CUED
Center
for Urban Economic Development
University of Illinois at Chicago
The Stevenson Strategy to Reform State Regulation of Pension Funds
Project Number: 168
Report Date:
Author(s):
Increasingly, a prime source of investment funds for productive purposes in advanced nations is social in origin -- the collective retirement savings of millions of workers. The expanding influence of pension fund capital in the American economy represents a fundamental structural change, the significance of which only lately has been recognized. By virtue of the investment of these deferred wages, workers in Illinois and the nation now own much of our industry.
There has been a rapid and sustained expansion of pension fund assets. This has given pension funds a growing influence in the economy of the United States. This report looks at the Stevenson Strategy to reform state regulation of pension funds. The first section of this report looks at the current role of pension funds in economic development, pension funds in Illinois and the need for reform of these pension funds.
The second section of this report discusses pension fund investment and revitalization in Illinois. Because of the expanding economic power of pension funds, Illinois needs to develop new ways of increasing the flow of pension capital to productive investments to enhance the Illinois economy. Outlined in this section are the three basic principles that underlie all of the Stevenson proposals for public pension fund reform in Illinois and the implications they have on various aspects of the Illinois economy.
The third section proposes several changes in the State pension funds regulations that are consistent with the Stevenson economic development strategy. These four include 1) Eliminate the statutory list of specific restrictions; 2) Amend the Illinois pension code to include guidelines regarding the duties of pension fund trustees; 3) Authorization to purchase Small Business Administration (SBA) and Farmer's Home Administration (FMHA) forward commitments; and 4) the development of state-sponsored industrial investment insurance.
The fourth section of this report lists examples of the numerous ways in which pension funds can invest in real estate, including limited partnerships, managed trusts, insurance company commingled funds, mortgage-backed pass-through securities and direct investment.
The fifth and final section of this report includes a recommendation for establishing an Illinois Pension Fund Investment Office.
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