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 East St. Louis was already facing an interception of state
funds to make up for missed payments to its firefighters pension fund, but now
the police pension is seeking the same remedy.
The city owes its police pension $1.79 million for fiscal years 2017 and 2018.
The pension board voted Sept. 26 to ask Illinois Comptroller Susana Mendoza to
divert state funds from the city until its debt to the police fund is paid,
according to a letter received by the comptroller’s office.
Add that $1.79 million to the $2.2 million that the city firefighters pension is
already seeking through Mendoza’s office, and the nearly $4 million would choke
city finances that started the year with a projected $5.5 million deficit. The
city in 2018 operated on $18 million and projected a $3.7 million deficit.
The firefighters pension was only 9% funded at the end of 2018, with an unfunded
liability of $65.2 million, according to data from the Illinois Department of
Insurance. The police pension was healthier, but still had only 31% of its
needed funds and a total pension debt of $39 million.
Neighboring communities’ police pension funds were in even worse shape: Madison
had 16% of its needed funding, Venice had 24%, and Alton and East Alton each had
28% of what they will eventually need to fulfill obligations to retirees and
their dependents.
East St. Louis city and pension board leaders were unavailable for comment.
East St. Louis is the fourth Illinois city to face state funding interception
since pension systems were first allowed to seek that remedy in 2018, said Abdon
Pallasch, spokesman for the comptroller’s office. The others are Harvey, North
Chicago and Chicago.
The city has 60 days to file a response to the firefighter pension fund’s
intercept request, which was received Sept. 17, as well as the police fund’s
request.
Even if the city protests the interceptions, it still faces at least a temporary
state funding loss after the 60 days because the state holds the funds until the
dispute is resolved, Pallasch said.
East St. Louis has over 26,000 residents, with 43% of them living below the
poverty line. It has the highest murder rate of any U.S. city. City government
discussed massive police and firefighter layoffs as a way to handle the
projected deficit, suggesting any loss of state funds could have a serious
impact on public safety services.
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Chicago is still in court fighting the interception
of state funds for $3.3 million the city’s firefighters pension
claims it’s owed for 2016 and 2017. North Chicago accepted the state
intercept, and repaid its pensions $863,677 after about seven
months.
Harvey is still repaying its pension funds after reaching an
out-of-court agreement. The city has $54.4 million in pension debt
between the police and fire pension funds, according to the most
recent data from the state. Moody’s Investors Services, which uses
less optimistic assumptions, pegs the debt at $87.3 million. The
police and fire pensions sought to intercept state funds after
Harvey shorted them last year but agreed to a repayment schedule the
city is still following. Still, the city was forced to lay off 18
firefighters, 13 police officers and other city workers to make its
pension contributions.
Illinois has more than 650 local police and firefighter pension
funds, each with its own board. Local pensions are estimated to
carry $63 billion in debt combined, and some have discussed
consolidating the funds. Chicago Mayor Lori Lightfoot requested a
state bailout of the city’s $42 billion pension debt, a move Gov.
J.B. Pritzker rejected in July. Were the state to take on all local
pension systems’ debt, it could raise the state’s total pension debt
to about $200 billion.
While the pension debt for the five statewide funds is officially
estimated at nearly $137 billion, Moody’s just pegged the debt at
$240.8 billion, using less rosy estimates of future investment
returns. That means despite a robust stock market, each Illinois
resident is on the hook for $18,896 in pension debt.
Since 2000, Illinois’ growth in state spending on pensions has led
the nation at 501%, while spending on core services that residents
value has dropped by one-third. Adding local pension costs to that
burden is simply not feasible.
Instead, Springfield must control those costs by leading the state
toward constitutional pension reform that protects earned benefits
while allowing reasonable adjustments to the growth of future,
unearned benefits. Short of that, local property taxes will continue
to grow as cities cut services and lawyers send out more letters
trying to force cities to pay what their pension funds are owed.
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