Metro-East News

Looming pension crisis puts East St. Louis operations in peril, Kelly warns

East St. Louis officials could soon see the entire city’s budget confiscated by the Illinois comptroller — leaving agencies like the police and fire departments without money for daily operation — if they do not begin to properly finance the city’s police and fire pension funds.

The issue stems back several years, according to attorney Dennis J. Orsey. He represents both the fire and police pension funds, which filed a lawsuit against the city in November 2015 when funding became an issue. At this point, Orsey said, the funds could potentially begin to intercept 100 percent of the city’s revenue sometime next year if nothing is done to remedy the situation.

The police department recently asked St. Clair County State’s Attorney Brendan Kelly to write a letter to the city, warning of the situation.

The letter, dated Nov. 1 to East St. Louis City Manager Daffney Moore, was obtained by the BND through an open-records request. In it, Kelly expressed concern about a looming budget crisis and asked for answers from officials on what’s being done to solve the problem.

“If that does happen we are very concerned about the ability of the police in East St. Louis to be able to continue to do their job,” Kelly said Tuesday. “They are already overworked, understaffed and overwhelmed on a day-to-day basis. If more cuts are made to the East St. Louis Police Department, that will make it all the more difficult for the police and people who are trying to help the police protect public safety.”

They are already overworked, understaffed and overwhelmed on a day-to-day basis. If more cuts are made to the East St. Louis Police Department, that will make it all the more difficult for the police and people who are trying to help the police protect public safety.

St. Clair State’s Attorney Brendan Kelly

Moore had not responded to Kelly’s letter as of Tuesday morning and she declined to comment on the issue.

East St. Louis Mayor Emeka Jackson-Hicks said the city is working to make decisions regarding its budget and the pension fund.

“Well, right now I am not in the position to share everything, because we are still ironing out what steps we are going to take to remedy the deficit,” she said. “So we are still working on that.”

East St. Louis is up-to-date on payments and wage reports for the 71 members enrolled in the Illinois Municipal Retirement Fund, according to an spokesperson. Those members enrolled in IMRF consist of city employees outside of the police and fire departments.

Orsey said the fire pension fund pays out approximately $303,000 a month to 90 beneficiaries, and the police pension fund pays out just under $250,000 monthly to 69 beneficiaries.

Active-duty members contribute to the funds as well — firefighters pay 9.445 percent of their income and police pay 9.91 percent of their income.

The city of East St. Louis began contributing $100,000 a month earlier this year to each pension fund at the direction of Charlotte Moore, the city’s treasurer, according to Orsey. Shortly before those payments began, Orsey and Jackson-Hicks confirmed the city paid a $1.5 million lump sum to the fire pension, which was depleting faster than the police pension fund.

Jackson-Hicks said it was a good-faith effort by the city to work toward a solution.

Even so, Orsey said, he is more concerned with regular funding that will sustain the accounts.

“Over one year we are losing over a million dollars in our account value. If we continue down this road, the pension funds will be broke,” he said.

The state legislature passed a law about five years ago, Orsey explained, that allows underfunded pension funds to legally intercept municipal revenue by way of the state comptroller’s office. Municipalities are required to allocate money to these pension funds through a tax levy — and if that isn’t sufficient, officials can fund the pensions with sources such as casino revenues and replacement taxes.

Orsey said the East St. Louis police and fire pension funds have had to wait to move forward on intercepting the money until the Illinois comptroller finalizes administrative rules pertaining to the new law, which should be completed by the end of December. However, he sent a letter in May to Illinois Comptroller Susana A. Mendoza as a notice of the plan to move forward with intercepting funds.

In that letter, Orsey noted documents from the East St. Louis treasurer indicate that the city contributed $302,623.30 to the police pension fund in fiscal 2016. Another $289,228.04 was contributed from payroll deductions.

Orsey wrote that the police pension fund needs to receive about $2 million annually from the city to function properly.

With the new law, the police pension fund and the fire pension fund could both legally intercept up to two-thirds of the city’s budget, according to Orsey.

That means the comptroller could begin to intercept 100 percent of the city’s budget sometime next year and allocate the money to both fire and police pension funds.

East St. Louis officials would then be left with no money to fund the government and agencies such as the police and fire departments.

The city’s attorney, John Baricevic, said he could not comment on the issue without permission from city officials.

Orsey said he met with the mayor, council members and Baricevic on Nov. 30 about the issue. He wanted to work with the city, Orsey said, in order to finance the pension funds without intercepting the city’s budget.

The financial resolution plan they drafted, however, requires the city to be up to date on fiscal audits.

“We are working on that as a council, there are no easy answers to the decisions we have to make as it pertains to our budget,” Jackon-Hicks said. “It is not an easy situation.”

East St. Louis officials are three years behind in audits, having only completed them up through fiscal 2014, Orsey said. Inadequate record-keeping in the past is blamed for the unusual lag in completing these audits.

If they do not complete 2016’s audit before March 2018, the city would then also have to complete the audit for fiscal 2017 before moving forward with the funding plan, according to Orsey.

“These are important issues, but these are not new issues for the city,” Orsey said. “These are issues they were alerted to two years ago when we filed the lawsuit. Over that time period they’ve gone through six or seven city managers. We have different players but we have the same problem — we hope the current people in place will take a fresh look at the issue.”

Councilman Charles Powell, who is chairman of the City Council’s finance committee, did not immediately return calls for comment.

We understand the consequences of the intercept, but the city has to understand the consequences of their inaction.

Attorney Dennis J. Orsey

“We understand the consequences of the intercept, but the city has to understand the consequences of their inaction,” Orsey said.

The Granite City lawyer has represented the East St. Louis fire pension fund since 2000 and the East St. Louis police pension fund since 2006.

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