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Florida Municipal Pensions: Not Yet Stockton but For S ome, Moving T hat Way

Florida Municipal Pensions: Not Yet Stockton but For S ome, Moving T hat 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

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Florida Municipal Pensions: Not Yet Stockton but For S ome, Moving T hat Way

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  1. 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

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

  3. 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)

  4. Total Pension Contributions as a Proportion of Total Governmental Expenditures Cities and Counties 2003-2009

  5. 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

  6. Grades & Participant Type

  7. 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

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

  9. 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

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

  11. Pension Holidays • Miami Beach --no funding 2001-2003 • Jacksonville

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

  13. Spiking • Miami Beach • Coral Gables

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

  15. 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

  16. 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)

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

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

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

  20. Switch to Defined Contribution • Lakeland (optional for current employees)

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

  22. 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

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

  24. 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

  25. Contact LeRoy Collins Institute • Office, 850-644-1441 • Carol Weissert, cweissert@fsu.edu • David Matkin, dmatkin@fsu.edu • http://collinsinstitute.fsu.edu/

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