Legislator researches St. Clare’s pension crisis, says diocese responsible

Former hospital employees still looking for attorney to move case forward
Assemblyman Phil Steck, who represents the state’s 110th District, is pictured in 2016.
Assemblyman Phil Steck, who represents the state’s 110th District, is pictured in 2016.

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ALBANY — A local legislator is doubling down on the assertion that the Roman Catholic Diocese of Albany has a moral responsibility to fund the failing St. Clare’s Hospital pension plan.

The pensioners, meanwhile, are still trying to gain legal representation in hopes of forcing some entity to put money into the fund. (The fund’s administrators are halting checks altogether for many former employees of the defunct Schenectady hospital and trimming the monthly payments to the rest by about 30 percent.)

Assemblyman Phil Steck, D-Colonie, whose district includes the old St. Clare’s Hospital campus, still in service as part of Ellis Hospital, said on Thursday that he doesn’t accept the church’s position. In recent days, he has had his staff look extensively into the relationship between St. Clare’s and the diocese, and it is just too close and sustained to be as casual and non-binding as the diocese asserts, he said.

On another front, David Pratt, an Albany Law School professor who is working in an advisory role with the 1,100-plus former employees of St. Clare’s, said on Thursday he continues to look for an attorney to represent them. Many area law firms he’s contacted have declined to help due to the potentially large commitment of time and money it would take, a conflict of interest with some of the parties that could be involved, or a reluctance to take on the Catholic Church.

St. Clare’s was ordered closed in 2008 by the state Berger Commission as part of a statewide wave of forced mergers and closures. The state paid $50 million to Ellis Hospital to absorb its smaller neighbor, $28.5 million of that to shore up a badly underfunded pension fund. From 1998 to 2008, St. Clare’s administrators made only a small fraction of the necessary contributions to that fund.

The $28.5 million infusion proved to be inadequate, as the fund lost value during the Great Recession and the payout costs proved to be higher than calculated. Also, as a cost-saving measure, St. Clare’s had opted out of the federal Pension Benefit Guaranty Corp., a move allowed only for religious-affiliated or run hospitals. As a result, the pensioners are left with no safety net.

Ellis Hospital has said it was absolved of responsibility for St. Clare’s pensions as a condition of absorbing St. Clare’s into what is now Ellis Medicine. The state has said its $28.5 million contribution in 2008 ended its involvement in the matter. The diocese maintains it never owned or operated St. Clare’s, only “sponsored” it or was “affiliated” with it, and therefore has no responsibility for the pension fund now. 

But Steck said the hospital’s history shows that the diocese was heavily involved and has a moral responsibility.

St. Clare’s was a Catholic hospital opened by The Franciscan Sisters of the Poor in 1949.

Bishop Cusack bought the land a century ago. The diocese recruited the sisters to run the hospital. Bishop Gibbons laid the cornerstone. Monsignor Howard Manny chaired the hospital board when it opted out of the pension guaranty. Bishop Hubbard was chairman of the board in the hospital’s last days and negotiated its closure. Bishop Scharfenberger, until recently, sat on the board of directors of the St. Clare’s Corporation, as did two Schenectady parish priests. The corporation operated until recently out of rented space in the diocese’s Pastoral Center in Albany.

“I don’t know what they mean by ‘affiliated,’” Steck said. “I think this was under the direct control of the diocese. There doesn’t seem to be any other conclusion that one could reach.

“It is unquestionably true that the diocese set up this pension plan. We can all hide behind the technicalities of the law, which may or may not apply. The reality is, this was a diocese-run hospital.”

The Schenectady area’s two state senators, James Tedisco, R-Glenville, and George Amedore, R-Rotterdam, last week blamed the state for the mess, saying the bailout was insufficient in 2008. They called on the state to provide $53.5 million in the 2019-20 budget to pay for a bailout, after the state comptroller does an audit.

In a remarkably blunt statement for a state agency, the Department of Health said in response: ‎”Unlike others, the owners of this hospital specifically chose not to contribute to the pension guarantee fund on behalf of its workers. The state stepped in to help salvage workers’ retirement and contributed $50 million, with $28.5 million earmarked to support the workers’ pension liabilities. The mismanagement of the pension fund is the moral responsibility of the diocese, and they should fund their fair share.”

The diocese responded later in the week by repeating its earlier assertions:

“The collapse of the St. Clare’s Corporation pension is a tragedy, and creative solutions should be sought to assist pensioners during this challenging time. However, the Department of Health is misinformed. The management of St. Clare’s funds — pension and otherwise — was always the responsibility of the St. Clare’s Corporation, under the direction of its president and fiscal officers. The diocese was never the owner or manager of the hospital or its pension fund.”

Steck said last week, and repeated Thursday, that the state never had a responsibility to do a pension bailout as part of the Berger Commission action and does not now. It is now the “moral responsibility” of the diocese, he said. He would support a partial state bailout of the pension fund in 2019, but he doesn’t think the state would agree to that unless the diocese was paying for the rest, he said.

Steck also said he has brought the matter to the state Comptroller’s Office and state Attorney General’s Office, but he was not aware, as of Thursday, of any laws that were broken.

He is a practicing employee-rights attorney and aware of the intricacies of pension law,  but he said he was not aware of the intricacies in this particular case because he is not involved as an attorney and cannot be because he is an assemblyman.

If the retirees can get themselves an attorney, there are a number of avenues Steck could see to approach the matter. Because it would be a civil case, the rules state the diocese would essentially have to prove itself not responsible in order to avoid losing a lawsuit.

Pratt said the cost of gaining legal representation has been a stumbling block as much as the lack of local attorneys willing and able to take the case. The pensioners are not wealthy, for the most part, so they’d be unlikely to kick in $500 each to provide a $500,000 retainer. Just getting a total $500 for some FaceBook advertising took a while, he said.

Pratt, who is volunteering his advice, can’t take the case himself because he’s not a litigator and doesn’t have a law firm.

“We have not given up on the idea of finding an attorney,” he said Thursday, adding that he may have a line on one who would work without a retainer. “I am guardedly optimistic.”

The case has gained significant attention in traditional media, on social media, in more than 3,900 signatures on an online petition, and in messages of support from various politicians and local government bodies.

(All four Schenectady-area state legislators have weighed in on the matter. Only Assemblyman Angelo Santabarbara, D-Rotterdam, hasn’t pointed a finger at a particular entity as a cause or solution of the problem, calling instead for all parties to come together and find a solution. The diocese and the St. Clare’s Corporation have offered to be part of such dialogue.)

Pratt said some law firms won’t touch the St. Clare’s pension case because of the power and influence of the Catholic Church, but he’s not aware of any such reluctance among state officials.

“I haven’t seen any direct evidence of it,” he said, adding, “we know that the Catholic Church is a powerful force in New York state.”

Pratt said the matter is far from over, and far from lost.

“This is a case that’s got quite a lot of attention [nationally],” he said. “So as I said, I am guardedly optimistic.”

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