City turns back on $5.1 million annual savings to keep pressure on fire fighters in pension dispute
By ED FINKELSTEIN
St. Louis –In the just ended session of the Missouri Legislature, the Slay Administration vigorously fought a proposal by Fire Fighters Local 73 to change the actuarial computation method for its pension plan even though it had supported the concept the year before and now, quietly, out of public view, is proposing that very same method in the new ordinances it has pending before the Board of Aldermen.
The plan originally proposed by the fire fighters to switch from the current FIL actuarial concept (Frozen Initial Liabilities) method used in computing how much the City will pay each year into the fire fighter’s pension plan to one called “Entry Age Normal” (EAN) would save the City $5.1 million annually.
EAN is one of seven different actuarial accounting methods that can be used when computing the income needed to support the plan’s benefits. According to experts, EAN is helpful because it is not impacted by stock market volatility and because it looks 30 years out, reduces the contributions needed today thus saving money paid in for current and future benefits. FIL can result in significant volatility as costs are frozen “initially.” This method tends to understate costs over time resulting in potentially higher costs. EAN more accurately accounts for costs as they are accrued, and costs are more stable over time as a level percent of payroll.
CITY ON BOARD
Two years ago, with the City’s cooperation and agreement, Fire Fighters Local 73 took the EAN actuarial approach, as well as a change in their disability plan, to the state legislature for authorization to allow both to go before the St. Louis Board of Alderman for approval.
In this effort while the City fully supported Local 73’s efforts, Senator Jason Crowell (R-Cape Girardeau) nixed the EAN change because he felt it was not a long-term solution. The disability change was, however, approved and sent to the City for the Board of Alderman’s approval or denial.
Then suddenly, things began to change:
• The disability reform, which to their credit the fire fighters accepted in an effort to help the city financially, an issue they had previously fought, suddenly was held up by Alderman Craig Schmidt at the request of Mayor Francis Slay.
• Between 2011 and 2012 legislative sessions, the City asked the pension trustees if they would temporarily authorize the switch to the EAN actuarial plan, anticipating that it would be passed in pending session of the state legislature. The issue, of course, was being able to reduce pension payments from the City by $5.1 million annually for the next few years. The pension trustees agreed after the City’s Board of Estimate and Apportionment said that if the EAN proposal was not eventually authorized in Jefferson City, the City would revert to the FIL computations and pay the $5.1 million savings in the current fiscal year back to the pension fund over a period of five years. The $5.1 million is the additional amount the City would have paid under the original FIL actuarial computations.
Then suddenly, when a similar authorization bill was again introduced in Jefferson City this year that included authorization for EAN, the City opposed it. “Again the mayor, we believe, acted politically to the detriment of the taxpayers, deciding that saving the $5.1 million was not as important as politically gaining total control over the plan by trying to keep the fire fighters in the public’s eye as the ‘bad guy’ in this fight,” Fire Fighters Local 73 President Chris Molitor said.
City Budget Director Paul Payne and Operations Director Sam Dodson spoke vehemently against the fire fighter’s plan in committee hearings that included the EAN actuarial method.
“It’s clear to us that this is simply a tactic to use the pension cost issue as a way of getting the Post-Dispatch to do a hatchet job on the fire fighters, trying to make us look unwilling to cooperate in difficult financial times,” Molitor stressed. “By doing this, the Slay Administration torpedoed any effort to save pension plan costs for the taxpayers.”
Since the EAN concept was not authorized by the legislature, the City is now obligated to pay an additional $1 million a year into the fire fighters pension plan to catch up to the FIL actuarial contributions.
CITY TURNS DOWN
ANOTHER $2.4 MILLION SAVINGS
To further support his point, Molitor reiterated that in the last session of the Missouri Legislature, the fire fighters passed enabling legislation to make changes to the disability pension program, saving the City $1.2 million last year and another $1.2 this year and each year into the future.
“The mayor demanded that Alderman Schmidt hold the proposed ordinance in his committee, not allowing an implementation vote by the entire Board of Aldermen simply because he wanted to keep the public pressure on the fire fighters in an effort to gain total control over the pension plan,” Molitor stressed again.
CITY ‘CUTTING OFF ITS NOSE…’
Noted one observer who asked for anonymity, “This disability debacle makes it clear to anyone paying attention that the Slay Administration is willing to cut off its nose to spite its face in order to try and get control of the $440 million sitting in the pension plan.”
The source added that the fire fighters and the pension fund trustees have “tried to work with the City, trying again this year. The City fought them again, wanting drastic cuts and the key – total control over the pension fund and its staff.”
Two ordinances are now before the St. Louis Board of Aldermen, one seeking to dismantle the current Firemen’s Retirement System; the other to replace it with an entirely new plan that would include drastically reduced benefits for current fire fighters as well as retirees.
The mayor’s new plan includes the EAN actuarial accounting method that the City fought against this year when fire fighters attempted to get enabling legislation passed in Jefferson City.
Molitor pointed out, again, that the reason the fire fighters are fighting so hard to protect their pensions is the fact that when they retire, they are not eligible for Social Security. Their pension is all they have to support themselves and their family.
City uses fire fighters pension
$$ to fight the fire fighters!
St. Louis – With the failure of the EAN actuarial method to be authorized by the Missouri Legislature, a failure enhanced by the Slay Administration’s opposition, the City is obligated to pay an additional $1 million into the fire fighters retirement system for the next five years.
However, according to sources, the $1 million is not being paid into the plan, but instead is being used to pay the $250,000 fee to the law firm of Thompson Colburn who drafted the current ordinances now before the Board of Aldermen to destroy the current fire fighters pension plan and create a new one. It’s also being used to pay the well known Segal Actuarial Consulting a fee which has not yet been disclosed.
“The City is using the fire fighters own pension money to fight the fire fighters. If that isn’t the height of audacity, I don’t know what is,” a source confided to the Labor Tribune.