State Treasurer Alexi Giannoulias and a team of watchdogs didn’t mince words on Monday when they lashed out at political insiders who have fed off the complexities of the state’s pension systems for years. Along with some good-government allies, the treasurer announced that he’s reviving an old plan for curbing abuse: consolidating the five-fund system into a single, more transparent fund.
Giannoulias is still fishing around for a legislative sponsor who will bring his Illinois Public Employees Retirement System (IPERS) proposal to the General Assembly. A similar 2002 initiative never made it that far. For that, the treasurer blames Gov. Rod Blagojevich. Watch the video:
GIANNOULIAS: Gov. Blagojevich allowed convicted political insiders to thwart the plan so they could protect their crooked schemes … The cost of this corruption can be measured in millions of dollars in unnecessary costs that the states pension systems has spent in the past five years so that corrupt political insiders could protect their criminal behavior.
One by one, those insiders -- Stuart Levine, Tony Rezko, and William Cellini -- have been indicted for cooking up pay-to-play schemes, some of which plundered the hard-earned retirement money of teachers and other government employees.
Creating a combined $72 billion fund under IPERS would cut administrative costs by as much as $82 million a year, Giannoulias estimates. His office is still crunching the numbers on how that money could plug a woefully underfunded pension system. “It’s not going to fill the gap,” treasurer spokeswoman Kati Phillips tells us. “But it’s a step in the right direction.”
By improving oversight and cutting out the insider deals, Giannoulias says the fund managers could get away from decision-making processes like this:
GIANNOULIAS: We have influential board members who made decisions not based on what will get the state the best rate of return but who knows who on what boards and how they can convince money mangers to contribute to campaign accounts of elected officials.
“When it comes to ethics and transparency, we support [the treasurer’s] goals,” American Federation of State, County and Municipal Employees (AFSCME) Council 31 spokesman Anders Lindall tells us. “Whether this is the way to get there, we’re not sure yet.”
For AFSCME members who have a stake in three of the state’s five pension funds, the devil will be in the legislative details. Retaining a voting member on the board would be crucial in earning the union’s endorsement, according to Lindall. Investment security is the other sticking point, he says.
The treasurer’s office anticipates that it could improve returns through a consolidated pension fund by combining each of the fund’s best investment strategies.
Sun-Times personal finance columnist Terry Savage sums up how the 271,000 invested pensioners would be impacted:
Combining them would not only save administrative costs and fees, but the plan would also bring much-needed ethical reform to the management of the nearly $70 billion invested through these funds. [...]
Consolidating these powerful and shadowy boards won’t guarantee investment profits, but it will save a small fortune annually on costs.
Still, not everyone’s buying the pitch. The Teachers Retirement System has come out in opposition. So has Sen. Jeff Schoenberg (D-Evanston). Giannoulias’s office is looking for other feedback via e-mail: ilpersnow@treasurer.state.il.us.
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