The proposal claims the state could save $50 million to $80 million a year on administrative costs and management fees by merging the investment duties of five government employee retirement systems, according to the Chicago Tribune. The proposal also includes ethics measures that would set higher standards and stricter regulations for board members.
Under the plan, the individual boards overseeing more than $70 billion in pension funds for teachers, lawmakers, judges, state workers, and university employees would continue to work with beneficiaries, but investments would be made by a new board called the Illinois Public Employees’ Retirement System, according to the news report.
The treasurer also proposes to ban board members, their spouses, and employees from accepting finders fees and contributing to political campaigns. Members would be required to have at least five years of investment experience and would be prohibited from running for elected office.
Lawmakers say they welcome the ethics reforms but not so much the idea of combining the investments.
Governor Rod Blagojevich’s administration tried to consolidate state pension boards during his first year in office, but federal prosecutors allege campaign fundraiser Antoin “Tony” Rezko (See Blagojevich Backer Charged in Pension Fund Kickback Scheme) went to the governor to block the idea at the request of convicted political insider Stuart Levine and recently indicted Republican power broker William Cellini (See Former Illinois TRS Trustee Pleads Guilty to Kickback Charges ).
The news report said both feared combining the pension panels would limit their ability to steer state business to certain companies, including a real estate investment firm run by Cellini and his family members. Levine would use his board position to steer investments to firms preferred by Rezko, prosecutors have said.
The state’s Teachers’ Retirement System said on Monday it is opposed to the proposal because transferring assets in a down market could create significant losses and the consolidation would threaten further growth of its program to maintain a large stable of Emerging Managers — younger investment firms that are often women and minority-owned (See Illinois TRS Rejects Combining Pensions Investment Boards ).
More information about the Giannoulias proposal is available here .