Florida Municipal Pensions: Not Yet Stockton but For Some, Moving That Way University of North Florida - Foundations of Local Government August 17, 2012 Carol S. Weissert, PhD Director and Professor of Political Science, Florida State University David S. T. Matkin, PhD Research Fellow and Assistant Professor of Public Administration, Florida State University

LeRoy Collins Institute State-Local Relationships Pensions and Health Benefits First Issue Early work (Feb. 2011) retirement benefits as percent of local spending

LeRoy Collins Institute and Florida Municipal Pensions In 2009 average annual retirement obligations for cities accounted for 8.3 percent of spending—and growing Includes both pensions and OPEBs (mostly health benefits)

Total Pension Contributions as a Proportion of Total Governmental Expenditures Cities and Counties

But in Florida There are some cities in Trouble Nearly one-third of Florida’s 100 largest municipalities have funding ratios of less than 70 percent. Variation whether plans are general employee or public safety ones

Grades & Participant Type

Costs Per Participant “A” Plans$5,786 “F” Plans$26,305 General Employees$9,297 Police$15,245 Firefighters$17,819 Police&Fire$21,738

Jacksonville general employees “C” Jacksonville police and fire “F” Jacksonville Beach police, fire “C” Jacksonville Beach general employees “B”

Jacksonville General Employees $5,725 Jacksonville Police&Fire $26,323 Jacksonville Beach General $2,572 Jacksonville Beach Fire $6,272 Jacksonville Beach Police $6,076

Why the Variation? Mismanagement of pension plans – Pension holidays – Poor investment decisions – Miscalculation of expected returns Spiking Difficulties with renegotiating contracts

Pension Holidays Miami Beach --no funding Jacksonville

Poor Investment Decisions Auburndale—solely in currency Winter Springs—overestimated expected returns

Spiking Miami Beach Coral Gables

Actions Will Be Taken Hollywood special election New Smyrna Beach special election Pembroke Pines, Miami, Hollywood filed for financial urgency

Reforms to Reduce Costs Increasing employee contributions Cutting pension benefits Eliminating Cost of Living adjustment Changing calculation of final benefits Increasing retirement age Switching from DB to DC

Increasing Contributions New and old employees (Bradenton, Cape Coral and Winter Springs) Along with a pay increase (Delray Beach and Lakeland and Coral Springs) For new hires only (Palm Beach Gardens)

Altering COLs Elimination (Hollywood, New Smyrna Beach) Frozen COL (Temple Terrace) Lowered (Coral Springs; Palm Beach Gardens)

Calculation of AFC Limit overtime (Winter Springs) Decrease multiplier (Winter Springs, Coral Springs) Base salary only (Coral Springs) Reduce maximum benefit (Palm Beach Gardens)

Age Requirements Raise retirement age (Hollywood and New Smyrna Beach) Increase number of years to be eligible (Palm Beach Gardens)

Switch to Defined Contribution Lakeland (optional for current employees)

Indirect Activities Reducing payroll expenses Reducing staff Cut salaries of new hires Reducing holiday pay

Collins Institute Recommendations Eliminate spiking Age can receive retirement benefits should be 60 Municipalities need to contribute in good economic times and bad. State premium tax allocation should be revised Public informed early and easily

Details on Pension Trends How much of problem due to stock market fall? What trends are evident that political leaders should be aware of?

Trends? Underfunding not new in Florida municipalities Pension contributions increased substantially Local governments are picking up more of the pension costs, especially public safety Growth in proportion of pension plan retirees

Contact LeRoy Collins Institute Office, Carol Weissert, David Matkin,