Plan for pension systems delayed

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Plan for pension systems delayed

By Kate Clements, The News-Gazette

May 29, 2003

SPRINGFIELD, Illinois – The governor's budget director said Wednesday that no effort would be made this final week of the legislative session to combine the state's pension systems, but he did not say the idea was off the table permanently.

While the news was welcomed by those who opposed the consolidation, "no one is taking the matter lightly," said James Hacking, executive director of the State Universities Retirement System. "This initiative seems to have more lives than a cat."

The state's teachers' unions and the boards that currently manage the pension funds independently are not in favor of the proposal to collapse the retirement systems for teachers, university employees, state employees, General Assembly members and judges into a single megafund to be managed by the State Board of Investments.

Budget Director John Filan said the governor's office wants to ensure that the $10 billion in pension bonds the state plans to borrow will be smartly invested and managed.

The proposal was part of the talks the governor's office and the budget office are having with the pension fund systems on how best to do that, he said.

The governor's office had argued that since, by law, the state has responsibility for funding existing and future obligations for each pension system, it should have more input into investment decisions.

Hacking said the retirement systems' assets belong to the participants and beneficiaries of the systems and should be managed solely in their interests, while the governor's office wants to operate them with the state's best interests in mind.

Jim Mosman, executive director of the National Council on Teacher Retirement, said about one-third of states have a consolidated retirement system for public employees, and the rest are separate, like Illinois.

"Frankly, it works well both ways," Mosman said.

But he warned that there is usually a "huge upfront cost to doing it that most people don't think about," because the systems often operate on separate software platforms that must be consolidated, and savings are often overestimated.

The governor's office claimed it could save $10 million in professional fees and by taking advantage of economies of scale.

"In terms of the investments, the portfolios, there's really no huge savings that's going to come from having the management under one group," Mosman said.