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Thursday, Oct. 17, 2013 12:01 am

Pension wars

Police spike under fire

 Springfield Mayor Mike Houston last week appointed the city’s budget director to fill a lapsed seat on the city’s Police Pension Board that has defied a state order to calculate pensions at a lower rate than has been the board’s practice.

The appointment of budget director Bill McCarty came one day after Ward 7 Ald. Joe McMenamin called on Houston to fill the seat held by former alderman Tom Selinger, whose term had expired. McMenamin also said that the pension board should be following state directions.

“I will not stand for money being spent unwisely out of this treasury,” McMenamin said during a press conference last week. “That’s what’s happened.”

The pension board has defied a 2012 order from the state Department of Insurance to calculate pensions based on the actual annual salaries of officers rather than on 5 percent increases officers receive for just two weeks a year. The so-called pay spike is paid for one week after birthdays and dates of hire, and officers often retire during those spike periods to increase pension benefits that inflate by an average of $65,000 over the lifetime of each retiree, thanks to the pension formula used by the board and ruled improper by the state.

“We need a member (on the pension board) who says, ‘Yes, we should follow the rule of the Department of Insurance,” McMenamin said. “It’s the law. It’s as simple as that: Just follow the law. This language (in the law) is unmistakable and specific.”

Ron Stone, attorney for the Police Benevolent and Protective Association, the union that represents officers, says he doesn’t believe the state’s order was well-founded.

“Apparently, the pension board did not, either,” Stone said.

The board sued the Department of Insurance last year after a hearing officer sided with department staff and determined that the city wasn’t properly calculating pensions. But the board took no action after filing a complaint and so the lawsuit was dismissed for lack of action in August. The Department of Insurance then threatened the board with enforcement action from the attorney general. Sangamon County Circuit Court Judge John Schmidt has since reinstated the lawsuit, with a hearing set for Dec. 10.

James Moody, the board’s lawyer, wouldn’t discuss why the board didn’t follow up for more than a year after suing the state, nor would he discuss other aspects of the case.

“I can’t really discuss our legal strategies with regard to the case,” Moody said. “I think the pleading sets forth our argument that the (state’s) order is ambiguous.”

Regardless of what happens in court, the pay spike is set to disappear in February under terms of a police collective bargaining agreement approved last year.

James McNamee, president of the Illinois Public Pension Association that represents the interests of police and firefighters pension funds, said that his association is watching the court fight and backing the board. Pay spikes, he says, aren’t uncommon in Illinois municipalities because they encourage veteran cops with high salaries to retire early, which saves money for cities and villages that replace veterans with lower-paid rookies who are less prone to file disability claims. Long hours sitting in a patrol car takes a toll on backs, he says, and cops have a high rate of diabetes from eating fast food.

Critics of pay spikes, McNamee says, are grandstanding.

“It’s politics, really – it’s all politics,” he said.

Joe McCoy, legislative director for the Illinois Municipal League, said he’s not aware of any other city that has defied the Department of Insurance. The league, he says, supports the state.

The issue has come up at least once before in Illinois courts.

In 2010, the First District Appellate Court upheld a Cook County judge who decided that a retired police chief for the Village of Westchester could not receive pension benefits based on a raise he received less than three months before his retirement date. He had asked for the raise when notifying the village that he was going to retire.

The key, according to the appellate court, is whether money for a raise given shortly before retirement is included in an appropriations ordinance. Otherwise, the court found, added pay can’t be used when calculating pensions.

Houston said that he believes that the pension fund should be reimbursed by recent retirees who have received added benefits based on spikes ruled improper by the state. Repayment should come from eleven former police officers who retired since February of last year, when the state ordered the pension board to stop using spikes to calculate pensions. The overpayments total $16,500, the mayor said.

Contact Bruce Rushton at brushton@illinoistimes.com.

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