Because of deep investment losses in recent years, the Fire Department cost of the Fireman's Retirement System is going up by $4.7 million next fiscal year, which will force the City of St. Louis to make cuts in the Fire Department. Those cuts will include 30 firefighter layoffs, the maximum number the City can reduce without closing fire houses. It marks the sixth straight year the cost of FRS has gone up. It marks the first time that anyone can remember that the City has laid off firefighters.
At the same time, Police Chief Dan Isom reworked the department's 2011 budget and, despite an increase in the cost of the Police Retirement System, will be able to avoid laying off police officers. In addition, the Police Retirement System has proposed changes to reduce future pension fund cost increases.
The cost increase of the Employees Retirement System is even smaller. So, the City does not anticipate a large number of layoffs with civilians because of the pension cost increase. Likewise, civilian employees have accepted changes to their pensions as well.
"This is a good news, bad news story," said Jeff Rainford, chief of staff to Mayor Francis Slay. "We are going to avoid laying off police officers and minimize the layoffs of civilian employees. But, because the cost of the Firemen's Retirement System is so much more, we cannot avoid laying off firefighters. We cannot spend money we do not have. State law gives us no flexibility. So, we have to lay off firefighters so we have enough money for their pensions."
For the current fiscal year and next year, the cost increase for FRS comes to more than $16,000 per firefighter. By comparison, the cost increase for ERS for the same time frame comes to almost $1,000 per civilian employee.
The cost of the pension is so high that layoffs alone won't solve the long-term problem. "Our goal is to make cuts that will have the least impact as possible," Rainford said. "But, if the cost of FRS keeps going up, we are going to run out of options. We are going to continue to meet with firefighters for a long-term solution. If we reach one, and the cost of FRS ever goes down, we hope to restore the cuts. If not, there could be even more cuts in the future."
The mayor has been warning for years that if the cost of FRS did not stop going up, it was going to result in layoffs and deep cuts in the Fire Department. The City has met with firefighters since last summer to find a common sense way to keep the pension costs from going up. It brought in mediators. The City made proposals. It asked firefighters for proposals. With this latest bad news from FRS, time has run out.
Despite a $46 million shortfall in the City budget this year, the Fire Department budget actually went up this year by more than $2 million. Unfortunately, the department is on track to overspend its budget by another $2 million. Now, on top of that bad news comes the FRS requirement for another $4.7 million.
Here are the facts on the cost of FRS. Before the latest cost increase, it cost $33,000 per year per active firefighter. Retirement costs amount to 59% of the Fire Department's payroll. They consume nearly a third of the Fire Department budget. As a result, the Fire Department budget has gone up by 48% in the last decade, and yet the City has not added firefighters nor opened new fire houses over that time.
Even though there are far fewer firefighters than civilian employees and uniformed police officers, the cost of FRS is going up by more than the other two pensions. While FRS is going up by $4.7 million, the cost of the Employee Retirement System cost is going up by $1.7-million, and the Police Retirement System cost is going up by $2.5 million. It means even though there are roughly half the number of firefighters than police officers, the cost of FRS is more than the cost of PRS.
"We have raised taxes, increased fees, and have eliminated hundreds of civilian jobs, and that wasn't enough" Rainford said. "Even as bad as things are, we are not giving up. We will continue to meet with firefighters to try to find a long-term solution."
To put a dent in the rising cost of public employee pensions, the City eliminated sick leave buyback for both civilian employees and firefighters. The City pays its employees when they are home sick. Under a decade old policy, employees could bank their unused sick leave and cash it in when they retired. While civilian employees accepted the elimination of sick leave buyback, firefighters sued the City to keep it.
Representatives of the firefighters union have falsely alleged the City would have the money for the skyrocketing cost of their pension if it had not diverted money from a sales tax that voters approved in 2008. The City has lived up to both the letter and the spirit of the law. That tax raises $16 million. As promised in the ordinance, $11 million goes to pay off money borrowed to for the increased costs of the firefighter and police officer pensions. An additional $1 million is allocated in support of crime prevention efforts. The remaining balance of $4 million has been allocated, as promised, to help cover salaries and pay raises for firefighters and police officers, including the costs of funding a 3.5% pay increase that was approved upon passage of the tax. In addition, the Fire Department and Police Department budgets combined have gone up by $30 million since the tax was passed.
"Many of our citizens don't have jobs. Some who have jobs don't have a pension or a 401(k). It is not right to ask them to pay more in taxes or get less in services to make up for investment losses in the Fireman's Retirement System," Rainford said. "So, we are in a very tough spot. But, ignoring the problem, or passing it along to future generations are not options."