Pension crisis forces firehouse closure, 9 firefighter layoffs in East St. Louis
East St. Louis is short $9.5 million between a budget deficit and back payments owed to its fire and police pensions. As a result, city leaders are closing a firehouse and laying off nine firefighters.
Nine firefighters have been asked to hand in their gear and their fire station will temporarily close as East St. Louis, Illinois, faces a $5.5 million budget deficit and interception of nearly $4 million in state funding for debts owed to its police and fire pensions.
City Manager Brooke Smith notified the firefighters of the layoffs Oct. 15 in a letter stating they would end work at the end of the month.
“Unfortunately, with 100% of the City’s state revenues being redirected to the police and fire pensions, we are faced with the difficult task of strategically reducing some services in order to continue to meet our financial obligations for the next few months,” she wrote.
The city’s firefighters pension board on Sept. 17 notified Illinois Comptroller Susana Mendoza requesting an interception of the city’s state funding until it receives $2.2 million the city owes the fund. The city’s police pension board made the same request on Sept. 27, seeking $1.79 million the city still owes. The state funding has since halted and the city has 60 days after those dates to appeal, Mendoza’s spokesman Abdon Pallasch said.
Besides the loss of state funding, Smith also cited the city’s budget deficit.
“As you are aware the City of East St. Louis has been forced to make some difficult financial decisions to meet its budgetary obligations. According to the 2019 budget, there is a $5.5 million deficit and the city is now proposing lay-offs in the Fire Department,” she wrote in the layoff notice.
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.
Rob Schield retired from the city’s fire department last month. He said he’s glad to be out but feeling bad for his former colleagues. He said there were alternatives to cutting firefighters.
“No police or non-essential employees got cut at City Hall,” he said. “Thanks for cutting more hard-working jobs and putting the citizens and the remaining firefighters in even more danger.”
The firehouse to be shuttered at 1700 Central Ave. protects four of the city’s public housing projects. He said only two firefighters were there one recent evening, plus two at another station and three at the third.
He said the city once had nine stations and 120 firefighters. By Nov. 1 there will be two firehouses and 28 firefighters, he said.
He had harsh words for the city government, citing repeated federal prosecutions of corrupt city leaders and decades of fiscal mismanagement leading to inadequate fire equipment and manpower, plus failure to fund pensions. East St. Louis was given a riverboat casino license to rescue it from bankruptcy in the 1990s, along with decades of state financial oversight to control its spending.
East St. Louis has seen decades of population loss and now 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.
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, Pallasch said. The others are Harvey, North Chicago and Chicago.
Illinois has more than $11 billion in pension debt across more than 640 local police and firefighter pension funds outside of Chicago, each with its own local board. Gov. J.B. Pritzker’s task force on pension consolidation recently recommended merging their assets, but not their administration and overhead. Full consolidation of assets and administration could save $21 million a year.
Tally the shortfall for all local systems, including Chicago, and taxpayers are liable for $63 billion in local government pension debt.
Then there is the state pension debt. While the combined pension debt for Illinois’ five statewide funds is officially estimated at nearly $137 billion, Moody’s Investors Service just pegged the debt at $241 billion, using less rosy estimates of future investment returns. That means despite a healthy 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. Despite spending more than 25% of the state budget on pensions, they remain only 40% funded — a mark experts see as a point of no return from which the pensions cannot recover without structural changes.
Springfield must make those changes 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, state leaders will keep generating creative schemes to raise taxes, local property taxes will continue to grow as cities cut services and lawyers will send out more letters trying to force cities to pay what their pension funds are owed.