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East St. Louis firefighter pension fund attempts to trigger state intercept law

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East St. Louis this week became the fourth Illinois city to have its public safety pension fund ask Comptroller Susana Mendoza to withhold state money from the city and instead send it to East St. Louis’ chronically underfunded firefighter pension fund.

Officials from East St. Louis’ firefighter pension fund pointed to the city’s failure to pay an actuarily required $2.2 million into the fund in 2017 and 2018, and noted the fund is only 11 percent funded as of January 2018, according to documents obtained by The Daily Line.

Fund officials are attempting to trigger Illinois’ pension intercept law, which allows Mendoza’s office to seize money a municipality receives under the state’s Local Government Distributive Fund, and direct it to the underfunded pension fund. […]

The East St. Louis firefighter pension fund has approximately 90 beneficiaries, according to a recent report on the funding condition of Illinois’ 641 police and fire pension funds. As of 2016, the most recent year included in the COGFA report, The market value of assets within the fund was $7.5 million, versus its $59.8 million in total actuarial liabilities.

The unfunded liability for that one pension fund works out to be $1,962 per city resident.

posted by Rich Miller
Friday, Sep 20, 19 @ 9:22 am

Comments

This might be the single biggest issue facing the state of Illinois.

Comment by Steve Friday, Sep 20, 19 @ 9:29 am
641 police and fire pension funds. 641. Are there even that many firefighters outside of the City of Chicago?

Comment by JP Altgeld Friday, Sep 20, 19 @ 9:31 am
This is the problem the intercept law is supposed
to remedy.
I am surprised more pension funds don’t use it.
Also why didn’t the Illinois Department of Insurance that audits, regulates and publishes these underfunding numbers do something about this underfunding situation? Last I noticed police and firefighters also pay state taxes. Looks like they have not gotten much for their money.

Comment by Back to the Future Friday, Sep 20, 19 @ 9:35 am
Might be Steve?

Comment by Cornish Friday, Sep 20, 19 @ 9:38 am
Nope
Not Steve.
Back

Comment by Back to the Future Friday, Sep 20, 19 @ 9:43 am
It’s difficult to run a pension program when the appropriate amount of money isn’t being put away all of the time. Eventually the SEC will have to look into this one way or the other.

Comment by Steve Friday, Sep 20, 19 @ 9:44 am
The problem with intercepts for pensions is that it applies to all state money going to the city. For example, money sent to Chicago for public health purposes was redirected to the CFD pensions. In fact, money to increase vaccination rates wasn’t even sent to Chicago because it would be redirected to the pension funds, rather it was spent elsewhere in the state.

I agree with the concept of intercepts, but there has to be some exclusions were merited.

Comment by JSS Friday, Sep 20, 19 @ 9:53 am
JP
According to the Bureau of Labor Stat. there are 17,170 Firefighters in IL with Chicago having around 4500.

Comment by No relation Friday, Sep 20, 19 @ 9:54 am
What’s the argument against consolidating these funds statewide?

Comment by ChicagoVinny Friday, Sep 20, 19 @ 9:56 am
== The unfunded liability for that one pension fund works out to be $1,962 per city resident. ==

That’s what Mayor Lightfoot needs to get everyone focused on if she’s going to frame this as a statewide issue. The per resident liability is as bad or worse than Chicago’s in a number of Illinois municipalities. (I think Chicago’s is around $1,800 per resident for firefighters.) Chicago at least has a robust local economy that is producing tax revenue. The other towns don’t.

Comment by Roman Friday, Sep 20, 19 @ 9:58 am
With the bad news, there is also a bit of good news for a few of the police and firefighter retirees. I will note this will mostly be police since firefighters in small towns are often volunteers, not salaried employees.

Those towns with a population under 5,000 mostly have their pensions funded since they are in IMRF. Yes, there are a few of those towns in pension trouble also, but most are in good shape. Which is good, because those same small towns, at lot of which are slowly dying, would not have the resources to dig out of such a hole.

Much as Chicago cries poor, they have resources. Same for most towns of about, say, 50,000 population or so up. Not to say, like Springfield at 110,000, the larger towns aren’t feeling the pain of pensions. But they can somewhat control the pain and damage.

It is mostly the 5,001 to 50,000 towns that are struggling. These are a lot of your county seats and other regional centers. Many of them were 1 or 2 business company towns and did OK while the business was there but got in dire straits when the company moved out of state or, often, out of the country. Ironically, the sleepy backwaters that just relied on the local agriculture and never had company town money are in a bit better shape because they never had a lot of money to spend on the first place.

While I don’t expect it to become common, I do expect we will see some more pension funds asking the State to intervene.

Comment by RNUG Friday, Sep 20, 19 @ 9:59 am
Intercepts might be the only thing that keeps some of these cities honest. I know some cities have been dealt a difficult hand, but there is also a lot of historical corruption in places like Harvey and East St. Louis.

Comment by Chicagonk Friday, Sep 20, 19 @ 9:59 am
Chicago Vinny- the argument is that Municipalities who make the required contributions shouldn’t bail out those that have failed to do so. If you want to consolidate for the purposes of admin and investment cost savings -fine. But that really won’t help a fund with 1- percent funding. The answer is to permit municipal bankruptcy not asking better funded municipalities to jump into the drowning pool

Comment by Sue Friday, Sep 20, 19 @ 10:02 am
@Sue: ” The answer is to permit municipalities to transfer the cost of their financial failures onto the backs of workers”

Fixed it for ya

Comment by DIstant watcher Friday, Sep 20, 19 @ 10:06 am
Home rule be damned.

Comment by JP Altgeld Friday, Sep 20, 19 @ 10:07 am
11%? Well done East St. Louis. You have taken fiscal mismanagement to new lows.

I’m sure this will end well.

Comment by SSL Friday, Sep 20, 19 @ 10:09 am
City and state pensions are exploding the Illinois economy and will get much, much worse.

Sigh.

Comment by Pick a Name Friday, Sep 20, 19 @ 10:09 am
===City and state pensions are exploding the Illinois economy===

Record low unemployment, bub. https://chicago.cbslocal.com/2019/09/19/illinois-unemployment-rate-record-low/

Comment by Rich Miller Friday, Sep 20, 19 @ 10:14 am
===Illinois economy and will get much, much worse.===

Economy goes south, bad for Trump.

To the post,

Following the law, that’s how it works. The number of towns that may or “will” be next is a concern to the fiscal health of the state and munis but muni bankruptcy with state approval is still a tough sell.

Comment by Oswego Willy Friday, Sep 20, 19 @ 10:15 am
The only thing that can save small towns in Illinois is developing an alternative local revenue source. Much as we might morally decry it, video gaming has helped a lot of places. Same for casinos, the original ones were targeted at impoverished areas.

Another potential local revenue source is tourism. IMO, Illinois has done an inconsistent job promoting tourism in the state. With all the parks and historic sites, we need to capture more of the tourist dollar. Money properly spent by the State promoting a region could be more beneficial that just giving the same amount of money to the region. And it’s not just Lincoln. You have the labor history like Mother Jones, the founding of the NAACP, lots of famous authors, the various Civil War connections including Grant, the expansion west like the Donner Party and Lewis & Clark, architecture (even outside Chicago), etc. We should be flooding the neighboring states with ads to get more day trippers and overnight stays, all to generate local revenue.

Comment by RNUG Friday, Sep 20, 19 @ 10:17 am
East St Louis and Harvey are the worst funded pensions funds in IL. Residents are going to be angry when the state refuses to bail them out, but they should be blaming themselves for electing (and then re-electing) people who refused to make the required payments.

Comment by Lester Holt’s Mustache Friday, Sep 20, 19 @ 10:17 am
If you can’t afford the pension, you can’t afford the employee.

The intercept is a wake-up call for govt entities to properly compute and fund the full compensation package.

Comment by City Zen Friday, Sep 20, 19 @ 10:27 am
Would like to know more about consolidation.
At first blush the idea of taking out local control and turning the administration of these funds over to the “State” when the “State” played a big role in causing and ignoring the problem for decades just doesn’t seem like a very good idea.

Comment by Back to the Future Friday, Sep 20, 19 @ 10:30 am
Sue, I don’t think it would involve bailing anyone out to have each town pay according to their unfunded & current liability. Do you know if there was any bailing out when Wisconsin pooled their local pension funds?

Comment by Blake Friday, Sep 20, 19 @ 10:34 am
== Would like to know more about consolidation. ==

As I understand the current proposal, it is mostly administrative. On the books, each town would still have their fund with it’s associated liabilities and assets. The major difference is the funds would be pooled to achieve better investments / fees that smaller funds can not get. The gains would be distributed proportionate to the amount of money invested. In other words, basically an IMRF for police and firefighters.

Comment by RNUG Friday, Sep 20, 19 @ 10:40 am
Folks in East St.Louis are good people afflicted by bone crushing poverty. They live in a ruins of failed everything. The barriers to self sufficiency are nigh on insurmountable…and
I daily witness
acts of kindness, courage, community.
Just one example I pass every day.
One elderly woman who I often see sitting on her porch, opened up her side yard (she owns a double lot) for folks sleeping rough. There are usually a few tents pitched, she provided a picnic table, and this spring a portapotty appeared. ( at least that’s when I noticed it )

Look I know we like to argue numbers and policies. They are clean and theoretical.
But I hope we can always keep in mind that what we are referring to, what is really behind all this are consequences
to real
live
human beings
in all their complexity
good and bad.

Posters who want to break stuff down
destroy administrative or government function.
Maybe realize that
East St. Louis
is what you get when you do that.

Comment by Honeybear Friday, Sep 20, 19 @ 10:43 am
Thanks for the information.
It seems the Governor’s Office is very much on board with the consolidation idea. Of course, most general assembly members have more police and firefighters in their district than Governors.
Hopefully public safety employees will have some
input into the process.
It

Comment by Back to the Future Friday, Sep 20, 19 @ 10:54 am
=This might be the single biggest issue facing the state of Illinois.=

Chronic pension under funding is a real problem.

East St. Louis is a different problem though.

The school district has been bailed out (bail out in the true sense of the word) at least twice in recent history. Both times the ISBE took over the district and then returned control to the locally elected officials. Each time a large infusion of cash from the state put the district back on sound footing.

City government is being run no better it seems. Although in this case it may be legacy costs may be the issue.

Comment by JS Mill Friday, Sep 20, 19 @ 11:14 am
== City government is being run no better it seems. Although in this case it may be legacy costs may be the issue. ==

Taking about legacy costs, isn’t East St Louis still renting back their town hall from the person who won it in a lawsuit against the city?

Comment by RNUG Friday, Sep 20, 19 @ 11:20 am
== they should be blaming themselves for electing (and then re-electing) people who refused to make the required payments. ==

There’s lots of blame to go around. But keep in mind that East St. Louis and Harvey were industrial towns and the industry left, mostly for reasons related to global economics. That left those towns with little tax base. Even with very competent, fiscally conservative municipal leadership, that’s hard to overcome.

Comment by Roman Friday, Sep 20, 19 @ 11:20 am
A town of 26k and dropping should go to an all volunteer fire dept.

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 11:33 am
===A town of 26k and dropping should go to an all volunteer fire dept.===

Please show all the fiscal impacting and the safety ramifications of such a move for towns that size.

Thanks.

Comment by Oswego Willy Friday, Sep 20, 19 @ 11:36 am
Ofallon illinois.29k

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 11:38 am
Intercept is nothing more than a bandaid on a shotgun wound. If you address the underlying problem, you avoid (poorly) addressing the symptoms.

Comment by A State Employee Guy Friday, Sep 20, 19 @ 11:40 am
===Ofallon illinois.29k===

“Please show all the fiscal impacting and the safety ramifications of such a move for towns that size.“

You’re halfway done.

Comment by Oswego Willy Friday, Sep 20, 19 @ 11:42 am
Safety ramifications. I have been told that if this LGDF money is redirected, 8 cops and 5 street dept folks get their walking papers.

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 11:51 am
=== I have been told that if this LGDF money is redirected, 8 cops and 5 street dept folks get their walking papers.===

“Please show all the fiscal impacting and the safety ramifications of such a move for towns that size”

The fire department. Thanks.

Comment by Oswego Willy Friday, Sep 20, 19 @ 11:54 am
Like Roman said. And, at as African-American population increased, white people abandoned those towns, too.

Comment by Rasselas Friday, Sep 20, 19 @ 11:58 am
That is the Trump economy driving low unemployment. How does Illinois stack up against the nation, against our neighboring states?

How are the state and city obligations looking 3-5-10 years down the road?

That is what I meant by exploding the Illinois economy.

Comment by Pick a Name Friday, Sep 20, 19 @ 12:15 pm
===That is the Trump economy driving low unemployment. How does Illinois stack up against the nation, against our neighboring states?===

So is it low unemployment or not?

Ya can’t claim the state is a faltering mess then claim the economy Trump has is great, then decide it’s going to go down which is not Trump’s fault, lol

If ya want Trump owning the economy, have at it. Lots of baggage, good and bad.

Comment by Oswego Willy Friday, Sep 20, 19 @ 12:19 pm
Like many fire departments, it looks like the East St. Louis firefighters are cross trained as paramedics, do fire inspections and hazardous material tasks in addition to fighting fires. Got that from their website.
Never been to that city, but thinking having a volunteer fire dept. for a city that size would effect the safety of the citizens that call that city home.
We can come up with grants, for example, for the film industry in Illinois every year. Personally I would set a priority on public safety before other spending. Losing 8 police officers also seems like a terrible idea. Again, I don’t live there. Should we push for a volunteer police department?

Comment by Back to the Future Friday, Sep 20, 19 @ 12:27 pm
Pontiac has approximately 14k population and has a hybrid department with some full time firefighters and supplements them with volunteers. For East STL, given its size, I don’t think an all volunteer department would be safe for the community. They could possibly shift to a similar organization as mentioned above though. Might be worth looking into at least.

Comment by Fixer Friday, Sep 20, 19 @ 12:59 pm
This will become more common to many municipalities around Illinois soon enough. Glad we decided to sell and rent instead.

Comment by Cronish Friday, Sep 20, 19 @ 1:01 pm
===Glad we decided to sell and rent instead.===

You must be a treat as a tenant, yelling at people to stay of your landlord’s lawn everyday, lol

Comment by Oswego Willy Friday, Sep 20, 19 @ 1:08 pm
Cronish, that’s twice. Move along

Comment by Rich Miller Friday, Sep 20, 19 @ 1:09 pm
Arm chair politicking, of which i am guilty of is easy. The remaining residents of East St. Louis must take the bull by the horn, and find solutions. If this means a hybrid fire dept, like Ofallon, then so be it.

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 1:09 pm
Let’s stop talking about encouraging East Saint Louis to have a volunteer fire department. That’s a colossaly bad idea. There are a lot of abandoned buildings in E.STL places abandoned that no one is taking care of. It’s gotten better over the years for sure but we really don’t need a fire to burn half the town before volunteers could arrive and even get their turn out gear on.

East St. Louis is a tragic place full of good people doing their best, let’s not burn their houses down to save on Pension costs.

Comment by Mason born Friday, Sep 20, 19 @ 1:12 pm
Mason. What is your suggestion?

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 1:24 pm
Blue Dog for which part? The pensions or Fire Protection? Fire Protection should be a full time Department even if the Pension cost is a killer. If more people move out it’ll become more of a tinderbox.

How do you fix the long history of political corruption, abandonment, and casual indifference so that E. St. Louis Gov’t can get it’s house in order to cover it’s pension obligations? Who the Hades knows. Pretty sure burning their houses down won’t help.

Comment by Mason born Friday, Sep 20, 19 @ 1:37 pm
Let’s not kid ourselves - the only solution to problems facing several of our municipalities is to allow for a bankruptcy reorganization overseen by federal courts and allow the few really mismanaged towns to get a fresh start. Wouldn’t you rather see bond holders be held accountable as opposed to the State’s taxpayers

Comment by Sue Friday, Sep 20, 19 @ 1:48 pm
===- ChicagoVinny - Friday, Sep 20, 19 @ 9:56 am:
What’s the argument against consolidating these funds statewide?===

There is a whole industry of trainers, actuaries, accountants, money managers, etc. that have an interest in seeing 641 separate funds to service.

When consolidating to a statewide fund comes up, they have convinced active and retired police and fire that you can’t trust the State of Illinois, so fight consolidation and keep the pension local.

Comment by Shemp Friday, Sep 20, 19 @ 2:02 pm
===- Sue - Friday, Sep 20, 19 @ 10:02 am:
the argument is that Municipalities who make the required contributions shouldn’t bail out those that have failed to do so. ===

That’s a false premise as well that won’t go away. IMRF for instance charges different employers different percentage rates. One fund doesn’t mean everyone pays the same. One fund, multiple accounts.

Comment by Shemp Friday, Sep 20, 19 @ 2:06 pm
Also, it’s hard to feel sorry for E. St Louis when they keep doing this type of stuff even today: https://www.bnd.com/news/local/article233012572.html

June Hamilton-Dean, with trial on two felony fraud and forgery charges still pending in a St. Clair County Court, began a new job in East St. Louis as the city’s new Community Development and TIF Director last week.

At an annual salary of $73,000, Hamilton-Dean will manage the day-to-day operations of the city’s Community Development Department with an annual budget of more than $12 million, according to city records. Her first day on the job was July 16.

She previously served on the City Council and as a financial consultant to East St. Louis Township while her brother, Oliver Hamilton, was township supervisor. The pair were among seven metro-east public officials arrested in December 2016 on corruption charges.

Comment by Shemp Friday, Sep 20, 19 @ 2:22 pm
Mason. How do you pay for it

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 2:26 pm
Peoria is instituting a fee on every parcel in the city to pay for their Police and Fire pension shortage.

Comment by In_The_Middle Friday, Sep 20, 19 @ 2:35 pm
Perhaps the mandatory contribution requirements that IMRF has should be applied to the police and firefighters pension systems. The intercept seems a solid step in that direction. The investment restrictions for small funds could be changed, the ramp should be changed regardless of whatever solution comes up and why not have a state run fund like the Treasurers Investment pools that funds can get into or out of as they perceive as in their best interests.
Of course the consolidation solution should be looked at. Just don’t think it is realistic given the current political situation.
The underfunding has been building up for a long time. A lot of well meaning people made a lot of very bad choices for a very long time.
As to the effect of actuaries etc. convincing Public Safety workers, I suspect that those career or retired professionals are probably no more or less skeptical of Illinois fiscal leaders than anyone else in the state.

Comment by Back to the Future Friday, Sep 20, 19 @ 2:40 pm
=== Sue @ 1:48 ===
That will hurt all IL municipalities. Investors buy IL muni bonds for many reasons, one of which is strong credit protections. There is already a punishment in the bond market for issuing debt from Illinois governments because of budget and pension problems at the State level and at the local level, in Chicago and Cook County amongst others. Once there is precedence for IL municipal bankruptcy, the capital markets penalty would be worse for all governments including the best-funded of them.

If the State allows bankruptcy once, what will prevent it from doing so again? And then why would an investor purchase IL municipal bonds without a (large) bankruptcy premium?

Lastly, bondholders are not a faceless group. They are grandparents saving for their grandkid’s college fund. They are retirees with those bonds in their IRA or 401(k) in bond mutual funds. They are local banks. It’s not just Wall Street that gets hurt in that scenario. Even the mention that a bankruptcy measure would be considered would scare current bondholders away and those with faster access to the information would be hurt less, leaving a potentially less informed individual holding the bag.

Bankruptcy maybe solves a small problem here or there, but involves collateral damage to the whole system.

Comment by Downers Delight Friday, Sep 20, 19 @ 2:43 pm
Blue dog, they’re going to have to prioritize spending to keep those public safety services funded and unfortunately they may very well need more help from the State and St. Clair Co. You’re right that something is going to have to give, my point is it shouldn’t be public safety.

What’s your alternative that protects residents lives and property?

Comment by Mason born Friday, Sep 20, 19 @ 2:48 pm
Mason. Seriously. E St. LOUIS prioritize spending. Maybe a casino or something.

Comment by Blue Dog Dem Friday, Sep 20, 19 @ 3:59 pm

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