After more than two decades working in Miami Beach’s 911 call center, Pamela Kindle wanted her golden parachute.
Her $60,000-a-year job would provide a modest pension for retirement, but Kindle wanted more. So, she launched into a “marathon” of overtime, racking up an extra 50 hours of work a week during her final two years on the job.
When she retired in 2002, Kindle did so with a $150,000 taxpayer-supported pension. Yearly increases have pumped up her pension to more than $182,000.
“I earned my money,” said Kindle, 63, who says the city helped create her pension by perennially understaffing the call center. “I worked hard.”
By the time she reaches her mid-70s, the city’s pension fund will have paid her $4,074,000 in her golden years.
Scores of South Florida city employees, particularly police and firefighters, have recently retired in their mid to late 40s or early 50s with six-figure pensions, the result of generous pay and benefits packages that are now costing taxpayers tens of millions of dollars a year.
The deals were agreed to by elected officials in negotiations with politically potent employee unions — especially police and fire unions, whose members face the biggest risks but enjoy higher pay and better benefits.
During the real estate boom, there was plenty of money for pay raises and perks, even as employers in the private sector were ratcheting down health benefits and phasing out traditional pensions in favor of self-funded 401(k) plans.
Then it all went sour.
Cities, financially kneecapped by plunging property-tax revenues, stock market reversals and their own generosity, found pension costs eating up a rapidly growing chunk of their operating budgets — one out of every five dollars in Miami Beach, one out of four in Hollywood.
Those cities and others are now trying to take back what they promised. That has sent employees rushing toward the exits. A year ago, as pay and pension reductions imposed by Miami’s elected officials were about to take effect, more than 250 employees retired on the same day. The same thing is happening in Hollywood, where voters last week approved dramatic reductions in employee pensions.
What it really means to retire
Actually, in municipal government-speak, “retiring” doesn’t mean leaving the job now. In another perk not enjoyed by private-sector employees, it often means entering a years-long transition phase called the Deferred Retirement Option Program, or DROP, during which the worker remains on the job, earning both a salary and a pension benefit that is held in a savings account.
How generous are city pensions? More generous than pensions paid through the state’s retirement system, although the state has hundreds of six-figure pensioners. The Florida Retirement System, likened to a millstone weighing down the state budget, last year paid out an average yearly retirement benefit of $18,000.
• In Miami Beach, of the 38 police and firefighters who began receiving a pension in fiscal year 2009, 26 did so in their 40s with an average retirement benefit of $104,000 — and a promised annual increase of 2.5 percent.
• In Coral Gables, pension formulas that factor in hundreds of hours of overtime in addition to base pay and bonuses are allowing many to retire, like Kindle, with pensions significantly larger than their base salary. Examples: Fire Lt. Jeffrey Fabyan, 48, whose $106,000 pension dwarfs his $81,000 base salary; fire Lt. Donald Griffiths, 50, whose base pay is $81,720 but whose pension is $108,606; and police Sgt. John McRae, 49, whose salary is $79,414 but who will collect a $99,297 pension.
• Of the 154 Miami police and firefighters who “retired” (actually entered the DROP) on Sept. 26, 2010, 55 have annual pensions in excess of $100,000, 10 of them greater than $150,000. The latter group includes Chief Fire Officer Ronald Khawly, who transitioned into retirement at 52 with a pension of $181,856; Assistant Fire Chief Veldora Arthur (44, with a pension of $166,687) and Chief Fire Officer Joe Burns (54, with a pension of $165,910).
• In Hollywood, firefighters who left the city’s employ since 2008 after eight years in the DROP program have walked away with savings accounts of $500,000 or more, some as high as $1 million.
“Pensions can’t be as rich as they have been,’’ said Hollywood Commissioner Beam Furr. “When you are in the public service, you shouldn’t be expecting to become rich. You shouldn’t be expecting to become suddenly a millionaire, and that has happened.”
But employees like Khawly, who said he earned only a $16,000 salary when he began his tenure with the Miami Fire Department around 1980, are proud and protective of what they have earned through hard and sometimes dangerous work.
“I take offense to it when someone makes those kind of comments,” said Khawly.
“I’m out risking my life while everyone is sleeping in bed with their wives.”
Jeff Marano, senior vice president of the Broward Police Benevolent Association, said city officials and administrators mismanaged taxpayers’ finances during the past decade’s property-tax boom and now are scapegoating employees.
“The conspiracy of the day is that we’re the villains — public employees are the villains,” Marano said. “But that’s not the reality.’’
The average retiree doesn’t come close to raking in a six-figure pension. But with negotiated formulas that have allowed employees to factor into their pensions overtime, unused vacation and sick days, municipal employees have been retiring far younger and more comfortably than those in private industry.
So young that they can enjoy a second act. Donald De Lucca, the former Miami Beach police chief who retired in his 40s and cashes a $182,000-and-growing yearly retirement benefit, recently was hired as chief of the Golden Beach department at $100,000 a year, according to the town manager.
Pension analysts say city officials and unions both bear responsibility for the current excesses.
“Unions didn’t do it, and cities didn’t do it alone,” said Fred Nesbitt, retired executive director of the National Conference of Public Employee Retirement Systems. “They did it together.’’
State pensions vs. city pensions
Although municipal pensions are more generous than those of state employees and teachers, historically there was a key difference. State workers didn’t contribute to their pensions, while city employees generally did — as much as 12 percent of their pay.
While amassing her multimillion-dollar windfall, Kindle paid $119,823 into the pension fund during 25 years on the job.
The contrast between state and city pensions was altered this past summer when new legislation required public employees enrolled in the Florida Retirement System to contribute 3 percent of their pay toward retirement.
While city workers often pay considerably more, those contributions don’t come close to covering current costs.
Pension funds are run by trustees helped by consultants who project returns on investment, life expectancies, salary increases and other variables that affect a plan’s financial health.
Trustees invest the overall pot — but cities take the hit if those investments go bad.
In the early 2000s, it wasn’t a problem. Investments did so well that some cities barely paid anything into their pension funds. Miami Beach didn’t pay a cent into its general employees plan during 2001, 2002 and 2003.
But investment returns have since fallen far short of expectations. The 2008 stock market crash blew a gaping hole in those pension portfolios.
“Obviously nobody possesses the ability to make those kinds of predictions with accuracy,” said David Driscoll of Buck Consultants, which advises pension funds in Hialeah and Miami Beach.
Anemic investment returns weren’t the only missed assumption that drove up pension costs. Pension managers vastly underestimated elected officials’ generosity.
City governments have consistently handed out bigger pay raises than pension managers projected. In 2007, the managers of Miami’s police and fire pensions expected the city to grant pay hikes of 5.81 percent to police and firefighters.
Instead, the city handed out 18 percent raises. The following year brought another 18 percent increase.
In city after city, similar miscalculations occurred. Taxpayers got stuck with the check:
• In 2001, Miami’s annual contribution to its pension program — the part not covered by employee contributions — was $14 million. By 2010, it was $79.1 million.
• A decade ago, the taxpayer pension contribution was $3.5 million in Miami Beach. Last year: $49 million.
• Fort Lauderdale’s pension contributions have jumped from $10.6 million a decade ago to $52.2 million today.
• Hollywood’s taxpayer contribution rose from $8.5 million in 2001 to $36.6 million last year.
Despite those increased taxpayer outlays, some pension programs remain underfunded. In Hollywood, the value of the firefighters’ pension fund declined from $121.6 million in 2000 to $92.6 million in 2010, largely because of poor investment returns and increased employee benefits. The fund’s projected costs for present and future benefits promised to firefighters as of 2010: $233 million.
‘Locked into’ lousy deals
Pembroke Pines provides a case study of employee perks that expanded in lockstep with city revenues. In 2003 and 2004, with the city in the midst of explosive population and property-tax growth, commissioners approved richer benefits for employees. Nonuniformed employees got retroactive pay raises of 2 1/4 percent, longevity pay and merit increases, and a bump in yearly cost-of-living raises for retirees from 2 to 3 percent.
Police and firefighters did even better. New rules allowed them to retire with full benefits after 20 years instead of the previously required 26 years. They were also permitted to apply up to 1,000 hours of unused vacation and sick time toward their pension calculation. The automatic annual increase in pensions went from 3 percent to 4 percent.
That 1,000 hours of accrued time is key. Without it, Deputy Fire Chief Richard Moss would have retired with a pension worth $125,000 — 80 percent of his highest two years’ earnings. With it, Moss was able to retire at 46 with a pension of $154,763.
Pembroke Pines City Manager Charlie Dodge, a pension-receiving retiree who has been hired back as a contract employee, said he wishes he could wipe the slate clean.
“We’re locked into it,” he said. “In hindsight, maybe it wasn’t the best decision.”
Police and firefighters can thank former Gov. Jeb Bush for a lot of this.
Cities had long received money from the state for insurance policies sold within their city limits. The money was used to offset municipal pension costs for police and firefighters.
In 1999, in his first act as governor, Bush signed a bill that made that money contingent on improving benefits for first-responders. The Republican governor had promised to back the bill after winning the endorsement of the Florida Police Benevolent Association and Florida Professional Firefighters Association.
The law also stated that any increase in police officers’ and firefighters’ pension contributions must buy them greater benefits.
Bush’s predecessor, Democrat Lawton Chiles, had vetoed a similar bill in 1998, citing the potential cost.
This year, the Florida Legislature ratcheted back some of these benefits, capping pensionable overtime at 300 hours per year, and eliminating unused sick and vacation leave from retirement calculations. The new law, which applies to all collective bargaining agreements enacted on or after July 1, also states that increases in employee contributions need no longer be contingent on expanded benefits.
Although these changes will cut costs, cities will remain saddled for years with the burden of pension benefits awarded to their current retirees.
An epidemic of ‘financial urgency’
City officials around the region have recently moved to reduce future benefits, invoking a once rarely used state statute called “financial urgency” that allows city officials to reopen union contracts during troubled times.
Pembroke Pines declared financial urgency in 2009, and after tense negotiations, closed the general employees’ pension plan for new hires and froze it for existing staff. The city created a 401(k)-type plan in its place. Those who didn’t retire at that time lost their cost-of-living increases and took pay cuts of 4 percent, saving the city about $7 million for 2011 and much more in the future.
Pines officials also froze accrued-leave accounts for police and firefighters, and stretched back to 23 years (26 for new hires) the time required to retire on 80 percent of pay.
“Back in the days when investments were good and everything was up, we gave a little more because things were OK,” said Frank Ortis, who works as a lobbyist for labor unions in addition to being the mayor of Pembroke Pines. “Nobody could see the economic downturn that came. Nobody saw that — not even economic advisors from Washington.”
Miami declared financial urgency last year to help close a $105 million budget hole, caused in large part by salary escalation and generous contract terms. At that time, police and firefighters could retire with full benefits after their time of service plus age added up to 68. That meant a firefighter who signed on at 21 could be out the door or in the DROP — collecting a pension — at 47. But commissioners slashed salaries and changed the age-plus-service threshold for retiring fully vested from 68 to 70, with a minimum age of 50. The commission also capped pensions at $100,000 for employees not yet eligible for normal retirement, though they can exceed the cap through cost-of-living increases.
Last year’s moves were so effective — they instantly saved the city roughly $80 million, including tens of millions of their upcoming pension contribution — that city leaders declared financial urgency again this year while simultaneously lowering the tax rate, sparking threats to recall Mayor Tomas Regalado.
Still, three of the city’s four unions announced last week that they had agreed to millions in new concessions, marking the third year in a row in which employees have given up compensation and benefits.
One of the fiercest battles has been fought in Hollywood, whose leaders declared financial urgency in May and tried to extract deep concessions from employees through negotiation. But after absorbing layoffs and pay cuts of 7.5 to 12.5 percent earlier this summer, employee unions balked at further concessions proposed by city officials, noting that the city’s bungling of its books contributed mightily to Hollywood’s financial problems.
Hollywood’s charter stipulates that pension changes must be approved by voters when city management and employees can’t agree.
Last Tuesday the voters spoke, approving sweeping reductions in benefits — raising the retirement age, eliminating automatic cost-of-living adjustments, changing the formulas used to calculate pensions, and freezing the DROP program.
“There’s no choice,” said homeowner Dale Slomoff, 62, who voted in favor of the changes.
The benefit cuts are expected to put an $8.5 million dent in Hollywood’s projected $38 million budget gap.
Other cities have worked with their unions to curb costs, but with mixed results.
When Miami Beach demanded its unions cut benefits, forgo raises and contribute more of their salaries toward their pensions during negotiations in 2009 and 2010, police officers boycotted voluntary overtime and off-duty details when massive crowds were in town for the Pro Bowl and Super Bowl.
Although the city negotiated some $15 million in savings from all its unions, police and firefighter pensions were mostly spared. New employees took the brunt of the cuts.
“There was no political will to go against the unions,” said Mayor Matti Herrera Bower.
Even those modest police and fire pension reforms have not yet been implemented and a judge has ruled that they require a voter referendum.
A warning that went unheeded
While Frank Ortis, the Pembroke Pines mayor, asserts that no one could have foreseen today’s pension crisis, there are those who disagree.
“It’s so irresponsible to think that no one anticipated that what goes up must come down,” said Victor Diaz Jr., a former Miami Beach commissioner appointed in late 2008.
Diaz was put on the commission as a short-term replacement. With no need to appease unions, he went after the city’s rising pension costs. At a public meeting in 2009, Diaz projected onto a big screen the city’s accelerating long-term pension debts and detailed retirees’ six-figure pensions.
Union leaders accused him of demagoguery, and their attorney said Diaz was hell-bent on slashing benefits because he was upset over a traffic citation.
“Not a single person came to my defense,’’ Diaz recalled, pointedly referring to his colleagues on the commission. “Silence. Stone cold dead silence.”
To observers like Bill Werther, a University of Miami business professor and labor mediator, it’s no surprise that most elected officials are reluctant to challenge the municipal unions.
“The people responsible for the fiscal discipline of the government budget are also the people who are relying on the political support of the people they’re providing these benefits to. So you have an inherent conflict of interest,” Werther said. “The problem is: Who’s representing the interest of the taxpayer?”
OUR OPINION: Cities, unions have to deflate bloated municipal pensions
BY THE MIAMI HERALD EDITORIAL
The same strings on the golden parachutes that have cushioned the retirements of thousands of municipal employees have tied up many a city in budgetary knots. But several South Florida cities finally are taking steps to slip those knots for the good of their fiscal health and the greater good of residents who are funding benefits most can only dream of.
The Miami Herald series Pension Bonanza starkly highlights how negotiations during times of bounty, a bullish stock market and, of course, political back-scratching have turned too many pension packages into lifetime money gushers for municipal employees, whether managers or union members. Now that property-tax revenues are down the tubes and cities are forced to do more with much less, they are looking at those generous pensions and looking to take back what they blithely handed over when times were good.
It’s past time. Miami, Hollywood and a host of other South Florida cities have targeted pensions, not because public employees are an evil drain on the public resources, as many anti-government rants put it; nor is this endeavor seeking to strip workers of their right to collective bargaining. And it’s not an unappreciative slap to the dedicated employees who put their lives on the line every day to keep the public safe.
No, it’s a matter of simple math: Shelling out 80 percent (!) of a retiree’s salary + dwindling property-tax revenues + a wheezing stock market = a whole lot of problems as cities try to meet all of their obligations. And when those union contracts factor in overtime, unused vacation time and sick days into the pension equation, the situation becomes unsustainable.
Consider: A Miami Beach call-center worker catapulted her $60,000-a-year job into a pension that will pay more than $4 million by the time the 63-year-old retiree is in her mid-70s. She paid $119,823 into her fund over 25 years. Why the huge payout? She worked a “marathon” of overtime during her last two years on the job.
Some Hollywood firefighters have retired with more than $500,000; in Coral Gables, overtime and bonuses turn five-figure salaries into six-figure pensions.
Municipal generosity because the coffers were full was only part of the equation, the more benign part. Politics were the darker force driving these deals. When elected officials came through for the unions, the rank-and-file would come through for them at the ballot box and campaign funds.
It has become the podium-pounding pledge among candidates seeking to run cities large and small: “I’ll run this city like it’s a business.” It’s time to make that vow a reality. The private sector is trimming salaries; phasing out traditional pensions; phasing in 401(k) programs that employees fund; and hitting up workers for more in the way of healthcare benefits — if health insurance is available at all.
Some cities, such as Hialeah, are seeking to reopen contract negotiations with their unions. Some have declared a state of “fiscal urgency,” which puts contracts back on the table. Hollywood, unable to come to an agreement with its unions, put it to a referendum. Voters were clear: The unions’ salaries and benefits had to scale back.
Everything has to be on the table: Salaries for new workers may have to ratchet down; overtime abuse must end. Vacation time and sick days? Try “Use ’em or ’lose em” like in the private sector. And pensions approaching 80 percent of a salary? In the business world, 40 percent is more like it.
It’s time for public officials and unions alike to do the math.
By THE PALM BEACH POST
Updated: 9:16 p.m. Friday, Nov. 11, 2011
Posted: 6:35 p.m. Friday, Nov. 11, 2011
For simplistic solutions to Florida's public pension problems, see Gov. Scott and the Legislature. For serious solutions, see Jupiter and the Police Benevolent Association.
The town and the union have just worked out a "memorandum of understanding" that reduces Jupiter's pension costs by more than $1.5 million a year. The union made some concessions, but they're smart concessions that keep the pension system sound. The need for reforms was underscored with Thursday's release by the LeRoy Collins Institute of a study that gave Jupiter's police pension a grade of D because it was only 62.3 percent funded.
Gov. Scott and the Legislature required all state employees, including teachers, to contribute 3 percent of pay to the retirement system. But that was a money grab, not a way to shore up the Florida Retirement System, which actually is in good shape.
Cities have much bigger problems, especially with police and fire pensions. The issues can be mind-numbingly complex. The bottom line, literally, is that cities and counties have not been putting away enough money to meet obligations. Jupiter, for example, had seen its unfunded liability rise from nearly $5.5 million in 2003 to just over $14.8 million in 2010. Town Manager Andy Lukasik said in an email, "This increase in unfunded liability was due, in large part, to changes in the minimum benefits that were mandated by state law."
One of the biggest problems - and it's one the Legislature failed to address this year - is a 1999 law that affects the special assessment on insurance policies designated for police pensions. The law said any increase in collections over the base year could be used only to provide enhanced benefits. The money can't be used to meet existing pension obligations. A similar law covers fire pensions. Jupiter contracts with Palm Beach County for fire-rescue service.
Jupiter and the police union used an innovative work-around known as a "stop/restart" provision that soon will allow the town to use an additional $1.8 million from those insurance assessments to reduce the unfunded liability. It also will free up about $300,000 a year for pension benefits.
To ensure police officers continued access to the popular Deferred Retirement Option Program (DROP), the union agreed that officers would contribute a higher portion of their salaries. Officers hired after the town approves the deal, expected in a few weeks, will have a later retirement age and a "multiplier" - which affects the final pension payment - of 2.75 percent instead of the current 3 percent.
Before the pension changes, Jupiter would have expected to contribute $46.4 million to the police pension system over 10 years, or 37.8 percent of base payroll. After the changes, the figure drops to the target 25 percent of base payroll, or about $25.4 million over 10 years.
Last session the Legislature considered changes that would have made it easier for all cities to shore up police and fire pensions. The issue, which will come up again, is contentious. The deal between Jupiter and the Police Benevolent Association shows the way toward common ground.
- Jac Wilder VerSteeg,
for The Palm Beach Post Editorial Board
by John Kennedy | December 12th, 2011
Florida cities said Monday that they are poised to make another attempt at revamping costly pension requirements that emerged under former Republican Gov. Jeb Bush.
The current Republican-led Legislature may be wary of antagonizing police and firefighter unions, a frequent election-year ally. But Florida League of Cities officials said they hope a pocketbook appeal might drive changes when lawmakers reconvene in January.
“Pension reform is by far the issue that has garnered the most attention,” among city leaders, said Scott Dudley, a league lobbyist. “It’s important to preserve and protect pensions into the next generation of police and firefighters.”
A report released last month by the Leroy Collins Institute gave mixed reviews on the health of pension plans in 100 Florida cities. 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. Plans in Riviera Beach, Boca Raton, Jupiter, Boynton Beach and Lake Worth earned D’s in the Collins Institute analysis of financial strength.
The League of Cities is promoting legislation (SB 910, HB 365) that would effectively lift a standard in place since 1999 that has 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 the league says have forced cities to spend an additional $460 million on pension costs since 1999.
Now, as the economic slump has put added strain on city pension investments, taxpayers are paying more in property taxes to meet the demand of the public safety providers’ extra benefits.
This pro-union law also has the tantalizing history of being the first measure enacted by Bush and Republican legislators in Florida, then the first GOP-controlled government of any state that had been part of the Confederacy.
Bush eagerly signed the measure - relishing the symbolism of making good in a hurry on a campaign promise made while getting the endorsement of the Florida Police Benevolent Association and Florida Professional Firefighters Association.
Bush and Republican leaders, however, are rarely thought of as being allied with unions. Indeed, Bush earlier this 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, now a front-runner for the Republican presidential nomination.
Matt Puckett, lobbyist for the Florida PBA, said collective bargaining negotiations can resolve some of the deeper financial issues clouding local pensions. But he said that no legislation is needed that would go so far as to remove the insurance premium tax standard in place since 1999.
“The cities just want to have total control of those moneys,” Puckett said.
One in an occasional series previewing the Florida Legislature, which begins its session Jan. 10.
By LAURA C. MOREL
Cities throughout Florida would no longer be required to fund extra pension benefits for police and firefighters under a proposed bipartisan bill.
Instead, cities could apply those funds to basic pension benefits in the future, or avoid having to increase property taxes to pay for the enhanced benefits, proponents of the bill say.
The Florida League of Cities, an organization representing the state’s municipalities, is lobbying hard for the proposed legislation. The bill negates a law passed in 1999 under then-Gov. Jeb Bush, requiring cities to dedicate growth in tax revenue from property and casualty insurance premiums to extra police and firefighter pension benefits.
Since 1999, Florida cities have spent more than $460 million in extra pension benefits, according to the League of Cities. Extra pension benefits can range from receiving 13-month pay checks in one year to early retirement. The law allows some police and firefighters to retire early and make more than $80,000 a year -- before turning 50, the league states.
“Those monies could have been used to provide and sustain for the (pension) plan,” said John Thomas, the league’s director of communications and political initiatives. Under the proposed legislation, Thomas said, pension benefits instead “will be available for future police officers and firefighters.”
The legislation, known as HB 365 or SB 910, calls for collective bargaining between cities and unions to negotiate both basic and additional benefits.
“We want to be able to sit across the negotiating table from the police and firefighters,” said Scott Dudley, director of legislative affairs at the League of Cities.
But some local union and city officials are voicing their opposition to the bill.
“It’s unnecessary,” said Matt Puckett, executive director for the Florida Police Benevolent Association, which represents both Bradenton and Palmetto police departments. “We made some reforms last year that have shown to be very helpful to the city and to the taxpayers.” The additional benefits, he stressed, serve as a “rewards system” for police officers and firefighters because of the nature of their jobs.
Last year, the current law was amended to cap the number of overtime hours used to calculate retirement compensation at 300 hours per year to avoid spiking benefits. But Dudley said the change is misinterpreted and the 300-hour mark is used as a minimum number of overtime hours. The 2012 legislation also calls for a clarification of this measure.
At the Suncoast Professional Firefighters and Paramedics, IAFF Local 2546 union, which represents the Bradenton Fire Department, business agent Rocco Salvatori said Bradenton and its union “don’t need the League of Cities’ help for pension reform.”
Palm Beach Post
GREENACRES — The city council urged Florida legislators tonight to reform pension laws to correct "unfunded mandates" that have more than doubled the city's costs for police and firefighter pensions during the past three years.
Legislation from Tallahassee has created a pension system for public safety employees that is "unstable, unsustainable and unreliable," a resolution approved tonight by the council states.
The city's cost for police and firefighter pensions rose from $521,621 in 2008 to $1.3 million last year.
The city's resolution supports the Florida League of Cities push to reform laws governing municipal pension plans for police and firefighters during the legislative session that begins Tuesday.
The League of Cities is backing House Bill 365 and a companion bill in the Senate that would allow cities to move from defined-benefit retirement plans to defined-contribution plans and to bargain over benefits paid for by the surcharge on insurance premiums.
The legislation also would limit the amount of overtime used in calculating pension benefits and allow cities to challenge the presumption that heart disease, high blood pressure and tuberculosis are job-related.
Pension mandates imposed by legislators "have driven up taxpayer costs, making the current taxpayer-funded pension structure unstable, unsustainable and unreliable for future police officers and firefighters," Assistant City Manager Deborah Manzo wrote in a memo to the city council.
Also tonight, the council approved on first reading a "share plan" through which $497,579 in insurance premium contributions will be distributed to eligible participants in the city's Firefighters and Public Officers Retirement Plan.
By JENNA BUZZACCO-FOERSTER
Naples Daily News
Sunday, December 25, 2011
NAPLES — Florida lawmakers will be asked during the 2012 legislative session to change, for the second year in a row, the way local governments operate public safety pension plans.
But two bills — House Bill 365 and Senate Bill 910 — meant to reform local police and fire pension plans also take aim at the so-called disability presumption outlined by several state laws.
Disability presumption works like this: If a police officer or firefighter suffers from certain conditions — like heart disease or high blood pressure — it is presumed to be work-related. Those ailments are then covered under workers' compensation and disability pensions.
But supporters of disability presumption reform said a change needs to occur to ensure employees aren't gaming the system.
Kraig Conn, legislative counsel for the Florida League of Cities, said the addition of disability presumption to the association's platform is meant to recognize that "disability presumption has an impact on the pension system."
The Naples City Council earlier this month passed a resolution supporting disability reforms. Assistant City Manager Roger Reinke said in a Nov. 28 memo to council the reform was a way to "make the plans sustainable, sound and secure for current and future police officers and firefighters in Florida."
"The bottom line is you take two people, they're identical twins. One becomes a police officer and one becomes an attorney. They go through their lives and lead similar lifestyles and at 50 they both develop hypertension. The one who is a police officer, it's presumed it's part of the job," Reinke said recently. "The purpose of the reform is to level the playing field."
While current disability presumptions don't take factors such as lifestyle or medical history into account, Conn said the proposed changes would require employees to meet age and employment requirements and allow risk factors to be considered.
"With disability presumption the burden of proof changes," Conn said. "If you had a heart attack, you could have been a smoker all your life and been out skiing, or on a fishing tournament hauling up a 300-pound (fish), and the employer has to prove" it wasn't work related.
Changes to disability presumption, however, wouldn't prevent someone from applying for workers compensation or disability benefits. But Conn said it would just flip the burden of proof onto the employee.
Not everyone who supports pension reform is backing disability presumption reform.
Becky Bronsdon, an assistant chief at the North Naples Fire Control and Rescue District, said the district isn't coming out in support of disability presumption reform. Bronsdon said the district is staying out of the discussion, and doesn't plan to "move forward and fight something statutorily."
"We don't want to be in the position of telling someone no," she said.
Robert Young, president of Naples police union, said his organization — both locally and at the state level — is against the proposal. Young said the belief among union officials is the law "needs to be left the way it is."
"I know there are people who want to change it, but I don't know if this is something you can accurately measure when you first hire someone," Young said. "You have a young person, who is what 25 to 30, and you're testing them to see if they have (a condition)."
But Reinke said the reform is needed to ensure local governments are properly paying for claims.
"There's so many factors that go into these things," Reinke said. "And (the question is) is the presumption the right thing."
South Florida Sun-Sentinel Editorial
December 29, 2011
Earlier this year, Florida legislators started making state employees contribute to their pensions. That strengthened the state's biggest public pension plan, and made it fairer for the taxpayers who subsidize pensions.
But there are hundreds of smaller pension plans run by Florida cities for their employees, and many aren't as well funded as the state plan. And while legislators also took some steps to help cities shore up their plans, much more needs to be done.
This isn't just an issue for city leaders and employees. Local taxpayers share the burden of bankrolling pensions through employer contributions to the plans.
Rising retirement costs can force tax hikes or siphon dollars from other needs, from public safety to parks. If not adequately funded, those costs theoretically could bankrupt a city.
A recent report from the LeRoy Collins Institute, a think tank associated with Florida State University, found that almost one in every three plans run by the state's 100 largest cities were badly underfunded as of a couple of years ago, the most recent date for which figures could be analyzed.
The institute graded plans from "A" to "F" based on whether they have sufficient assets to cover their future costs.
The Collins Institute report cited another study by the Florida League of Cities which stated that retirement costs for municipalities as varied as Miami, Pembroke Pines, St.Petersburg and Hollywood now top 50 percent of their payrolls.
Holluwood voters smartly enacted pension reform this past year, but plenty of other city halls haven't done enough to protect their taxpayers.
Many cities dug a hole for themselves by promising more in pension benefits than they could afford. State laws, passed under pressure from public employee unions, have made the plight of cities even worse by strictly limiting their authority to control their retirement costs.
The most notorious is a 1999 law governing a tax on property insurance premiums, a primary funding source for police and fire pensions. The law says that as the take from that insurance tax grows, the additional money must go to boost retirees' benefits rather than to help pay what cities already owe. The law has forced cities to spend $460 million to sweeten benefits instead of saving plans from ruin.
Two area legislators, Sen. Alan Hays of Umatilla and Rep. Fred Costello of Ormond Beach, are sponsoring legislation to unshackle cities from the 1999 law and make other reforms to help them corral pension costs. Taxpayers deserve no less.