State’s new Firefighters Pension Investment Fund will pinch pockets of Quincy firefighters

QUINCY — The members of Quincy Firefighters Pension Fund Board learned at a Monday meeting that the pension fund portfolio had a total value of $44,226,832, a 24.4 percent rate of return for the last 12 months and an 11.3 percent rate of return for the past five years.

That’s the good news.

But the board also learned about the steps that must be taken and the deadlines for those steps to happen to transfer those local assets into the newly created Firefighters Pension Investment Fund, which has informed firefighters across the state that it hopes to have a 6.5 percent rate of return.

“The idea behind (the creation of the FPIF) is so everybody gets a greater return,” City Treasurer Linda Moore said. “But Quincy isn’t.”

Illinois Gov. J.B. Pritzker signed into law in December 2019 the consolidation of 649 downstate and suburban police and fire pension plans into two new pension funds. A fact sheet from the Illinois Municipal League indicated the police officers’ fund will manage an estimated $8.7 billion in assets, while the firefighters’ fund will manage an estimated $6.3 billion in assets.

The bill was the result of findings of a Pension Consolidation Feasibility Task Force that Pritzker created in 2019. The task force reported that consolidating the assets of the plans would generate investment returns far beyond the annualized 2 percent its report said the plans achieved in the past 10 years because of their small sizes. 

Of the total 649 plans, 424 of them (65.3 percent) have less than $20 million in assets each.

The transfer of investment authority for the municipal pension funds’ assets to the new pension funds for police officers and firefighters must take place no later than June 30, 2022.

“The concept behind (the law) is that those pension funds that are struggling, this would help them because they could then invest all the assets together and get a greater return on their money,” Moore said. “You can make more money on billions of dollars than you can on millions of dollars, right?”

Moore believes the state should have consolidated all of the plans that have less than $10 million in assets into one fund, rather than force a pension fund the size of Quincy’s to join.

William Atwood, interim executive director of the FPIF, said state statutes do not allow for local pension funds to opt out from the state pension plan.

“The legislature passed the law, the governor signed it into law, and our job is just to execute the law,” Atwood said. “So as to why or how this law happened, that’s sort of above my paygrade.” 

Moore said the current state formula calls for funds the size of Quincy’s to invest 65 percent of its money into equities and 35 percent into bonds or fixed assets. Pension funds with less than $10 million in assets are limited to investing 35 percent in equities.

“For a community like Quincy, we just don’t see any benefit (to joining the newly created fund),” Moore said. “If they had structured it to where they were first going to consolidate all the small funds, get them a greater return and then start taking in some of the bigger funds, maybe it would be more palatable. 

“(The state), of course, wants to start with the bigger funds so they can show bigger impact.”

Moore also said the Quincy fund will be paying more in state fees than it is now.

“There’s not much we can do about it. Absolutely nothing,” she said. “Not enough facts were put on the table when they made the decision to do this. Theoretically, it makes sense. But when you start digging into the details, it doesn’t. It’s one more political decision instead of making a business decision.”