St. Louis leaders added to firefighter pensions for years
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St. Louis leaders added to firefighter pensions for years

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ST. LOUIS • It was 1982. St. Louis firefighters were asking for a new benefit to their pensions. And then-Mayor Vince Schoemehl was concerned.

For years, the firefighters had been making contributions into their system, the same way that private sector workers pay into Social Security. But now firefighters were asking to get every penny of their payments back in a lump sum on the date of retirement — on top of their regular pension payments. Schoemehl objected, warning that the move could bankrupt the city.

Still, aldermen voted to pass the measure, 27-0.

Two years later, the firefighters were back with another request: Make the benefit retroactive for firefighters who retired before 1982, at an anticipated cost of nearly $6 million to taxpayers.

Again, Schoemehl protested. "If the people of this city knew what the Board of Aldermen was doing, they'd reduce the size of the board by lynching," he told reporters at the time.

And that was just the beginning.

City leaders approved about two dozen laws between 1980 and 2002, doling out extra benefits to retiring St. Louis firefighters, costing the city millions of dollars and exacerbating the pension crisis that some of those same officials denounce today.

Mayors and aldermen approved extra retiree bonuses, funeral subsidies and sick-leave buybacks worth tens of thousands of dollars per retiree. And they allowed firefighters to retire but continue working, paying them salaries and pensions at the same time.

Now, the city says the cost of fire pensions has risen fivefold since 2001, and Mayor Francis Slay is advocating for unprecedented cuts to the system. On Friday, his supporters introduced a plan at the city's Board of Aldermen that would essentially close the current system, abolish "unaffordable" benefits and start a new pension plan.

Yet, Slay himself voted for 12 out of 14 proposals to increase pension benefits during his tenure as alderman and aldermanic president.

No one understood the impact of such decisions back then, the mayor says now. Officials were told pension investment gains would cover the costs. "We can see now the stock market just doesn't keep going up," he says.

But the impact is clear. With all of the added perks, battalion chiefs, fire captains and even some privates can retire with a pension worth about 90 percent of their final salary and hundreds of thousands of dollars saved up in specific bank accounts accessible only upon retirement.

A Post-Dispatch analysis of fire pensions and pay shows that incentives beyond the basic retirement have cost taxpayers at least $5 million for the roughly 80 firefighters who retired in the last five years, an average of about $60,000 per retiree.

The total impact is probably much higher. The system paid $34 million in benefits in 2010, according to the system's annual reports, six times the $5.5 million it paid in 1980. Even accounting for inflation, payouts have more than doubled.

"There were things passed that shouldn't have been," said 26-year Alderman Fred Wessels, who voted to approve several of the perks. "It's easy to see now, 15 to 20 years later.

"City elected officials are going to have to come to grips with this," he said. "And I think the sooner the better."

Firefighters argue that they deserved every increase. Their jobs are dangerous. They often skipped pay raises in favor of extra benefits. And they don't get Social Security benefits.

"They got a lot of perks," said Freeman Bosley Sr., a longtime alderman from the 3rd Ward. "But look, when they go in there, the damn building falls in on them and kills them. Look at his family. All you need is one of them to have a problem like that and that kind of, how would I say, makes up for all the rest of them that it doesn't happen to."

The fact that the economy was booming helped, too. When the pension's investments were making high rates of return, many people expected that the trend would continue indefinitely.

Officials said that the promise of no-cost benefits, coupled with the political might of the firefighter unions, made it hard to vote against the bills.

Alderman Steve Conway, who's been on the board for 21 years, said he spoke out against some of the pension bills. He said it's clear that politics played a role in decisions, citing one former colleague who had "200 firefighters in his ward. He can't vote against it. It'd be really hard politically for him to be against some type of increase."

Firefighters, lobbyists and supporters generally told city leaders the additions wouldn't cost much — and few challenged that assertion.

But there never was enough money in the fire pension system to cover the additional benefits. In fact, the city's accounting rules generally call for payments into the pension fund every year. The money in the fund is invested, and the interest covers much of the amount withdrawn each year in pensions. But as the market tanked and benefits added up, the amount the city contributes has skyrocketed.

City leaders say fire pension costs will rise to about $31 million next year.

The Firemen's Retirement System is now the most expensive, per capita, of the city's three pension funds — for general city employees, police officers and firefighters. According to city budget division calculations, retirement packages for regular City Hall workers cost, on average, less than one-quarter of each employee's annual salary. Police benefits cost about 50 percent of payroll.

But firefighter pensions cost nearly 74 percent of total salaries, or almost $42,000 per year per firefighter — more than a private's starting salary.

In April, Slay hired the Thompson Coburn law firm to help find a way to "opt out" of the system, which is partly governed by state laws, and create a new city-governed system. The problem, Slay said, is that changes to fire pensions must be approved by the state Legislature as well as aldermen. But the city would need help from firefighters to sway legislators — something they're not getting, he said. "We've run out of options now," he said.

Last month, his chief of staff, Jeff Rainford, began meeting with aldermen about proposed changes: adding a minimum retirement age, cutting disability benefits, increasing each employee's yearly contributions and ending the practice of returning those payments.

Firefighters vowed to fight the plans, saying they will offer their own proposals that will cut benefits for new hires but keep benefits intact for current firefighters.

$326,000 IN CASH

The 1959 law that created the Firemen's Retirement System outlined these rules:

After working for 30 years, a firefighter could retire with just over 40 percent of the average of his final five years of pay. After 35 years on the job, he could get 50 percent. And while firefighters could retire after 20 years, they had to wait until they were 60 to collect their pensions without penalties.

Those disabled on the job could retire immediately with 75 percent of their pay. They could also collect workers' compensation, but the amount would offset any city payments.

Widows generally got 25 percent of their husbands' final average pay.

But by 1982, three years before a 30-year-old Francis G. Slay won the 23rd Ward aldermanic seat, firefighter pensions had been substantially enriched.

Firefighters could retire after 30 years of service with 70 percent of their final pay rather than 40 percent. The pay was based on an average of their final three years' salaries — typically the most lucrative — rather than the final five years. A firefighter who was disabled on the job was paid 75 percent not of his own salary, but of the highest possible salary for his rank.

Perhaps most importantly, the Board of Aldermen, led by President Tom Zych, unanimously approved a bill that returned to each firefighter his yearly contributions into the system, in one lump-sum payment at retirement.

Schoemehl, the mayor, only agreed to let it pass if firefighter unions agreed to endorse a nine-member pension advisory committee to screen all future benefit change proposals. But it's unclear whether the committee was ever formed.

From that point, until the end of 2002, the board passed at least 17 more bills to aid firefighter pensions.

"It was constant. It never stopped," Schoemehl said recently.

Some were smaller changes, such as ensuring older retirees got cost-of-living adjustments, redefining widows as surviving 'spouses" instead of "wives," or helping the children of deceased firefighters pay for college.

But most put money in firefighters' pockets:

• In 1989, the board allowed firefighters to credit unused sick leave days as years of service in pension calculations.

• In 1990, aldermen created a new fire pension fund from surpluses taken each year from the main pension account. The new fund pays dividends, sometimes worth several hundred dollars a year, to members whose cost-of-living adjustments have run out.

• In 1991, the board further redefined "final compensation" to be the average of the last two years, instead of three, again boosting monthly pensions.

• In 1993, the board established the Deferred Retirement Option Plan, which allows firefighters to bank their pensions for up to five years while they are still working. The pension money goes into a separate account that gains interest and cost-of-living increases; it often totals $200,000 or more by retirement.

• In 1995, the board voted to increase the maximum percentage of final pay from 70 percent to 75 percent for a 30-year firefighter.

• In 1998, aldermen narrowly passed a sick-leave buyback plan that until just recently allowed city employees to accumulate and cash out unused sick days — often over 3,000 hours for firefighters.

• In 2000, the board allowed firefighters to deposit sick-leave buyback totals into their deferred retirement accounts.

• In 2002, aldermen voted to let firefighters use one-quarter of the sick-leave hours as credit toward years of service and one-quarter as a boost to their final average compensation while taking the rest home in cash.

Most of the aldermen who sponsored such bills are now long out of office.

But a few of the current board's senior members — Wessels, Phyllis Young and Terry Kennedy, as well as Tom Villa, who returned to the board recently — voted for several.

"Over the years, whether we like it or not, we have created a fiscal monster," said Villa on Friday.

Slay, as alderman from 1985 to 1995, approved at least eight bills concerning the Firemen's Retirement System. As president of the board from 1995 to 2001, he voted to pass at least four.

And in his first term as mayor, in 2002, he signed one, giving firefighters flexibility with the use of their accrued sick leave.

'I DIDN'T STEAL IT'

The new laws created a system that especially rewards firefighters who leave on disability and those who stay long enough to take full advantage of the benefits.

Over the past five years, more than 80 firefighters have retired, according to Firemen's Retirement System data.

Of those, about one-quarter were privates who retired with normal service retirements. On average, those firefighters worked for 27 years, made about $55,600 their final year, and retired at 53, according to an analysis of the data. As retirees, they averaged about $33,100 in annual pensions, or about 60 percent of their salaries, with $92,000 in deferred retirement accounts.

But more than 30 of the firefighters retired after becoming disabled on the job. They made less than the average private while working, but far more in retirement — about $45,500 annually, or 84 percent of their salaries.

One of those was Romondo Battle.

On Feb. 4, 2008, Battle was inside a burning home, poking holes in the ceiling to help put out the fire, when the ceiling — and the dresser from the floor above — collapsed onto him, according to his state workers' compensation paperwork. Doctors found that Battle, a former Marine, had ruptured two discs in his neck. He retired on disability that November.

Battle was 33 and had been on the force for three years. He was making just over $42,300 in his last year on the job, according to city payroll records. But Battle's pension is about $43,500 a year — 103 percent of his final salary.

Battle confirmed the details of his injury in a telephone interview. But when his salary came up, the line went dead, and Battle didn't answer return calls.

Over the same five-year period, 30 more firefighters retired with ranks — and pensions — higher than the typical private's. For instance, six battalion chiefs worked on average 36 years, made about $83,900 their final year, and retired at 61, according to the data. As retirees, they're averaging 79 percent of their salaries, plus about $200,000 in deferred retirement accounts and an estimated $100,000 each in returned contributions.

One of those, Battalion Chief Ralph Ortbals, retired in 2010 after working for the department for 38 years. Now 65, he's getting a $75,000 annual pension — nearly 90 percent of his final salary — plus $433,500 in his deferred retirement account and $118,000 in contribution returns.

Ortbals said he earned his pension. He had to live through lean years as a young private — his salary so low he worked two jobs to support a wife at home, two kids, health care costs and private school tuitions.

And it wasn't like he personally asked for the increases, he said. "It's nothing that wasn't offered to me," he said. "I didn't steal it."

Still, he's not surprised the system is now under attack. "I don't think anybody expects this pension system to remain the way it is," he said. "It's expensive."

WARNINGS

Over the years, some officials sounded warnings about the consequences of passing benefit increases.

In 1983, former comptroller Virvus Jones, an alderman at the time, called the return of firemen's pension contributions a "raid on the treasury."

In 1993, Civic Progress, a local association of business executives, drafted a report saying police and fire pensions could bankrupt the city, Schoemehl said.

And in 1998, even firefighters hesitated on at least one of the additions.

"When they first proposed sick-leave buyback, they wanted it — City Hall wanted it," said Chris Molitor, president of the local chapter of the International Association of Fire Fighters, referring to then-mayor Clarence Harmon and aldermen. "We cautioned them on the true cost. And they went ahead anyway."

But Slay and other city leaders say they couldn't have understood the true cost of the changes in benefits. The stock market was booming in the 1980s and 1990s, and bill supporters kept telling leaders that the earnings would cover the benefit increases.

Slay said he believes some of the bills authorizing changes were misrepresented. Other mayoral administrations, he said — referring to Freeman Bosley Jr.'s and Harmon's — may have underestimated the impact of the deferred retirement option plan and the sick-leave buyback program.

"Did they know otherwise and were they lying to us?" Slay asked recently, noting that he voted against sick-leave buyback. "I can't speculate. I just know that's what we were told."

Bosley replied that Slay, as president of the board, had the same information he did. "Now to come back and say you're misled, I don't necessarily think that's fair," Bosley said. "If you want to come back and say you have some regrets about it, then say that." Harmon could not be reached for comment.

Still, Slay maintains: "I think everybody would have done things a lot differently, including the city, including myself, had we had the foresight."

Slay pointed out that there haven't been any benefit increases passed since 2003, after the Silicon Valley technology bubble burst, sending stocks sinking.

In 2006, he formed a pension task force to review the city's three retirement systems. The group met off-and-on for at least three years and presented conclusions to each retirement system. But the fire system never responded.

Slay said that despite months of negotiations, the union has not been open to meaningful reform.

Union president Molitor disagrees. He said members are trying to cut costs. They support benefit reductions for new hires and a change in the disability formula that would pay firefighters to go to college in exchange for a lower monthly pension.

Slay said the city needs to institute far deeper cuts to stave off a financial crisis. Last week, his office sent Molitor a letter declaring they had come to an impasse.

On Friday, aldermen introduced two new bills written by Slay's office. The two together chop half the benefits added over the past three decades, including the deferred retirement plan, sick-leave buyback and contribution returns.

But it's unclear whether Slay will have the votes to get them passed.

The system needs reform but won't be easy to change, nearly all agree.

"I think our predecessors ... should have thought long and hard before they passed all the bills," said newly elected alderman Larry Arnowitz. "They should have thought about it a long time ago."

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