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Study shows city pension woes here to stay

Wednesday, September 26th, 2012 by John Kennedy

Municipal pension plans are stretching thinner in Florida as a smaller workforce supports a growing number of retirees — with prospects bleak that funds will recover, a report released Wednesday concludes.

The Leroy Collins Institute’s latest review of the plans found that while the sluggish economy has contributed to the funds’ problems, deeper woes plague them.

“These municipal pension issues were not created overnight and can’t be changed overnight,” said David Matkin, a public administration professor at Florida State University, who studied Florida’s 492 municipal pension plans for the Tallahassee-based institute.

The problems track those facing the Social Security system or Medicare:  Too few workers supporting a growing number of retirees. If anything, municipal budget cuts and layoffs in recent years have contributed to the imbalance, analysts said.

The result: city commissioners must earmark a larger share of municipal budgets for pension benefits. That means citizen services decline, Matkin said.

“They take up a space that is demanded by other services,” Matkin said. “You have to have some budgeting tradeoffs.”

A report released last November by the Leroy Collins Institute gave mixed reviews on the health of pension plans in 100 Florida cities, with one-third drawing ‘D’ or “F” grades for being underfunded. In Palm Beach County, plans in six cities earned failing, or near-failing grades.

Boynton Beach’s police plan and Palm Beach Gardens’ police and fire pensions were among the 15 percent of municipal plans drawing F’s. Various Plans in Riviera Beach, Boca Raton, Jupiter, Boynton Beach and Lake Worth earned D’s in the Collins Institute analysis of financial strength.

But general employee pensions in Boca Raton, Delray Beach and the West Palm Beach police pension also were named as some of the best-funded plans in the state.

Matkin found Florida’s pension slide began in the early 2000s, well before the recession. The timing is close to when Gov. Jeb Bush and the Republican-led Legislature approved changes that improved city police and fire pensions.

 The provision requires that growth in dollars flowing to cities from state taxes on property insurance premiums go to additional benefits for police officers and firefighters.

Cities next responded with such pension sweeteners as cost-of-living adjustments, lower retirement age, or an increased “multiplier” used in determining pensions based on years-of-service, all of which municipal officials say have forced cities to spend hundreds of millions of dollars more on pension costs since 1999.

 The pro-union law was the first measure enacted by Bush and Republican legislators in Florida that year, then the first GOP-controlled government of any state that had been part of the Confederacy. Bush had been endorsed in the 1998 governor’s race by police and fire unions over Democrat Buddy MacKay, largely on the strength of the promised payback.

Bush eagerly signed the measure ­- relishing the symbolism of making good in a hurry on a campaign promise.

Bush and Republican leaders, however, are rarely thought of as being allied with unions. Indeed, Bush last year co-authored an Op-Ed in the Los Angeles Times, decrying the financial woes of states, putting much of the blame on union contracts.

Bush’s co-writer was Newt Gingrich, then a candidate for the Republican presidential nomination.

City pension plans next target for GOP and biz coalition

Thursday, May 12th, 2011 by John Kennedy

The business coalition backing Gov. Rick Scott and the Republican-ruled Legislature’s drive against public pensions Thursday turned its eye toward next year — saying municipal retirement plans are the next target and that these funds must be shifted into 401 (k)-styled investments.

Lawmakers agreed to take 3 percent out of the paychecks of  655,000 government employees enrolled in the Florida Retirement System, and used the $1.1 billion it generated as a plug for the state’s almost $3.8 billion budget shortfall.

The last time Floridians for Sustainable Pensions surfaced, it was joined by Gov. Rick Scott, was last month prodded legislators to pull money from employees because the retirement system was on troubled ground financially.

Analysts said the FRS could meet about 87 percent of its benefits payout — if all pensioners demanded the money at once. Although financial analysts said this level of funding is not alarming, Scott did all he could to fan fears of a financial meltdown.

But on Thursday, Florida State University economist Randall Holcombe said the FRS is strong.  And putting the $1.1 billion extracted from employees into their retirement plans “is irrelevant to the solvency of the pension scheme.”

Instead, Holcombe and others who spoke on behalf of the business coalition, said lawmakers next year should convert the FRS and the dozens of municipal pension plans around the state into investment funds.

Just as Scott used questions of FRS solvency to push for reform, analysts are again raising doubts about whether city plans will have enough cash for beneficiaries.

“I think the Legislature needs to do that and bring (them) under control,” Holcombe said.

A scaled-back city pension bill sent to Scott

Wednesday, May 4th, 2011 by John Kennedy

The House joined the Florida Senate in approving a measure Wednesday making mostly modest changes to city pension plans — backing away from more sweeping approaches proposed earlier to stabilize some of the financially troubled funds.

The only major overhaul included in the legislation (CS/SB 1128) limits overtime pay to 300 hours per year for benefit calculations for police, firefighters and other municipal employees. The cap would stop government workers from using what critics say is a common pension-boosting practice.

The legislation was approved 80-35 and sent to Gov. Rick Scott, who is expected to sign it into law. The bill also requires more oversight from the state’s Department of Management Services of the hundreds of local funds, including posting a five-year history of each plan’s financial status.

But it stops far short of what many cities had earlier proposed. The Florida League of Cities had wanted lawmakers to rework a 1999 law that fattened the pensions of police and firefighters that had been spearheaded by former Gov. Jeb Bush.

The lucrative pension provision was the first bill signed into law by the former two-term governor, who had been endorsed by the Florida Police Benevolent Association and Florida Association of Professional Firefighters in the governor’s race the previous fall. (more…)

Pension work nears finish line

Friday, April 29th, 2011 by John Kennedy

Plans to dramatically revamp Florida pensions at the state and city levels appeared headed Friday toward the finish line — far short of where Gov. Rick Scott and lawmakers had initially proposed.

House and Senate negotiators have settled on extracting 3 percent paycheck contributions from 655,000 teachers, police, firefighters and other government employees enrolled in the Florida Retirement System, part of an effort to pull $1.1 billion into the state’s recession-strapped budget.

But a plan to scrap the state’s Deferred Retirement Option Program (DROP) has been abandoned,  House and Senate negotiators agreed. The House had wanted to bar the lucrative early retirement program to new enrollees in July; the Senate in 2016.

But what emerged Friday night from House lead negotiator Ritch Workman, R-Melbourne, was a proposal to reduce the 6.5 percent interest rate paid on DROP benefits to 1.3 percent. The move will save $81 million, if agreed to by Sen. Lizbeth Benacquisto, R-Wellington, the Senate’s lead negotiator on the Florida Retirement System.

Among other changes nearing agreement are a plan to increase the retirement age for new enrollees in the FRS from age 62 to 65.  An existing 3 percent cost-of-living adjustment would be eliminated for service earned after July 1, with Workman saying the goal being that it would be reinstated in 2016.

That change save $404.8 million, analysts said.

Meanwhile, plans to revamp municipal pensions also have been scaled-back. (more…)

Latest pension overhaul shows how political wind has turned against unions

Sunday, April 10th, 2011 by John Kennedy

The municipal pension rewrite now advancing in the House — and headed to the Senate Budget Committee next week — has a history rooted in Republican politics, having emerged as a payback to unions that supported Gov. Jeb Bush in 1998.

But the political wind in Tallahassee has shifted sharply this spring.

And for Florida’s police and fire unions, one-time allies are now enemies, with the pension overhaul the latest in a series of what labor sees as union-busting moves by the GOP leadership.

“Did we go too far? Yeah, maybe we did,” said Sen. John Thrasher, R-St. Augustine, who as House Speaker in 1999 led the legislation sought by Bush. “But we were pretty flush back then. We can’t afford this now.”

As for Bush, he’s apparently changed, too. In January he and presidential hopeful Newt Gingrich co-authored an op-ed piece in the Los Angeles Times. In it, the pair urge that states consider declaring bankruptcy to reorganize their troubled finances.

Why do they need to take such a drastic step?

To get out from under sweetheart pension deals for greedy unions, the former deal-maker turned reformer now writes.

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