Investigations
From Skepticism to Savings: Suburban Pension Consolidation Helps Ease Burden for Illinois Taxpayers
The sweeping overhaul of Illinois police and firefighter pensions — once mired in lawsuits and distrust — is starting to show some positive returns.
Records obtained by WTTW News reveal consolidation efforts are boosting funding and easing the financial strain on communities long burdened by rising pension costs.
It isn’t a cure-all for local taxpayers, but it’s helping keep local public safety funds afloat. Reports show decreased operating costs, and funding around the state has improved for local pensions.
Signed by Gov. JB Pritzker in 2019, the Illinois law sought to increase investing options for local police and fire departments outside Chicago, to decrease the cost of investment advising and to strengthen pension security.
“In investing, scale really helps,” William Atwood, executive director of the Illinois Firefighters’ Pension Investment Fund, said. “Putting this all in one place at a large scale allows us to get better returns, and then drive costs down.”
Before this legislation, each fund made investment decisions individually. Local funds began transferring assets to the new consolidated managers in 2021.
Other obstacles to pension reform in Illinois remain, including potential proposals to adjust Tier 2 benefits. Tier 2 employees, hired after those in Tier 1, require a higher retirement age and have a lower salary cap.
There has also been recent turmoil in the markets. But in the world of pensions, recent funding momentum appears positive.
The law merged local public safety management into two statewide investment funds, the Illinois Police Officers’ Pension Investment Fund for Article 3 pensions and the Illinois Firefighters’ Pension Investment Fund for those under Article 4.
Not every local fund had to consolidate. Some small municipalities weren’t required to join because the plans pay retirement benefits as they go or lack investments.
There is still great variation in the funding levels of individual pensions, and managing the assets of large departments in places like Aurora and Naperville is very different from managing the smallest funds, which might be as small as a volunteer fire department with one paid chief.
All of the qualifying fire pensions with investment assets have been consolidated into the fire investment fund. All but two required to transfer assets into the consolidated fund have done so, according to a spokesperson from the police fund. The state funds manage $25 billion in assets for about 650 departments and fire protection districts.
‘It Lets Some of the Air out of the Balloon’
Almost every municipality across the state has made decisions about taxes and services related to escalating pension costs in recent years.
“Public safety is one of the biggest operating expenses borne by most communities. It varies from town to town, but pensions make up a big part of that public safety expense,” Atwood said.
The communities most affected by increasing costs are those with fewer resources. Improved funding becomes possible when new options with higher returns are made available to pensions previously excluded from such investments.
“That certainly doesn’t solve the problem, but it lets some of the air out of the balloon,” Atwood said.
As liabilities have increased across Illinois, pressure also grew to fund them.
One important way for the new law to reduce costs was by centralizing the financial advice and fee structure for each retirement fund. Local police and fire boards previously hired outside financial professionals to guide investment decisions and issue reports.
Records from the fire investment fund show major cost reductions at both the aggregate and individual levels following consolidation.
Operating costs dropped from 57 basis points pre-consolidation to 12.3 basis points for the fire investment fund, saving $127 million over three years, according to Atwood.
Looking at the past fiscal year, individual pensions also showed steep reductions in annual fees. A fund with $211 million in assets reduced fees by 72%, from about $417,000 to $116,000.
Another saved more than $100,000, an 83% reduction in fees. A third saved $175,000, a drop of 80%.
Pooling assets cut costs through better negotiating power and economies of scale, and will benefit the individual funds, according to Richard White, executive director of the police investment fund.
The consolidated fund also had better returns than before, generating an additional $255 million from management under the fire investment fund, Atwood said.
The new law established a minimum required statutory contribution, which will ensure the municipalities fund the pension contribution using actuarial methods required by the Illinois pension code.
“The funding level in aggregate of Article 4 pension funds has improved pretty substantially since 2020,” Atwood said.
Four years into consolidated management, funding for fire pensions improved 11% to 67.13%, according to records from the Illinois Department of Insurance. Police pensions were more than 63% funded in aggregate, improving about 8% over a similar time period, records show.
Atwood doesn’t expect the overall figure to improve this drastically every five years, but he remains optimistic that continued performance like this might drive individual funds closer to state targets.
“If you can do this over 20 years, you know that 67% funding is going to get much closer to 90 or 95%,” Atwood said.
The returns for the fire and police funds were above the established benchmark for each fund in the past fiscal year, records show.
‘Somewhere Between Skepticism and Hostility’
These financial results followed a rocky rollout.
Lawsuits slowed the consolidation process after the funds were established. There was reluctance by many to make the change, but the resistance thawed, Atwood said.
A court case in Kane County Circuit was decided in favor of the statute, and won on appeal to the Illinois Supreme Court.
“The response through much of the firefighting community was somewhere between skepticism and hostility,” Atwood said.
While many hesitated, the local firefighter fund managers wanted to play by the rules. This was a typical conversation with firefighters and leaders, according to Atwood.
“It’s the law,” Atwood said. “So what do we have to do to make this work?”
Some were afraid that pensions with poor financing would pull the value of other funds down. Consolidation in Illinois is operated like a mutual fund with each pension controlling its share, preventing impact on individual funds.
Some funds waited until the lawsuits were resolved to transfer investments. Communities around Illinois shared concern, according to Lisa Petersen, director of finance for the village of Schaumburg. She described consternation by some at giving up local control of investments.
“Early on there was skepticism by the local pension boards as the trustees feared their investments were being turned over to the state of Illinois,” Petersen said.
Petersen said she supported the change, and hopes to see continued positive returns.
Schaumburg has transferred assets into the pooled funds. The village’s police and fire pensions were funded at 54.2% and 58.2% in 2024, roughly unchanged from 2021, records show, despite paying annual contributions to levels required by the consolidated funds’ actuaries.
While she agrees the investment advisor totals decreased, new administrative costs from the measure offset those savings, Petersen said. The individual funds still pay for accounting related to the village’s annual financial reports, and spend time and money on services including benefit administration, disability hearings and actuarial services.
Documents show about a $16,000 fee for outside financial management for the police pension in the 2024 fiscal year, when Schaumburg kept advisors on following its consolidation of assets. The village spent about $78,000 in 2023, and recorded no outside investor fees in 2025, records show.
The public safety funds in Schaumburg adopted a more passive investing approach that lowered costs before beginning the pooled investing, Petersen said.
Small funds should benefit more than the larger ones because of new options through the consolidated investments, according to Petersen. Previously, funds with lower levels of assets were limited in the percentage of equities they could invest in, which limited both risk and potential returns.
Schaumburg is in the top 5% of Illinois public safety pensions by market value of assets, reports show. Its fire and police funds are top 10 in terms of total retirees.
According to Petersen, the new law is not a “silver bullet.” She emphasized the need for continued reform and realistic expectations.
Petersen said the earnings benchmarks set by the fire and police funds could be a little more aggressive. But it’s important to think of investment and management with long-term goals in mind.
“It’s not like we’re going to shut down these pension plans in 20 years,” Petersen said. “We want to take some risk, but these are funds that live forever.”
Individual municipalities including Schaumburg often face decisions to increase revenue or decrease services as pension obligations climb.
The property tax levy for Schaumburg is $19.5 million per year, Petersen said. The levy has been flat since 2019. Recent budget documents estimate that without reforms, property tax revenue will be entirely consumed by pension costs as early as the 2027 fiscal year.
“When we get to that point, we would talk about increasing revenues,” Petersen said. “Whether that revenue is the property tax levy or other types of revenue, I don’t see us cutting services for public safety.”
Contact Jared Rutecki: @JaredRutecki | [email protected]
