The Missouri Court of Appeals will hear arguments tomorrow on whether the city of St. Louis had the right to make changes to the pension benefits it offers its firefighters.
In lobbying for the changes in 2012, Mayor Francis Slay cited the financial burden pensions were beginning to place on the city. Its budget for fiscal year 2013 included a $31 million contribution to the system, up from $23 million the year before.
That argument persuaded aldermen to increase the amount of money current firefighters had to pay into the system - nine percent as opposed to eight percent, and without a refund at retirement. Firefighters were also no longer able to retire with full benefits before the age of 55.
Union members sued, arguing that the city couldn't make those changes without getting permission from the state General Assembly.
That additional level of approval is needed to make sure that firefighters have enough money to live on when they retire, said Demetris Alfred, the union president.
"We don't get Social Security, so this is huge," he said. "For anybody to come after our pensions, we would have this type of response because it's our livelihood."
Firefighters also argued that the changes violated the constitutional protections given to pensions, but a city judge rejected both those arguments. The union appealed, and that's what will go before the appeals court on Tuesday.
Here's how we got to this point:
St. Louis opted into the Firefighters Retirment System in the 1960s. State law giving cities the right to set up a pension system required municipal officials to get permission from the Missouri General Assembly before making any changes to those pensions.
Between 2001 and 2011, the city’s annual contribution to the FRS increased nearly 600 percent, from $3.4 million in 2001 to $23 million in 2011. Some of that jump was the result of the stock market crash. It was compounded by a 2007 Missouri Supreme Court ruling that forced the city to make the full payments recommended by the pension system’s actuaries, which it did not do in the 2004 and 2005 budgets.
February 10 2012 – Citing the increasing financial burden, Mayor Francis Slay introduces a plan that changes pension benefits for city of St. Louis firefighters. The new laws made no changes to benefits firefighters had already earned. But going forward:
- New hires would have to wait until age 55 to retire with a full pension, rather than simply after 20 years of service.
- New hires would get fewer cost-of-living increases when they retired.
- New hires would not be eligible for a program that allowed firefighters to draw a pension while still working for the department. The deferred retirement option (DROP) helped keep experienced firefighters on the job.
- New hires would pay more into the system and could not get those contributions back.
February 24, 2012 – St. Louis Board of Aldermen president Lewis Reed, who is widely believed to have eyes on the mayor’s office, holds a press conference flanked by dozens of firefighters. He unveils his own plan for pension reform. It would:
- Keep all benefits for retired firefighters. Current employees would see minimal changes, mostly to disability benefits.
- New hires would get back 25 percent of the contributions they made into the system. Contribution rates would remain at eight percent.
- The deferred retirement option would be retained
- Pensions would be based on their salary over from the last five years of a firefighter’s career, rather than the last two years.
- Pension benefits would vest after 10 years, but new hires would have to serve at least 30 years, or until age 55, to retire with full benefits.
- The provision requiring the Missouri General Assembly to approve any pension changes is retained. Sam Dotson, who was Mayor Slay’s director of operations at the time, called this final provision a “non-starter.”
March 2012 - Both sides sit down at the negotiating table and report some progress, but the requirement for state approval remains a sticking point.
April 12, 2012 – The Board of Aldermen approves an ordinance giving Mayor Slay the authority to opt out of the Firefighters Retirement System. The union representing city firefighters threatens to sue, saying that even opting out of the system requires approval by the Missouri General Assembly.
April 27, 2012 – Slay’s benefit changes are again introduced at City Hall.
June 12, 2012 – Trustees for the Firefighters Retirement System file their lawsuit, seeking to stop Mayor Slay from implementing the changes. The case is assigned to Judge Robert Dierker.
July 13, 2012 – The Board of Aldermen approves the pension changes by a vote of 17 to 10. The legislation is supposed to take effect 30 days after it is signed by Mayor Francis Slay, but the parties agree to delay that date because of the court case.
September 28, 2012 – In a 34-page order, Judge Dierker rules that although the city is within its rights to terminate the current pension plan, the plan as proposed does indeed violate the constitutional protections afforded to pensions because it pays two different levels of benefits from one system. The judge blocks the city from enforcing the measure as written.
Aldermen immediately introduce a bill to create two different systems – one for benefits firefighters earned before the reductions, and a second that that will pay benefits after the reductions are approved. The bill is approved on December 14, 2012, by a vote of 18 to 10. Pension trustees again sue, making the same arguments as before - that the city has no right to change pensions without permission from the state. The two court cases are consolidated in front of Judge Dierker
June 3, 2013 – Judge Dierker rules again that the city is within its authority to terminate its old pension system and start a new one with new contribution requirements. “In the court’s view, there is no authority in Missouri for the proposition that a public employee, once hired, is permanently entitled to pension benefits under plans in place at the time of hire, when the plans themselves do not so specify,” Dierker writes.
The ruling keeps in place the two-tiered system established by the December 14, 2012 vote:
- The old system, known as FRS, funds the benefits for already retired firefighters, as well as the benefits earned by current employees before February 1, 2013.
- The new system, called FRP, funds benefits earned by current employees after February 1, 2013 as well as all benefits for new hires.
In addition, new hires cannot draw full benefits until age 55 regardless of years of service. They must contribute 9 percent of their salary, and do not get back their contributions at retirement.
Paul Payne, Mayor Slay’s budget director, said his department has not yet received estimates for how much the city must contribute to the two funds. Estimates during the legislative process put the savings at $50 million over 30 years. In his June, 2013 ruling, Dierker accepted the city’s argument that the pension alterations would save $4 million annually.
Firefighters and the pension trustees appealed Dierker’s ruling. That’s the case in front of the appeals court tomorrow. It will be heard by judges Roy Richter, Clifford Ahrens, and Glenn Norton.
Follow Rachel Lippmann on Twitter: @rlippmann
