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Comptroller won't review St. Clare's pension fund

Comptroller won't review St. Clare's pension fund

Counsel said fiscal agency lacks authority to audit private fund, but hopes its problems can be solved
Comptroller won't review St. Clare's pension fund
The main entrance to Ellis Medicine McClellan Street Health Center, formerly St. Clare’s Hospital, is shown.
Photographer: Marc Schultz/Gazette Photographer

ALBANY — The state Comptroller’s Office won’t investigate the management of the St. Clare’s Hospital pension fund nor try to determine how it wound up tens of millions of dollars short of what is needed to pay benefits promised to 1,100-plus pensioners.

The fiscal watchdog agency sent a letter to state Sen. James Tedisco rejecting the Glenville Republican’s request for review. 

The letter indicated state Comptroller Thomas DiNapoli applauds the effort by Tedisco and other area state legislators to help former employees of the Schenectady hospital and wishes him success in his efforts. While the state Comptroller’s Office would closely monitor any effort by the state to resolve the pension crisis, the comptroller’s counsel wrote, it lacks the authority to investigate, manage or audit a private pension fund.

The state is being viewed as a potential party to solving the crisis — area legislators are seeking inclusion of $20 million in the 2019-2020 budget toward an eventual bailout. The circumstances are unique, Tedisco has said, because the state ordered the hospital shut down in 2008 and in the process attempted to make the severely inadequate pension fund whole.

The state paid $58.7 million to facilitate the absorption of St. Clare’s into what is now Ellis Medicine, $28.5 million of which went into the St. Clare’s pension fund. Due in part to poor investment performance during the Great Recession, $28.5 million was far too little: The pension fund is now an estimated $42 million short of what is needed to pay the full amount promised to former employees. 

Tedisco has maintained that the state’s role in the 2008 closure and bailout makes it responsible to help solve the crisis a decade later, and maintains that the unanswered questions of how and why the crisis developed call for an investigation.

He told The Daily Gazette via email Wednesday he is disappointed that the Comptroller’s Office won’t be looking for those answers.

“I believe given the fact that a decade ago the state was involved in St. Clare’s Hospital’s closure as part of the Berger Commission’s right-sizing our state’s healthcare system and made a significant taxpayer investment here, the state should be investigating what happened to the money and what led to the pension fund’s insolvency. 

“The more than 1,100 people who lost partial or all their pensions are constituents of the governor, comptroller and attorney general. With their investigative powers, I would think they would deem it important to get to the bottom of what happened to help these individuals moving forward and prevent something like this from happening again.”

Six state legislators representing the Capital Region (and staff members for two others) met Feb. 8 at the Capitol with pensioners and Bishop Edward Scharfenberger of the Roman Catholic Diocese of Albany to seek a way to restore the income lost by former St. Clare’s employees. 

To varying degrees, all sides were optimistic after the meeting, the major accomplishment of which was agreement on a strategy by which the legislators would seek roughly $20 million from the state and the bishop would seek an equal amount from a church-affiliated philanthropic organization set up with the windfall proceeds of sale of a church-owned health insurer.

The unified multiparty approach to seeking a bailout was believed to have a better chance of success than a single effort. Multiple voices also hoped for a forensic probe of the first state bailout, either by the state Comptroller’s Office as a fiscal watchdog or by the state Attorney General’s Office, which has oversight on non-profit entities.


Meanwhile, some of the last corporate entities associated with St. Clare’s Hospital may finally cease to exist

St. Clare’s Hospital Holding Co., which previously owned a medical office building and some other assets, has filed paperwork in Supreme Court of Schenectady County seeking approval of a dissolution plan. The Attorney General’s Charities Bureau is listed as the respondent. St. Clare’s Hospital Foundation, an entity that supported the hospital and raised funds for it, also filed paperwork.

And the St. Clare’s Corp., which among other things oversaw the pension plan after the hospital surrendered its operating license, has turned the pension plan over the financial services company Prudential; has poured its remaining assets (about $500,000) into the pension fund; and will be moving toward dissolution itself, according to its president, Joe Pofit.

The corporation has no further business to conduct, he said.

Pofit added that St. Clare’s Corp. supports the efforts to find additional sources of money to pay the full pensions owed to all former employees. 

Should those efforts be successful, he said via email, “Our expectation is that another entity would disburse those funds.”


St. Clare’s was always the smaller of Schenectady’s two general-service hospitals, and it served as a safety-net provider for underinsured and uninsured patients. As such it had continual financial problems in its later years.

For the last ten years St. Clare’s operated, its managers made almost none of the contributions needed to keep the pension fund viable. And of course, the fund has received zero contributions in the ten-plus years since the shutdown.

As a money-saving move, the hospital in the 1990s took advantage of an exemption for religious-affiliated organizations that allowed it to opt out of the federal pension guaranty, leaving its retirees with no safety net when the pension fund tanked.

That religious affiliation — a close association with the Albany diocese that began before the hospital was built and continued after it closed — led many to conclude that the diocese was morally if not legally responsible for solving the pension shortfall. The diocese has rejected this, at first with blunt statements and then with compassionate words and offers to help seek a solution with someone else’s money.

The St. Clare’s pensioners were notified in 2017 that the pension fund was insufficient and their payments would be reduced six to ten years into the future. Then, in late 2018, they were notified that the cuts would come in just a few weeks.

In 2019, approximately 660 former employees have seen their pension payments eliminated and approximately 440 have seen their payments reduced, unless they opted for a one-time lump-sum buyout.

An attorney with the Legal Aid Society of Northeastern New York is representing two of the pensioners in an attempt to recover what was promised to them. If they are successful, their cases could provide an important precedent for the 1,100 other pensioners.

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