East St. Louis police, firefighter pension funds sue city over delinquent payments

After months of wrangling with the financially strapped city of East St. Louis, and several attempts to get the city to pay what it owes, the people who manage the firefighter and police pension funds have said enough is enough.

The two funds each filed suit earlier this month in St. Clair County circuit court, asking a judge to force the city to pay the millions of dollars it owes.

The first suit, filed by the firemen’s pension fund, lists the plaintiffs as Johnnie Anthony, George McClellan, Jr., William Fennoy, Michael Dill and Raymond Mix, who are elected and appointed trustees of the East St. Louis Firefighters Pension Fund.

The second suit, filed by the police pension fund, lists the plaintiffs as Nicholas Mueller, Michael Hubbard, Sandra Muckensturm-Griffin, Joseph McCaskill and Michael Floore.

The legal action was taken against the mayor, city manager and the City Council. Granite City attorney Dennis Orsey is representing both pension funds.

The 91 beneficiaries who are counting on the funds to pay their living expenses deserve to be comfortable and know that their money will be available monthly as it is supposed to be, Orsey said.

▪  The first count of the suits, which are nearly identical, asks for a judgment against the city and in favor of the pension fund for money owed to the fund for 2014.

▪  The second count asks that interest on the money in reserves that had to be used to pay dependents be returned to the fund.

The city owes the firemen’s fund $2.46 million and the police fund $1.21 million.

“The firemen’s pension fund had to draw money out of the stock market so they lost the ability to get a return on the investment. The pension fund had to draw down almost $3 million off their investment reserves in the stock market,” Orsey said.

The suits also are asking for a declaratory judgment, which means the plaintiffs want the judge to take note of the circumstances surrounding the city’s reckless disregard for making its payments to the fund on time as required by law, and to enter an order that the city properly fund the pension fund.

The contributions to the fund are to be paid in the first quarter of every year for the previous year, Orsey said. He said come January, the problem will get worse.

“The city has a pattern and practice here that says they’re not living up to their statutory responsibility. Our biggest concern and the reason we filed the lawsuit is that we’re concerned that if the city continues to underfund the pension fund, it will be depleted of all of its reserve funds and will be out of money in 30 months.”

The firemen’s fund pays out benefits to 91 retirees and widow. There also are 51 active firefighters who are contributing to the fund who are depending on the find to be there when they retire, Orsey said.

Currently, the members contribute 9.45 percent of their salary into the pension fund. Orsey said the fund pays out $280,000 a month to meet its responsibility to the beneficiaries.

The East St. Louis Firemen’s Pension Fund is only funded at 22 percent while the average downstate pension fund is funded at 58 percent, according to documents. And the law requires that by 2040 the fund be funded at 90 percent.

The Firemen’s Pension Fund has been around since 1914; the Policemen’s Pension Fund was created in 1919.

In the early 1980s and 90’s, the Firemen’s Pension Fund and its counterpart, the Policemen’s Pension Fund, were underfunded and the city was confronted with a lot of debt. The city’s finances were so bleak that the Illinois legislature appointed the Financial Advisory Authority to oversee the city’s finances.

Records show that as long as the FAA was in place, the city’s contribution to the fire and police pension funds were paid on time and in full. The legislature mandated that the FAA was to stay in place until the city balanced its budget for 10 consecutive years. The FAA remained in place for 23 years. The FAA was disbanded on Dec. 21, 2013.

At a recent meeting at City Hall with the retirees and other beneficiaries of the fire and police pension funds, City Manager Alvin L. Parks Jr. said the city will pay the fireman’s fund $50,000 and the police fund $50,000 in February. By the first part of January, the city’s contribution should be about $2.2 million for the firemen’s fund.

“We know we have an up-and-coming obligation of $3 million for 2015,” Parks said.

East St. Louis has a budget deficit of about $5.9 million and has laid off a number of employees. City officials have talked about whether there will be “payless paydays” beginning in January, and Parks has said there will be more layoffs and the city attempts to close the budget gap.

Parks said he is aware of the city’s responsibility to pay into the pension funds. And, he says the city intends to pay the money, but it can’t pay what it does not have.

Parks said the city is exploring other options, including looking into a loan. But, he acknowledges that until the city’s 2013 audit is complete and approved by the City Council, the city cannot get a loan.

He also said $2 million that the city should have gotten from the state is still being held up in Springfield because the state has no budget. Parks said gaming revenue is down in East St. Louis, and some of that is being withheld by the state as well.

Johnny Anthony, president of the Firemen’s Pension Fund, said the city knew it had a responsibility to pay the fund and it should have made it a priority because the men and women who now depend on the fund dedicated their lives to keeping the city safe while they were working. Now, they and their families are depending on the fund to take care of them in their retirement years and, in some cases, their widows and disabled loved ones.

“The city made a promise to take care of the firefighters and their dependents. The job didn’t pay that much when many of the retirees signed on to do the job. The city’s promise was one of the enticements of taking the job,” Anthony said.

Anthony said the suits, which were filed Nov. 23, were the last resort.

“After meeting with various city officials and the city manager since March, we felt it was time to take legal action. It seems that they do not want to take responsibility of properly funding the pension funds.”

As of January 2015, there were 78 beneficiaries being paid by the Policemen’s Pension Fund. They constitute retirees, widows and one disabled person, There also were 53 active police officers paying into the fund. But eight officers recently were laid off.

For 2014, the city should have paid this fund $1.82 million, and is $1.21 million in arrears. For 2015, the city owes another $1.88 million that is supposed to be paid by January 2016.

“City Manager Parks said there will be no more money coming from the city until the spring of 2016 and the city would only be paying $50,000,” Orsey said.

As of January 2015, the police fund was 44 percent funded, which means it’s in a little better shape than the firemen’s fund. Like the fire fund, the police fund has “had to draw off of investment reserves to pay beneficiaries,” Orsey said.

Asked how long this fund can hold out if the city continues to underfund it, Orsey said, “seven years.”

The city is “very concerned about getting them their money. We’re working on it. We’re exploring our options, including loans,” Parks said.

Asked whether he would consider having the city file for bankruptcy, Parks replied, “Absolutely not.” He explained that the city could not file for bankruptcy if it wanted to because Illinois does not allow it. Orsey said he is aware of a bill in the legislature that Gov. Bruce Rauner is pushing that would allow for bankruptcy filings by local governments.

The city of East st. Louis has 30 days to file a response to the two lawsuits.

This story was originally published December 2, 2015 at 12:15 PM with the headline "East St. Louis police, firefighter pension funds sue city over delinquent payments."