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Ted talked with Quaid of the WTAD News Round Table about two of Gov. J.B. Pritzker’s big announcements this week: the release of his state economic development plan and the release of his pension consolidation task force’s recommendations.

Some highlights from the interview:

“The real problem with Pritzker’s economic development plan is that it puts the cart before the horse. The foundation of this state is broken. You can talk all about building a better workforce and a strong economy, but unless you fix that foundation it’s all a house of cards …A big part of fixing that foundation means reforming pensions, which brings us to the recommendations of Pritzker’s pension consolidation task force.”

“The task force’s suggestion to combine the investments of Illinois’ 650 local police and fire pension funds makes sense. If you can make 1-2 percent more on your investments and save on fees, you should do it. But don’t go so far as to call it a monumental action. It doesn’t fix the pension problem, it doesn’t get rid of all those 650 pension funds. It doesn’t free cities from overbearing state control.”

“The public shouldn’t get a warm feeling about this. If anything, they should be worried that consolidation will deflate pressure to enact real reforms, because the politicians and unions are going to act as if they’ve really done something – and they haven’t.”

“And it’s naive to think that just because we earn a little bit more interest on our investments, that the savings will end up with the taxpayer. Instead it’s likely to go straight to the union coffers.”

Read Wirepoints critique of the consolidation recommendation: Consolidation of Illinois police and fire pensions: a good idea with limited impact and many risks

Interview starts at 9:25

 

To read more about Illinois downstate pension crisis and the solutions 

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Rick

Consolidation is not fair to the funds that have been somewhat responsible. If you are dumping it all together the badly run funds get a good deal and the good funds get a bad deal because they have to uphold the bad ones. Unless you make the ability to withdrawal also based on the original health of each fund. You cant just “average” a fund into being healthy by combining it with healthier funds. Maybe I just dont understand what they are proposing. But eventually it will come to this. Maybe they are consolidating just the assets today but in… Read more »

nixit

I don’t think they’re consolidating the liabilities at this point, just the pension assets. So those grossly under-funded pensions will remain grossly under-funded, but, in theory, their pension investments will yield better returns.

Astonished

I never see a dollars-and-cents discussion of what the IL pension systems are paying their fund managers (as a percentage of assets under management.) My guess is that there’s a phenomenal amount of profiteering there.

Nothing that would move the needle on the crisis.Yes, there are some well-paid folks in there, but most of them are pretty sophisticated and they come at a high price, in line with other states. There has been a persistent problem, however, with politically connected managers and abusers of minority programs.

riverbender

I challenge their records compared to index investing over their tenure in office and don’t forget to include brokerage commissions in the comparison because index etfs can be bought commission free at brokerages today. I wonder if their is a way to isolate their performance to make a comparison like this?

Freddy

Ballotpedia has data but only for 2012..Just check Pension Management fees by state. Like I mentioned in another thread Illinois fees are 12 times higher than Alabama asset adjusted These fees diminish total assets but as long as taxpayers are on the hook the unions don’t care. $1 Bil in fees every 3 yrs. Calper’s in Ca are in the process of reducing fees by 1/2. Brought this up to my local state Rep and went nowhere in Springfield but at least it was brought up. Between fees and Tier 1 retirees before 2010 they are draining the trough dry.

Willowglen

Yes, but I think commentators like Rick are worried what this program will morph into, especially since it doesn’t address the underlying problems. I recognize the difficulty of speculating but I think it is informed specula given the state’s track record.