Guns and Hoses – a pension crisis in the making

By Scott Reeder
Illinois News Network

Sandra Olson was a Schaumburg cop – until she injured her foot.

“I know it sounds lame – the other cops gave me a hard time about it – but I can’t be a police officer anymore because I injured my foot,” she said.

She says the incident – which occurred during a traffic stop in 2005 – damaged the cartilage between a toe and the rest of her foot.

The 58-year-old now collects an annual disability pension of $43,452 and will receive taxpayer-paid health insurance for the rest of her life.

And yet, despite her injury, she continues to work on her feet – as a cashier.

Olson’s situation is not unique.

Escalating numbers of public safety workers are taking disability pensions, contributing to a financial crisis affecting Illinois municipalities large and small.

The Illinois Municipal League is a coalition of Illinois cities and villages that lobbies on their behalf in Springfield. League officials contend that many of the people receiving duty disability pensions are not disabled to the point that they cannot pursue alternate careers.

But just how incapacitating the majority of these injuries are is a bit of an open question because a comprehensive study has never been done.

A duty disability pension allows someone who has a work-related injury to collect a pension even if they are quite young and their injury relatively modest.

The threshold for receiving the benefit is whether the employee can continue as a police officer or firefighter because of their work-related injury.

The pension starts at 65 percent of the employee’s final salary and includes cost-of-living adjustments. Free health insurance usually is included for the workers and their families.

These generous benefits are straining already cash-strapped municipal pension systems across the state, and hurting the municipalities themselves.

Duty disability pensions are paid from local pension funds, while the related health insurance benefit comes directly from city coffers.

The average Illinois police and fire pension fund is only 54 percent funded, according to a Commission on Government Forecasting and Accountability report released in April. Unfunded liabilities for the police and fire pension funds for all Illinois municipalities outside Chicago are $7.5 billion.

This is the next major financial crisis facing Illinois, state Senate Republican Leader Christine Radogno said.

Municipal property taxes will likely skyrocket as cities grapple with the additional costs incurred by more police officers and firefighters seeking disability benefits, said Danville Mayor Scott Eisenhauer.

But it’s not just taxpayers who are at risk – police officers and firefighters should care about the health of their pensions, which are drawn from the same pool of money as the disability pensions.

The way the law is being interpreted right now, it has the potential of bankrupting every police and fire pension in the state, said Roger Huebner, deputy executive director and general counsel for the Illinois Municipal League.

In fact, during a six-year period, the number of Illinois firefighters receiving disability pensions increased by 24 percent and the number of police officers collecting disability pensions shot up 30 percent, according to data from the Illinois Department of Insurance.

Those professions haven’t become inherently more dangerous. But judges have broadly interpreted the law, making it easier for firefighters and police officers to have themselves declared the victims of “catastrophic” injuries.

A good case in point is Craig Richardson, a former Libertyville firefighter who suffered a back injury while working in 2006. Richardson, who is now 45, said he could no longer continue as a firefighter.

Since leaving the job, he and his family have collected more than $355,969 in pension payments and an additional $107,072 in health insurance benefits, village officials said.

But Richardson hasn’t stopped working.

He’s gone on to teach firefighting classes full time at Lake County High Schools Technology Campus, according to pension records provided by the Teachers’ Retirement System.

Richardson did not respond to a request for comment so it is not known what responsibilities his new duties involve.

Often it is difficult to ascertain the exact cause of some of these injuries.

“We see things like knee injuries, back injuries – things that they contend are a result of the cumulative effect of working on the job,” Huebner said. “But how do we know that? We also see things like people claiming a mental disability. They will say they saw something on the job that makes it too difficult for them to go on being a police officer or firefighter.”

In 2010, municipalities across Illinois spent $36 million on firefighter disability pensions – double what they spent just six years earlier. For police officers that number is $10.4 million – 78 percent more than just six years earlier.

The increased payments are because of the escalating numbers of people applying for duty-disability pensions, Joe McCoy, a lobbyist for the Municipal League said.

But the costs go well beyond that because cities are now required to provide health insurance to disabled police and firefighters, their spouses and their children up to age 26.

Just how much the health insurance benefit costs taxpayers in municipalities across the state has never been tabulated.

But in Peoria alone, taxpayers paid $1.4 million in health insurance benefits to 16 former police and firefighters on duty disability between 2003 and 2011.

The law that gives police and firefighters this health insurance benefit is called the Public Safety Employee Benefit Act, or PSEBA, and was enacted in 1997.

“When we passed that law, the idea was that it would only cover people who were ‘catastrophically’ injured and who couldn’t work ever again – like a wounded police office in a wheelchair,” said former state Sen. Laura Kent Donahue, R-Quincy. “But the courts have interpreted ‘catastrophic’ much differently than we ever intended.”

In 2003, the Illinois Supreme Court ruled that a “catastrophic injury” need not be a calamitous-type injury. In Krohe vs. Bloomington, the court ruled that any injury where a line-of-duty disability is awarded – regardless of the scope of that injury – qualifies as “catastrophic.”

And just what constitutes a line-of-duty disability rests largely in the hands of members – and former members – of the unions representing police and firefighters.

Local police and fire pension boards rule on who is eligible to receive the duty disability pension. Those boards consist of two members of the union representing the employee, a retiree from the union and two appointees from the city administration.

“Not only will the majority of the board likely know the firefighter seeking a disability pension, but they will likely have socialized with him and his family in addition to having worked with him,” Huebner said. “It’s not a fair situation for the taxpayers.”

Today a police officer or firefighter with a bad knee can claim the injury is a result of the cumulative effects of their job and get a disability pension – even if they were having ongoing knee problems before they were hired, said Dean Rich, retired finance director for O’Fallon.

“We had one guy who said he slipped on something,” Rich said. “He already had a bad knee when we hired him. But he said this aggravated the injury and he couldn’t be a police officer anymore. We are now paying him more than $40,000 a year, providing free health insurance for his wife and six kids and within six months of leaving the department he got job as a security consultant for a company in St. Louis, where he’s making more than $100,000. That’s just not right.”

About the same time, another O’Fallon officer in his 30s received a duty disability pension for an injured knee. He was photographed by a local newspaper repairing the roof of his barn a few months after his retirement, Rich said.

“I hope the officers understand that every time someone does something like this, it endangers the pensions for everyone else,” Rich said.

Rockford Mayor Larry Morrissey said police and fire pension issues have the potential of dragging cities across the state into insolvency.

“Rockford is in better shape than most. We won’t be the canary in the coal mine on this one, but it is a serious problem,” he said.

Morrissey said the problem goes beyond how judges interpret the statute.

The relationship between state lawmakers and government employee unions has also been a contributing factor, he said.

“They take money from the unions for their campaigns and they pass these laws. It has the added advantage – for them – of being something the state doesn’t have to pay for. These are unfunded mandates being imposed upon cities.”

A good case in point is the presumptive disability law, he said.

Ailments such as lung cancer and heart disease are considered occupational illnesses for firefighters. Under Illinois law, a firefighter diagnosed with these conditions can receive occupational disease pensions.

“It’s like we are playing against a stacked deck. People get cancer. People have heart attacks … But no court would ever say that it is certain it was caused by their work – except that the Illinois Legislature created a law that made it a legal presumption that is the case,” Morrissey said.

Under current state law, it could be presumed that a firefighter’s high blood pressure is work related.

“The reality is that firefighters aren’t more likely to have a heart attack than anyone else,” said Marcia Fritz, president of the California Foundation for Fiscal Responsibility.

Fritz was part of a team that conducted an actuarial study of the California Public Employees’ Retirement System to
determine lifespans of public safety workers. How long government employees live is an important issue for state retirement systems charged with paying their pensions.

“What we found is that firefighters and police officers actually live longer than the general population. Just why is a bit of an open question. Our best guess is their access to excellent health care,” she said.

Fritz was hired as private consultant by the state of California to examine the issue.

Still, firefighters have lobbied to include heart disease and other ailments on list of occupational diseases and their supporters in state legislatures have responded.

“Heat can cause a lot of stress to the body that we just don’t understand,” said state Rep. Don Moffitt, R-Gilson, who is co-chairman of the legislative “Fire Caucus,” a group of lawmakers who advocate for firefighters.

Moffitt added that it is not just physical stress that firefighters must deal with, but also emotional stress that contributes to it.

Fritz counters that there is stress in many jobs. She added that one cannot presume that job stress alone is responsible heart disease.

But the issues in play aren’t all medical – they are also financial.

There are also economic incentives that make disability pensions a more appealing option for workers than a standard pension, Huebner said.

“If you work a 30-year career you can retire and get 75 percent of your pay – and no health insurance,” he said. “But let’s say you got hurt your second day on the job. You could get a 65 percent of your pay for life if you get a disability pension, you get free health insurance for you and your spouse for the rest of your lives and for your children up to age 26. You also get full pay for your first year and you get to file a workers’ compensation action.”

“No one objects to disability pensions for those who have suffered debilitating injuries that would prevent them from working ever again,” Huebner said.

But often those receiving disability pensions are able to pursue lucrative second careers.

“A disability pension is a greater financial benefit for someone than if they were working,” he said.

Huebner said there is plenty of anecdotal evidence indicating that disabled police officers and firefighters are going on to work in new careers, but concedes there has not been a comprehensive study.

Radogno said police and fire unions are opposed to changing the current system.

“They look at it as taking away something they already have,” she said.

But she added they should view it as a situation that puts their jobs in peril.

“One has to ask if a municipality is so cash strapped by offering this benefit will they have to cut back on the size of their forces? Privatize some of their functions? Combine with other municipalities? So this could have a negative impact on those folks who might never access the benefit because there would be fewer jobs,” Radogno said.

Radogno said she is in the process of hammering out a legislative proposal to address the escalating number of firefighters and police officers claiming to be catastrophically injured.

Among the ideas under consideration is creating an arbitration panel to review “marginal cases” to determine whether they should receive the health insurance benefit, she said.

“We want to strike a balance to ensure that those truly deserving receive this benefit but also make sure we are protecting the taxpayers,” Radogno added.