TALLAHASSEE – Actuarial and financial investment experts told lawmakers Wednesday that an oft-quoted study by two non-profits is exaggerating the problems facing pensions for city and county workers throughout Florida.
The LeRoy Collins Institute and Florida TaxWatch released a report this week that updates its research on 492 pension plans throughout Florida. It concluded that it had detected a “troubling trend” since 2010 where payouts are exceeding contributions in the typical plan.
The report is part of a raft of studies that Republican lawmakers are using to warrant an overhaul of state and local government pensions by shuffling employees into 401 (k)-type plans and away from plans that guarantee retirement benefits.
The LCI study isn’t calling for the shutting down of municipal pension funds, but it is recommending some fixes for local governments to adopt to avoid future shortfalls. They are the raising of the minimum age of retirees before they receive benefits; the elimination of overtime pay in calculating pension benefits; the making of pension benefits that are more transparent to the public and changing the interpretation of a 1999 law that would allow cities and counties to more flexibility in negotiating benefits with their police and fire unions.
But Brad Heinrichs, the CEO of a Fort Myers actuarial firm that manages 200 public pensions in Florida, told a House committee on government operations that the premise of the LCI study was flawed. In estimating each plan’s liabilities, LCI was projecting salary increases that hadn’t been awarded yet, giving the impression that the plans had much greater burdens then they do.
“It certainly makes the plans look worse off than I think they are,” said Heinrichs, who said he came to Wednesday’s meeting on his own. “You might call that conservative, but I call it aggressive.”
“What you’re saying is that these numbers are way off,” Rep. Irv Slosberg, D-Boca Raton asked.
“I’ve been trying not to say ‘way off’,” Heinrichs said. “But I would say it’s too strict of a grading scale.”
Heinrichs and Joseph Bogdahn, an investment manager at an Orlando firm, said that a slumping stock market was largely to blame for flat returns from pension funds in recent years. But they both said that was about to change and now was not the time to overreact.
“Sometimes, doing nothing is like taking action,” Bogdahn said. “Most of the funds are doing just fine.”
But Republicans who are pressing for changes were still leaning toward doing something.
The Senate’s efforts to reform municipal pensions is expected to be wrapped into a House bill that would require new school district, county, state, university, and community college employees who now can now enroll in the Florida Retirement System’s pension plan to instead sign up for a 401 (k) plan by next January. That reform is a top priority with House Speaker Will Weatherford.
Rep. Jason Brodeur, R-Sanford, chairs the House committee on government operations and said he felt that the criticism of the LCI report was unfair. He said that Heinrichs, who told the committee that actuaries don’t set uniform standards for the solvency of pension plans, had no place to question the findings in the LCI report.
“It’s disingenuous,” Brodeur said. “(The LCI report) will be another piece we’ll use to figure out where we are with funding levels for our municipal pensions.”