Editor's note: This story was originally published in the Belleville News-Democrat.
The East St. Louis Fire Pension Board has agreed to accept a deal from the city government to put $4.5 million into the pension fund by the end of May, according to Dennis Orsey, the fund attorney.
The city government recently turned over part of the funding — $2.7 million — to the Fire Pension Board, Orsey said.
At a March 28 meeting, the council voted 4-0 in favor of it. The fifth council member, Ryan Cason, did not attend the meeting.
City Manager Robert Betts did not return a phone call seeking comment about the deal.
The fund that pays fire pensions to 95 families had been in jeopardy because so little money remained. The city government had not contributed to the fire and police pension funds since September. East St. Louis already had been behind in funding the pensions by millions of dollars when it stopped its monthly contributions, officials said.
As a result, in January, both the Fire and Police Pension Boards decided to ask the Illinois Comptroller Susana A. Mendoza to seize state money allocated to the city and use it to help pay for police and fire pensions.
With the recent deal with the city government, the Fire Pension Board is not proceeding with its intercept request.
Johnny Anthony, president of the Fire Pension Board, is happy that his fund is immediately getting some much needed money.
“That was a deal that meant we get our money right away,” Anthony told the BND. “ We have 95 people depending on us for their pension. Our funds were low. And, the intercept would take longer for us to get our money.”
The Police Pension Board, on the other hand, is “moving forward with the intercept,” said Nick Mueller, board president.
This infusion of money into the Fire Pension Board will allow it to start investing and building a reserve account, which it hasn’t been able to do for years.
“Right now, the board is trying to get this infusion of money so that they actually put some money to work so they would have enough money to pay their beneficiaries and bills and actually start building a reserve account, which would be part of the investment account,” Orsey said. “...It’s the investment account that will give us a return on the investments through the stock market, which in the long run helps the city. If we get returns on our investments, that’s less money the city has to put in in future years.”
Pensions are funded in three ways: active-duty contributions, returns on investments and contributions from the municipality, Orsey said.
“The state does a calculation every year of how much needs to be contributed into the pension funds across the state,” Orsey said. “ East St. Louis knows how much they have to contribute. The state takes into consideration how much active-duty members contribute and what the return on investments are. Whatever the shortfall is , the city has to make up.”
Orsey is also the pension attorney for the East St. Louis Police Pension Fund.
“The police have decided to move forward with the intercept and reject any offer from the city,” Orsey said. “The city has decided they are not going to pay any more money into the police fund because the police are moving forward with the intercept.”
No date has been set for an intercept hearing. The purpose of the hearing will be to certify the underfunded amounts in the Police Pension Fund. The transcripts of the hearing and other documentation will be sent to the state comptroller for her review.
Orsey said a rough estimate of what an intercept for the Police Pension Fund would raise is about $3.7 million. He said the Police Pension Fund is not in as dire a position as the Fire Pension Fund.
“They’ve got around $20 million in their investment account. They’ve got sufficient funds to pay their beneficiaries,” Orsey said.
Betts, the city manager, told the BND in January that the city simply cannot afford fully funding the police and fire pensions.
“We could spend a whole day discussing the who’s, the what’s, the why’s, the where’s, and the when’s. At the end of the day, this is where we are,” Betts said. “The city cannot afford to continue to pay in excess of $8 million a year in pension obligations. The city doesn’t have the revenue.”
Betts said the good news is that in 2025 the state of Illinois will start managing the pension funds.
“Hopefully they can make some good investments so we won’t have this problem going forward,” Betts said.
Carolyn P. Smith is a reporter with the Belleville News-Democrat, a news partner of St. Louis Public Radio.
