Disability Pensions Allow Some Firefighters to Collect While Working Elsewhere

Click HERE for a story about abuse of the local firefighter disability system at Mehlville Fire Protection District. 

by JEREMY KOHLER and DAVID HUNN • ST. LOUIS POST-DISPATCH

February 19, 2012

Frank Palermo is a Webster University groundskeeper who has competed as a fourth-degree black belt in karate.

Joe Pree keeps order in a courtroom as a St. Louis sheriff's deputy.

Richard Griffard runs a financial services company that has managed $100 million in investments.

They share something in common: They retired early from the St. Louis Fire Department after the fire pension board ruled they were "totally and permanently incapacitated for duty."

The same could be said of about one out of every two retired St. Louis firefighters — 48 percent. All but a handful said their career-ending injuries occurred in accidents at work, helping them secure some of the nation's most generous disability pensions: 75 percent of the department's maximum salaries — tax free, for life, with annual raises.

On average, from 2001 through 2010, a firefighter who retired on disability was 42 — more than a decade younger than colleagues who retired based on years of service — and got a slightly bigger pension check that was tax-free.

Disability is supposed to be a safety net for those who risk their lives to keep the public safe, said Chief Dennis Jenkerson, a third-generation firefighter. The idea is that firefighters will be more aggressive — and save more lives — if they know an injury won't wreck their finances.

"But it's for the guys who truly get injured," he said.

With such incentives to retire, though, disability has become a costly entitlement program and a burden for taxpayers. A Post-Dispatch investigation found:

• Many disabled retirees go back to work, some to jobs that involve physical labor, and continue collecting their pensions.

• Firefighters rule the process. A longtime pension board member was also president of the firefighters union. Today, the eight-member board includes four active and two retired firefighters. The board has said its duty is to protect firefighters, not taxpayers.

•The pension board's longtime chairman acknowledges abuse in the disability system. But although the law empowers trustees to re-evaluate disabled retirees once a year, or reduce pensions for firefighters making more than allowed, the trustees almost never do.

• The city does not reassign firefighters who are capable of doing other city jobs. Meanwhile, it lays off workers, enforces furloughs and pay freezes and struggles to provide some services.

• Despite the high disability rates, the fire department has no fitness standards for active firefighters.

Mayor Francis Slay tweeted last week that "almost every municipal service in the future" depends on reducing the fire pension system's costs.

In a story last Sunday, the Post-Dispatch exposed how city leaders contributed to the crisis by adding benefits to a pension system that already could not meet its future obligations.

Today, using standard accounting methods, the pension system's unfunded liabilities total more than $100 million. Its auditor told the board Friday that the fund is in trouble. Disability payments make up nearly half of system's expenses, about $1.1 million a month.

No public official has succeeded in any effort to tackle the department's disability rate or substantially reduce costs.

Last year, the firefighters union backed a proposal to modify the pension by giving retirees with occupational disabilities five years of full pay, five years of college and a lifetime pension of 25 percent to 75 percent of pay, depending on years of service.

Chris Molitor, president of the International Association of Firefighters Local No. 73, said at the time he believed the proposed benefits would be less enticing to a firefighter considering a disability retirement.

"I think guys are going to try harder to stay on the job," he said.

But city budget officials said the plan didn't save taxpayers much. Slay killed the deal to draft broader changes introduced earlier this month.

Slay wants to dramatically reduce disability pensions for firefighters who are healthy enough to work somewhere else. His chief of staff, Jeff Rainford, said if that change is approved, "you will not see anywhere near one out of two people retiring for a disability."

Jenkerson said it irks "real firefighters," who work hard to overcome injuries, to know former colleagues are taking advantage. Without naming names, he said he thinks "there have been people who have come into the job with a focus more on the disability than the career of a firefighter."

"I won't put a percentage on it," he said. "But I will say some of the people who have gotten disabilities, if they would have wanted to be, could have been rehabbed and brought back, but they gave up."

Leonard Wiesehan, a firefighter who has been chairman of the pension board for 24 years, acknowledged abuse in the system but said "when you get three doctors who tell you (a) guy can't work anymore, it takes it out of our hands."

STILL ABLE

The fire department's disability rate far exceeds that of departments in San Antonio, Charlotte, N.C., and Phoenix. In fact, St. Louis has more firefighters on disability retirements than those three cities combined. The police department's disability rate is 10 percent.

There is no national standard for firefighter disability, and St. Louis does not have the highest rate. In San Jose, Calif., two out of three retired firefighters were on disability, a 2011 city audit found. Many of the disability cases were older firefighters who retired based on years of service and later were granted disability.

In Kansas City, about two out of five firefighters retired on disability, slightly less than in St. Louis and typically with a smaller payout.

Less than a third of the disability retirements in Kansas City are "duty" retirements that pay 62.5 percent of the department's maximum salaries. The rest were "nonduty" disability pensions that pay 25 percent of a firefighter's final salary plus 2.5 percent for every year served over 10 years.

Kansas City Fire Chief Richard "Smokey" Dyer said the pension board was protecting taxpayers by "really being stingy with line-of-duty injury pensions."

One major difference between St. Louis and many other cities is that the fire department expects every firefighter to be physically capable of fire combat after recovering from an injury — even if his job is inspecting buildings, working on an ambulance, investigating fires or teaching children to stop, drop and roll.

After a firefighter applies for a disability retirement, he is evaluated by three doctors chosen by Medical Services Management, based in Chesterfield, which works for the pension board. The company did not return calls.

The doctors determine whether a disability applicant can perform every firefighting task. They are provided a sheet of paper that lists firefighting duties and reminds doctors: "There are no part-time (jobs) or light-duty work in the fire service."

The pension board is not bound by the doctors' recommendations, but minutes of board meetings show it usually follows them.

In one exception, the board tried to block disability retirement for Earl Neal, an eight-year firefighter who refused to have surgery for a back injury. Neal appealed, and a circuit judge ruled in 1996 that the board could not ignore the medical board's findings and Neal wasn't obligated to undergo surgery to be entitled to a disability pension.

Neal retired at age 37 and became head of an ambulance district in Jefferson County and then of the ambulance district in Johnson County, Mo. A proclamation by the Missouri House in 2008 lauded his career of public service, as well as time spent as a youth football coach and baseball umpire.

In an interview, Neal said the ambulance-service jobs were administrative and didn't require physical strength. He said he "very rarely lifted patients up."

Without a doubt, the ranks of disabled retirees include firefighters who suffered serious, permanent injuries in the line of duty. Matt Held, 44, was crushed in a porch collapse in 2003. Now he walks with a cane, hunched and wincing with each step. A surgically implanted device delivers pain-relieving shocks to his spine.

His disability income of $3,700 a month helps him afford a small house on the South Side.

"If I didn't have this, I'd be living in a box," he said.

Jenkerson said he thinks doctors have little incentive to recommend denial of a disability retirement because they could be sued if the firefighter were reinjured.

Retiring on disability from other St. Louis city jobs is much more difficult. An employee of the forestry division, for example, must prove he can't hold down any kind of salaried job.

"It almost has to be a terminal situation," said Personnel Director Richard Frank.

But even when firefighters are capable of moderately heavy workloads, doctors will recommend they retire. Pvt. Romondo Battle, a three-year firefighter, injured his back while fighting a fire in 2008. Two months after surgery, his doctor found Battle could shoulder "medium-heavy" to "heavy" physical work, but not the "very heavy" firefighters' load, and recommended that he retire. The pension board agreed, and Battle retired at age 33 with plans to seek work as an aerospace mechanic, according to records in his workers compensation case.

If he lives to 78, the pension system will pay Battle about $2 million.

Battle confirmed the details of his injury in a telephone interview that was cut short when the line went dead. He didn't answer return calls.

Battalion Chief Cornelius Moore developed asthma and retired at age 44 in 1993 on a disability pension that currently pays him $63,000 tax-free a year.

Moore had 20 years with the department and would have qualified for a pension of roughly half that based on years of service. Heart and lung diseases and cancer are presumed to be line-of-duty disabilities in St. Louis. Because Moore's most recent physical had not flagged any breathing problems, the condition was presumed to have been job-related.

Even though Moore already had a management job in the fire department — as a battalion chief — he was awarded a disability pension under the rule that every firefighter must be combat-ready. So far, he has collected about $1 million in tax-free pension payments.

Interviewed recently, he said he had to retire in 1993 "because I was sick at the time."

Moore got a job as a security guard for the Department of Homeland Security. He then applied to be chief of the Robertson Fire Protection District in North County. Moore said it had been his dream to be a fire chief.

"Being a fire chief means running the department," he said. "It's strictly administrative. He doesn't necessarily have to be on the scene, and even if he's at the scene he isn't going to be in harm's way."

NO LIGHT DUTY

Over the years, the city has cut hundreds of workers and some city services — such as its animal shelter — almost entirely. Even the fire marshal's office lags in reviewing plans for sprinklers and smoke detectors.

Jenkerson said he did not 'see any problem" with moving some disabled firefighters into less demanding city jobs as an alternative to giving them lifetime disability pensions. "Most of the doctors when you get done looking at the (disability candidate) say that this individual is capable of gainful employment but just not at the level of a firefighter."

Molitor, the union head, said, "That has never been proposed by anyone in the mayor's office. If they have a proposal, we are certainly willing to listen."

However, Rainford insisted that moving disabled firefighters to other jobs would not save money.

In Atlanta, a disability pension is considered a last resort for firefighters who can still work.

"Today if I was to get hurt and I couldn't perform a firefighter duty, I would get put in somewhere in the city at the same pay … but I could not be a sworn firefighter," said Atlanta Assistant Chief Michael Simmons.

Joe Pree got another job in the city — but he gets his disability pension, too.

While moving a hose line to the second floor of a stairway in 1992, a firefighter ahead of Pree fell through a stairway and landed on Pree's left knee.

Pree, who retired in 1993 at the age of 38, said a surgeon removed a ligament and a tendon from his knee. He settled a workers comp case against the city for $12,000, and makes a $52,500 disability pension.

"I am physically not capable of being a firefighter," he told a reporter in a brief interview outside a St. Louis courtroom.

Pree, 57, started work for the sheriff's department in 2000. He said he applied because he needed health insurance. He makes $30,400, records show, transporting prisoners between jail and court, and securing the courtroom.

Pree said his most difficult task is walking into the court, but in 2008, he became involved in a struggle with an unruly inmate, hit his head on a wall and suffered a back injury. The city settled his workers compensation case for $5,000.

He said he plans to work until Social Security benefits — earned from other noncity jobs — kick in a decade from now. By that time, he also would collect a second city pension.

The left knee has continued to cause him problems — and cost the city money. While escorting prisoners in 2005, he turned sharply, heard a pop in the knee and felt pain, records show. He settled that claim against the city for $13,000.

NO FITNESS STANDARD

Paradoxically, while the fire department has exacting standards for the fitness of injured firefighters, it has none for uninjured firefighters.

Firefighters take a physical exam every five years to determine the health of heart, lungs and bones, but have no requirements for speed, strength or endurance.

St. Louis is missing out on a national movement to keep firefighters healthier and safer, experts say. The International Association of Fire Chiefs says a firefighter fitness initiative is one of its top priorities.

The association supports a training program and regular fitness evaluations for active firefighters.

"Our goal is to say you're a more fit firefighter, better prepared to do your job and less likely to be injured," said Matthew Tobia, a battalion chief for the Anne Arundel County Fire Department in Maryland, and a spokesman for the fire chiefs association.

Charlotte, with a disability rate of about 12 percent, is one of several departments that have embraced the idea. "Disability is not a good thing here," said Deputy Chief Rich Granger. "It's a necessary evil on a very rare occasion if somebody gets injured that bad."

Jenkerson said forcing firefighters to take a fitness test every five years would "absolutely" cut down on career-ending injuries.

"People say there needs to be an incentive for firefighters," he said. "There (would be) an incentive — you get to remain in the pension system."

LAX POLICING

A disabled former firefighter can't earn more in a second salary than his pension. The pension board can ask for the tax returns of people earning disability pensions to see if they are making too much money.

But Vicky Grass, executive director of the pension board, said that rarely happens.

"On occasion — and it has been a very long time — we request that they send in their tax returns," said Grass. "It's been a long time since we've done it."

Richard Griffard retired from the fire department with a disability in 1988 at age 38. He said he had surgery to remove bones from two injured wrists and that the department told him to retire. He said he cannot even button a shirt.

In 2001, he founded the Sunset Hills firm Saxony Securities, according to documents filed with the secretary of state.

Today, Griffard is listed as the president.

Griffard, 61, said the pension board has never checked his income. He declined to discuss his salary but said in most of the years since his retirement he did not make more than his pension.

"If you think I got filthy rich off my fire department pension and what little I'm making here, you need to rethink it," he said.

Several other disabled retirees own businesses. Douglas Mueller just recently sold his safety consulting business, Safety Technologies and Solutions LLC. He told a reporter he did not make much money with the business. John Kuehner owns a south St. Louis wine bar, 3500 Winehaus. Retiree Mike Dinzebach owns a home-remodeling firm in St. Charles that has worked for the ABC show "Extreme Makeover: Home Edition."

Neither Kuehner nor Dinzebach returned calls for comment.

Are they entitled to disability pensions?

The pension board doesn't know because it doesn't ask.

The trustees also rarely ask that disability recipients be re-evaluated for possible return to duty.

Said Wiesehan: "Experience has shown that the doctors will not change their opinions, and each time we do that it's an added cost to the system."

Chief Jenkerson knows of at least two firefighters he would like to see assessed.

Baby Ray Webber Jr. and Dedrick Harris each retired on disability for post-traumatic stress disorder after two fire engines T-boned in a spectacular collision in October 2008. A firefighter was hospitalized for a head injury.

Harris retired in September 2009 at age 43 and Webber a year later at age 35. Each gets an annual tax-free pension of $43,471.

"It's cliché to say it, but it comes with the job," Jenkerson said. "It's what you get paid for. You see a lot of atrocities over 25 years with the fire department. You see things that people can't even imagine ...

"There are all types of counseling available. I guess sometimes it's just easier to say, 'Yep, I'm done, I'm not going to work at it, I'm not going to try to get back.'"

Webber declined to comment. By retiring on disability, he followed his father's footsteps: Baby Ray Webber Sr. retired on disability in 1992 at age 46. The elder Webber could not be reached for comment.

Harris settled a workers' compensation claim against the city for $30,000 and is suing the captain of his engine company in circuit court, alleging he gave an order to run a red light.

In an interview, Harris said that the crash was so traumatic "it flicks a switch on/off inside of you to where you don't want to be in that situation again."

Harris got a new job where he doesn't have to ride fire engines.

He drives a MetroLink train.

Firefighter Retired on Disability Uses Bow to Hunt Suburban Deer

ST. LOUIS POST-DISPATCH -  February 19, 2012 12:00 am

Lou Salamone suffered knee injuries several times during his fire career, according to workers' compensation claims against the city.

He retired from the St. Louis Fire Department in 2007 with an injury to his left knee. He said after three surgeries doctors for the pension board told him he could no longer work as a firefighter.

Today, Salamone, 50, prowls the suburbs with a bow and arrow while earning a $44,203 annual disability pension.

As organizer of Suburban Bowhunters, his mission is to remove problem deer from west St. Louis County communities, where they pose a threat to motorists.

A Post-Dispatch reporter and photographer spent time with Salamone for a story in January 2009. The camo-clad ex-firefighter climbed a ladder to the top of a tree stand in a Clarkson Valley neighborhood and waited for hours without seeing a deer.

On a hunt with a photographer, Salamone hit a doe from a tree stand and carried the carcass out of the woods.

Salamone told the Creve Coeur City Council last May that if certain property owners gave him access to their land, "just me alone, I could reduce 15 deer easily, maybe 30, maybe 40."

COMMENTARY: Politicians Put Taxpayers at Risk Chasing Gain for Pension Plans

Watchdog News - http://watchdog.org - February 16, 2012 

By Frank Keegan | State Budget Solutions ^[1]

Politicians are setting up taxpayers and government workers for an even bigger crash by forcing retirement funds into risky investments, chasing gains required to pay promised benefits. That means trillions of dollars in higher taxes to provide no services or millions of betrayed public workers who will not get pension checks.

The public pension crisis just keeps getting bigger every year, as governors and legislators fail to deal with it, and fund managers have to go after higher and higher returns.

A recent Upjohn Institute “Analysis of Risk-Taking Behavior for Public Defined Benefit Pension Plans ^[2]” concludes: “An investment policy of increasing risk exposure on the asset side, while liabilities continue to increase with near certainty, can be a very poor gamble. Why would managers play this game?

“One motivation might be political decisions to make certain investments. Another could be transferring funding shortfalls as tax burdens to future generations. In addition, bargaining by unions could result in higher benefits, accounting incentives tend to guide behavior, and states may feel pressure because of fiscal constraints.”

Politicians want to project higher return rates, because that means­ less money they have to put in every year. Assuming delusional rates of return on investments lets them “balance” annual budgets by borrowing from retirement funds. That hidden debt just gets bigger every year.

By the time it comes due, they will be safely out of office. All state and municipal politicians have been pushing this time bomb into the future for decades. Now the clock is ticking down. None of them want to be holding it when it detonates.

The idea is simple. If you double the rate of return over 30 years, you only have to invest a third of the money required to pay the benefit.

At 8 percent — which is the rate public pension plans use  — you only have to invest 6 cents to pay $1 in benefits 30 years from now.

At 4 percent return, you have to invest 18 cents this year to pay $1 in benefits three decades from now.

Most lawmakers haven’t even been investing the 6 cents. And what they did invest, pension fund managers recently lost after pocketing billions of dollars for themselves and their cronies.

In just four years through 2010, 222 state pension funds lost $1.46 for every dollar “contributed” by taxpayers through state governments and employees.

It all adds up to trillions of dollars ^[3] somebody must pay.

Sure, all investors are dealing with 30-year, 15 percent, risk-free bonds recently rolling over into 3 percent bonds. And the Federal Reserve Bank’s ongoing policy of keeping interest rates artificially low makes it harder for pension fund managers to lie about how much they are going to gain.

Thirty years ago to guarantee $1 in benefits to be paid in 2011, you had to invest less than 2 cents. Right now to guarantee a $1 benefit in 2042, you must invest about 22 cents. Politicians do not want to do that.

So now they are shifting into riskier investments — which puts even more billions of dollars into insiders’ pockets — to try to claim future returns politicians can use to justify paying even less into pension and retiree health-care funds.

It is a perfect circle of deceit, corruption and racking up debt somebody else will have to pay.

Actuaries, the people who do the detailed accounting on pensions, call it “moral hazard ^[4].”

The fiscal immorality is all on politicians, but all the hazard is on taxpayers present and future.

Pension managers are betting our money that there never, ever will be another market downturn, and overall economic growth and investment gains will be beyond any in history.

If they are wrong, we pay the price. Even the Pew Center on the States’ “Widening Gap ^[5]” study, which showed a 26 percent increase in state and municipal retirement debt in just one year using official assumptions, admits the debt actually doubles when calculated realistically.

The Upjohn report cites as an example an average Ohio teacher. For that one teacher, the State Teacher Retirement System ^[6] will have only $518,000 in the bank to cover $1.3 million in pension checks, according to standard calculations used by everyone but governments.

STRS admits, “… long term, there is a shortfall in the funding …. If no changes are made, STRS Ohio will eventually be unable to pay pensions,” and says “The current expected long-term actuarial rate of return of 8 (percent) … cannot be raised; STRS Ohio cannot count on higher investment returns as a solution.”

The board does not explain how they plan to get even 8 percent. But the Ohio Public Employees Retirement System ^[7] last week revealed one way it plans to get the big bucks: hedge funds.

Ohio’s five state pension funds lost $31.4 billion, down 19.4 percent, from 2007 through 2010. And 2011 is not exactly shaping up to be the year they got it back, plus the 8 percent a year they continue to claim they will always get every year forever even when stark reality proves they never will.

Their solution is to double down on hedge funds, among the riskiest and most expensive investments anyone can make.

Even using delusional accounting, Ohio state pensions are only 66 percent funded, and politicians are not making full contributions, according to Pew. The retirement health-care fund is even worse at 31 percent funded and only 40 percent of the already low-ball annual contribution.

This supports the Upjohn finding that “managers take on more risk if the plan is underfunded and experienced poor investment returns in the previous three or five years. …” and, “… higher union membership percentages and a higher percentage of employees covered by collective bargaining are associated with more risk.”

Of course, none of that risk is on fund managers, politicians or government workers. It’s all on taxpayers, the only people not invited to the table.

Frank Keegan ^[8] is editor of Statebudgetsolutions.org ^[1], a project of sunshinereview.org ^[9]. The State Budget Solutions Project is nonpartisan, positive, pro-reform, proactive and anchored in fundamental-systemic solutions. The goal is to successfully engage political journalists/bloggers, state officials and opinion leaders in a new way of thinking about state government and budgets, fundamental reforms, transparency and accountability. frankkeegan@statebudgetsolutions.org ^[10]

MFPD Board Solves Issue Other Entities Won't Tackle

By MIKE ANTHONY - Executive Editor

CALL NEWSPAPERS

February 15, 2012 - We've been reading with great interest the debate over St. Louis Mayor Francis Slay's proposal to change the pension plan for city firefighters.

One published report noted that even before Slay's proposal was introduced to the city's Board of Aldermen, members of International Association of Fire Fighters Local 73 staged a press conference at City Hall to announce a counterproposal.

Firefighters' pension costs have escalated from $7.2 million in 2007 to an estimated $32.9 million in 2014, according to city officials. But the skyrocketing cost of employee pensions is not something that will keep Mehlville Fire Protection residents up at night, thanks to the efforts of the district's Board of Directors.

Chairman Aaron Hilmer and Treasurer Bonnie Stegman were elected in April 2005 after campaigning on a re-form platform, vowing to eliminate fiscal waste while improving services.

The biggest reform by far, according to the two, was changing the district's pension plan to a defined-contribution plan from a defined-benefit plan.

Less than a year after taking office, Hilmer and Stegman voted to change the district's pension plan. To listen to the outcry from members of Local 1889 of International Association of Fire Fighters and their legal counsel, one might have thought the world was coming to an end.

Heck, the union's legal counsel at the time was ranting about the need for a grand jury investigation.

Within days of the vote, Local 1889, which merged with Local 2665 last year, filed a lawsuit seeking to prohibit the board from changing the plan. After a nearly three-year legal battle in which the district and board — including Secretary Ed Ryan, who was elected in 2007 — prevailed every step of the way, union leaders agreed to settle the dispute.

Quite frankly, we're baffled why the proposal to change the plan met so much resistance. Under Mehlville's defined-contribution plan, the district contributes from 8 percent to 11 percent of an employee's total compensation to the retirement plan based on years of service.

Calculations performed about a year ago found the old pension plan's un-funded liability would have totaled nearly $18 million if the plan hadn't been changed.

We applaud the MFPD board for its foresight and courage to solve the pension issue instead of doing what most elected entities have done — kick the can down the road and hope a future board will solve the problem.

State Auditor Calls For Better Practices in Monarch Fire District

BY PATRICK M. O'CONNELL - ST. LOUIS POST-DISPATCH | Posted: February 16, 2012 

CHESTERFIELD • As he released a state audit of the Monarch Fire Protection District on Wednesday, Missouri Auditor Tom Schweich said he wasn't there to settle political scores or take sides in squabbles that have recently plagued the sprawling district.

"I hope this is a starting point for putting political differences aside," Schweich said.

Those contentious differences among board members, firefighters and residents over issues ranging from salaries, a sex discrimination suit and legal fees eventually led to the call for the audit a year ago.

The auditor's findings revealed several problems with district expenses and practices, leading to an overall "fair" rating and a series of recommendations to tighten spending, clean up financial record keeping, obey open meetings laws and re-examine a costly retirement incentive package.

Among the specifics cited by the auditor's report were $231,000 in retirement incentives over two years that his office said violated the state constitution, a $26,000 awards banquet and at least 40 instances of questionable closed meetings. The auditor also said the district needs to get bids and written contracts for legal services that in 2010 cost a total of $212,000, and perform a salary survey of administrative positions to ensure the pay structure is in line with those of other districts.

"I don't get involved in the politics. These are concrete, tangible ways to improve the problems of the district," Schweich said during a meeting to release the findings at district headquarters in Chesterfield. "All you have to do is fix these problems, and you will have a pretty well-run district."

Board members said they already have begun to implement changes, and the auditor praised district officials for their willingness to correct issues. The district serves Chesterfield and parts of west St. Louis County.

"If this audit is the mechanism for us to right the ship on the controls and processes of the district and cut down on the rhetoric and the politics, I'm all for it," board secretary Steven Swyers said.

Gov. Jay Nixon ordered the audit of the district in February 2011. Kim Evans, the current Monarch board president, had voiced concerns about possible wasteful spending of taxpayer money.

Schweich reviewed the findings Wednesday in front of board members and about two dozen residents. Afterward, Evans was unavailable for comment.

In terms of the Sunshine Law issues, the auditor's office criticized the district's closed meetings, saying the board did not document specific reasons for them. The auditor said such sessions, which happened 40 times from January 2010 through September 2011, prevent the public from becoming aware of the discussions and votes held in secret.

"We don't think anything devious was happening, but we did feel some of the meetings should have been open," Schweich said.

The auditor's office said the district's retirement incentive package, which provided $231,000 in compensation in 2010 and 2011, violated state law that prohibits extra compensation to public employees for services already rendered.

The incentive package gave employees $1,500 to $2,000 for each year of service and also set up a health insurance benefits plan for retirees, up to $2,000 per quarter for five years.

The auditor said the board should "ensure all retiree benefit expenditures are necessary and beneficial to district residents." The district formally responded in the report, saying it created the retirement package in coordination with the district's labor law attorney "to reduce long term labor cost."

The audit says the district spent about $26,000 for an employee awards banquet in September, and $16,000 of that went for 'service awards" to employees. It says 63 employees received awards including bronze bells, rings and watches the district bought. The audit calls the event "a questionable use of district funds."

It says the district paid $5,000 for the conference room and dinner, $2,000 to a guest speaker and $2,000 in miscellaneous attendance prizes.

Assistant Chief John Borgmann said the banquet was held on Sept. 11, 2011, in the pavilion at the Doubletree Hotel and Conference Center in Chesterfield. He said the speaker was John O'Leary of Webster Groves, a motivational speaker who was severely burned as a boy in 1987.

Borgmann said J.R. Terrell, manager of the district's health plan, later donated $1,500 to the district to help cover O'Leary's fee.

"Twenty-six thousand dollars for a party is too much money and we believe that was a waste of taxpayer resources," Schweich said.

The district responded that it will review "the dynamics of the awards banquet" and that it is "dedicated to cutting costs."

The audit also cited $212,000 in legal expenses in calendar year 2010, listing fees by legal service.

The audit says that the district sought formal applicants for general counsel but not for the other legal functions, and that the district had no written agreements for general or pension counsel. The audit says seeking proposals and written agreements provides more control at the "lowest and best cost."

The report also found the district made a $2,100 duplicate payment to a pension attorney, paid $1,200 to the wrong vendor for cleaning supplies and does not adequately document some expenditures.

Tim O'Neil of the Post-Dispatch contributed to this report.

Fiscal Reckoning: Not If, But When

By WALTER E. WILLIAMS

2012-02-09 15:02:02

THE ORANGE COUNTY REGISTER

Let's think about the kind of mess that we're in. Federal 2010 Medicare and Medicaid expenditures totaled $800 billion. The projected annual growth of both programs is about 7 percent. Social Security expenditures are more than $700 billion a year. According to the 2009 Social Security and Medicare trustees reports, by 2030, 49 percent of federal revenues will go for Social Security and Medicare payments. The unfunded liability of both programs is already $106 trillion.

But not to worry. The Congressional Budget Office estimates that it's possible to sustain today's level of federal spending and even achieve a balanced budget. All that Congress would have to do is raise the lowest income tax bracket of 10 percent to 25 percent and the middle tax bracket of 25 percent to 66 percent and raise the 35 percent tax bracket to 92 percent. That's a static vision that assumes that people will have no response and they'll work just as hard and send more money to Washington. If Congress did legislate such tax increases, it would be the economic equivalent of committing national hara-kiri.

Professor Daniel Klein, editor of Econ Journal Watch, and Professor Tyler Cowen, general director of the Mercatus Center, both based at George Mason University, organized a symposium to promote a better understanding of the U.S. debt crisis. The symposium's title, "U.S. Sovereign Debt Crisis: Tipping-Point Scenarios and Crash Dynamics" (http://econjwatch.org), is a strong hint about the seriousness of our nation's plight.

Professor Cowen introduced the symposium pointing out that in 2011, the major crisis was in the eurozone, where Greece, Italy, Spain, Portugal and Ireland dealt with the risk of default. The survival of the eurozone is now seriously doubted. Cowen added: "When it comes to a sovereign debt crisis, it is no longer possible to say 'it can't happen here.' Right now, we are borrowing about 40 cents of every dollar the federal government spends, and the imbalance has no end in sight."

Jeffrey Rogers Hummel, associate professor of economics at San Jose State University, says that a default on Treasury securities appears inevitable. He says that the short-run consequences for the economy will be painful but that the long-run consequences, both political and economic, could be beneficial. That's because an economic collapse is the only way we will come to our senses. That's a tragic statement about the foresight of the American people.

Participant Garrett Jones, associate professor of economics at George Mason University, is a bit more optimistic, seeing default as being less likely. But he argues that "default is still possible, and the GOP offers a uniquely American path to default: an unwillingness to raise taxes."

Dr. Arnold Kling is a member of the Financial Market Working Group at the Mercatus Center and tells us that the "U.S. government has made a set of promises that it cannot keep." He says that the "promises that are most important to change are Social Security and Medicare."

Joseph J. Minarik is senior vice president and director of research at the Committee for Economic Development. He argues that a "U.S. financial meltdown today is eminently avoidable. The wealthiest nation on earth, despite a painful economic slowdown, maintains the wherewithal to pay its bills. The open question is whether it maintains the will and the wisdom."

Peter J. Wallison holds the Arthur F. Burns chair in financial policy studies at the American Enterprise Institute. He agrees with Kling that "the most likely source of a U.S. sovereign debt crisis ... is a failure of the U.S. political system to address the growth of the major entitlement programs – Social Security, Medicare and Medicaid."

My translation of the symposium's conclusions is that it is by no means preordained that our nation must suffer the same decline as have other great nations of the past – England, France, Spain, Portugal and the Ottoman and Roman empires. All evidence suggests that we will suffer a similar decline because, as Professor Cowen says, "the American electorate has dug in against both major tax increases and major spending cuts."

© Copyright 2012 Freedom Communications. All Rights Reserved. 

Slay Offers St. Louis Firefighters a Pension Plan With Major Cuts for New ires

BY DAVID HUNN • dhunn@post-dispatch.com > 314-436-2239 | Posted: Thursday, February 9, 2012 12:45 am

ST. LOUIS • New city firefighters would earn a pension stripped of some current benefits deemed "unaffordable," according to two bills championed by Mayor Francis Slay and to be introduced Friday to the Board of Aldermen.

The bills, ready after months of preparation and debate, would essentially close the current Firemen's Retirement System of St. Louis, which is partly controlled by state law, and start a new, city-governed fire pension plan.

The bills, if passed, will not change benefits already earned by the city's 600 firefighters, according to copies obtained by the Post-Dispatch. They also would retain for new hires the maximum basic retirement — 75 percent of their pay per year, for life.

But Slay's proposal would reduce retirement earnings for nearly all firefighters going forward — and most drastically for new firefighters. New hires would have to wait until 55 to retire with a full pension. (There is no minimum age now; firefighters can retire after 20 years of service.)

In addition, new firefighters would get fewer cost-of-living increases and no more deferred retirement options — which pay firefighters their pensions while they continue to work.

Moreover, all firefighters would have to pay more into the system. And new firefighters would no longer get that money back. Current firefighters would not get back money they put into the system in the future.

And disability pensions, which both city leaders and firefighters agree have been abused, could get slimmed to just 25 percent of a firefighter's salary, depending on the injury. (Now, firefighters disabled on the job get 75 percent of the maximum salary for their position.)

The bills lay out Slay's legal and moral argument for reform of the system.

And they outline the financial strain it puts on the city, saying that city payments into the fire pension system have gone up nearly 600 percent, to $23 million in 2010 from $3.4 million in 2001, and now "consume nearly a third of the fire department's budget."

All three of the city's retirement systems — for firefighters, police officers and civil service employees — are under scrutiny now.

"This is a critical juncture for the city," said Slay's chief of staff, Jeff Rainford, who has been meeting with aldermen for months on the subject. "In a lot of ways, the city is a better place than it was. Tax revenue is going up. Crime is going down. We've gotten our financial house in order in every way — except for pension costs."

The city is focusing on firefighters' pensions first, Rainford said, as the most expensive per worker.

Rainford acknowledges that the bills won't be easy to pass. The mayor will need the support of at least 15 of the city's 28 aldermen. Some have already vowed to fight him.

In addition, the proposal, if passed, will likely face court challenges from the pension board, called the Firemen's Retirement System of St. Louis.

Executive Director Vicky Grass declined to comment on the bills' details. But the system's private attorney, Dan Tobben, said Wednesday that the mayor wasn't going about reform correctly.

"The fact that they're 'opting out' and setting up a different pension program seems clearly to be against state law," he said.

Moreover, he said, courts across the country have ruled that cities can't change benefits for existing workers, only new hires.

SICK PAY SUIT

Using similar arguments, the system sued the city more than a year ago after it stopped allowing workers to accumulate sick leave days. The case is still in court.

Some aldermen buy Tobben's argument.

"Haven't we tried this before, been sued and lost?" said Alderman Joe Vaccaro, D-23rd Ward, who introduced a bill last year to reduce disability costs and retrain injured firefighters. He had support of the firefighters union and the state legislature, before the mayor squashed the effort, saying it didn't go far enough.

Still, the mayor has already lined up supporters. Alderman Craig Schmid, D-20th Ward, will sponsor the bill, and, as chairman of the board's public employees committee, is likely to be its first shepherd through the city's legislative process. He said his aim is a "realistic, sustainable" pension system.

The bills outline the mechanisms the city plans to use to sidestep the concerns of Tobben and others.

The first bill would repeal 33 city laws and discontinue the accrual of benefits under the old system, effective June 1. It says the system has "transformed" from its origins and is now "unsustainable" with "unaffordable secondary benefits, which must be funded by City taxpayers but over which the City has no influence or control."

The second bill would establish the new system, merge it with the assets and liabilities of the old one, and dramatically change benefits for new hires.

It would eliminate the popular Deferred Retirement Option Plan, which aims to keep top brass for five years longer by paying them a pension and a salary at the same time.

Slay said he hoped to reach agreement with the union, the International Association of Fire Fighters Local 73, but on Monday his office sent it a letter of impasse.

UNION RESPONSE

Chris Molitor, president of the union, said the city never gave him a final offer to take to his members.

"That violates every proper protocol that's involved in negotiations," he said. "It is further proof that the mayor had no true desire to reach a compromise with firefighters."

Moreover, he said, the union has a plan to save about $6.6 million next year and for the next several years, which it will disclose soon.

Fire Chief Dennis Jenkerson said that he hadn't seen the bills' details but that he was concerned they could lead to a glut in retirements this year. "I think you always worry about wholesale retirements with upper management," he said.

Aldermen will need at least three meetings to pass the bills and have only about six left before the session ends.