definitely with MEABF, they weren't contributing like they cared that pensions would get paid later.)
Here is the most recent report I could find from the CGFA:
https://cgfa.ilga.gov/Upload/2023FinancialConditionDownstatePoliceandFire.pdf
The funded ratio from the downstate plans in aggregate was approximately 65% for the most recent reporting date, but the report reveals that the distribution of funded ratios differs significantly by plan size — I find that unsurprising.
Some of that was due to investment performance variability (the smaller funds tended to be more conservative, and had lower, less volatile returns). But I wonder that some had lower contribution rates, from a variety of reasons... not recently, but in the past.
Trying to climb out of a pension debt hole is much easier from a 65% fundedness than from a 20% fundedness (and it will be a lower percentage once the liability grows with the benefit boost.)
"They're like a virus, infecting a host, moving to a healthy one, then infecting that one." This is what my sister in Florida has been complaining about!
Thanks especially for the graphs. As in Margin Call, "the numbers don't lie".
I keep wondering when the financing comes unglued.
So glad I left years ago.