February 15, 2013

Report says Weatherford's pension reform might cost more

He’s called Florida’s pension system a “ticking time bomb” that will require a costly taxpayer bailout in the future.

But Florida House Speaker Will Weatherford’s aim to reform Florida’s current $136 billion pension plan, which has 145,000 member accounts, hinges on one key question. If you reform it, how much will it cost?

Plenty, says a 50-page study that was released late Friday. The study was done by Milliman, a Vienna, VA firm that is among the world’s largest providers of actuarial services.  Weatherford asked the Department of Management Services to study the financial impact of closing the pension plan to new members effective Jan. 1, 2014

The study looked at what happens when new employees working for the state, school districts, counties, cities and community colleges would be required to enroll in a 401-k plan rather than the current pension that provides guaranteed benefits. Members who are currently enrolled in the state pension plan would be allowed to remain.

But the findings seem to undercut Weatherford’s assertion that reform doesn’t threaten the benefits of those currently enrolled in the system.

Earlier in the week, Weatherford said those in the pension plan will be protected from having to pay higher contribution rates.

“I think that we can protect the current benefits that people have,” Weatherford said. “This is not going to change any teacher, state employee’s pension that is in the system today. In fact, it will preserve it.”

The report states, however, that because future members couldn’t join the pension plan, that plan would rely on a shrinking payroll base on which contributions to retirees are made. This would require the contribution rates to increase as a share of payroll.  

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February 13, 2013

Experts question a main premise of municipal pension reform

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.”


January 24, 2013

Coming attractions: The next battle between Florida and its workers

House Speaker Will Weatherford will battle state workers to get one of his top priorities passed.

Weatherford, R-Wesley Chapel, has called Florida’s current pension plan a “ticking time bomb” in state finances because he fears it could require a costly tax payer bailout in the future. To prevent that, he says he wants to require new employees, starting on Jan. 1, 2014, to enroll in 401(k)-style accounts rather than rely on getting regular pension payments.

On Thursday, a week after the Florida Supreme Court ruled against state workers and upheld a 3 percent levy on state workers to shore up the pension plan, a retirement reform plan supported by Weatherford was discussed at a House Government Operations Committee workshop.

So far, the draft legislation prevents new employees from joining the pension plan and requires them instead to enroll in a plan in which they direct the investments. It also eliminates an option to apply for disability benefits for new employees, although Rep. Jason Brodeur, R-Sanford, said it will be replaced by another option that has yet to be determined. Many other details still won't be known until a report on the Florida Retirement System and its $125 billion pension plan is completed in the next three to five weeks. 

Participants in the new plan will have more flexibility in deciding their investments, while taxpayers won’t be left on the hook if market conditions change, Brodeur said.

“There will no longer be a blank check written by taxpayers,” he said.

But the changes, as vague as they were, were denounced by representatives for state workers.

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January 17, 2013

Update: Court rules 4-3 in favor of state, tells workers they lose 3 percent in retirement battle

In a major victory for the state, the Florida Supreme Court ruled 4-3 against state workers and allowed the state to retain the 3 percent levy on worker salaries to offset the state's investment into the Florida Retirement SystemDownload Retirement ruling

The ruling allows lawmakers to avoid another $2 billion budget hole in the 2013-14 fiscal year while all state workers will see their salary cuts retained indefinitely and will continue to see no cost of living increases adjustments made to their retirement accounts. 

The lawsuit, Scott v. Williams, was filed by the Florida Education Association after lawmakers passed, and Gov. Rick Scott signed, a law in 2011 to tap salaries of 623,000 teachers, law enforcement officers, firefighters, nurse and other public employees and put the money into the retirement system.

In the decision written by Justice Jorge Labarga, the court cited a 1981 ruling in Florida Sheriff’s and said the unions and trial court were incorrect in concluding that the decision was not intended to allow changes in retirement contribution plans for both current and future employees.

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March 16, 2012

Lawsuits pile up after Legislature finishes its work

TALLAHASSEE — For the second consecutive year, the conservative agenda of Florida lawmakers and Gov. Rick Scott appears likely to be settled in a courtroom.

Critics — who have sued to stop 14 laws passed by Republicans within the past year — are preparing to challenge at least two more bills in 2012. One would allow prayer at mandatory school functions. The other would require random drug testing of state employees.

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March 06, 2012

Scott and Haridopolos full of spite for Fulford's ruling

Gov. Rick Scott and Senate President Mike Haridopolos both couldn't understand how Fulford had arrived at her decision with Haridopolos repeating his claim that Fulford, who ruled against the state in the prison privatization decision, was responsible for judicial activism.

"I think its unfortunate, clearly after vigorous debate in both the House and Senate, signed by the governor this was a law that we passed that showed respect to workers across the state,'' Haridopolos told reporters. "The fact that so many people pay into their own private retirement accounts, we're moving it to this new type of system. As I expressed yesterday, I think this is an example of judicial activism, and this is why we are immediately going to appeal this decision.

"I'm hopeful that Sen. Alexander's evaluation of the subject is the correct one. Again, it just causes concern when a judge, over a year later, makes this type of decision. To add insult to injury, we expected this to happen before we close out the budget. Now that we have closed out the budget, we need to re-address this situation.

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Scott blasts court ruling, promises 'swift appeal'

Gov. Rick Scott has issued the following statement on the pension ruling:

“As you would expect, I believe this decision is simply wrong. 

"The trial judge has ignored thirty years of Supreme Court precedent in a decision that refuses to allow Florida to have common-sense pension reform. This is another example of a court substituting its own policy preferences for those of the Legislature.  The Court’s decision nullifies the will of the people and leaves Florida as one of the only states in the country in which public employees contribute nothing towards their retirement, leaving working Floridians with100 percent of the tab. 

"The State plans to file a swift appeal to reverse this decision.  Nonetheless, the Court’s order should be stayed throughout the appellate process, which will avoid an immediate impact on the 2012-2013 budget."

October 26, 2011

Judges tells state that cuts to state worker benefits broke contract

The decision to cut state and local government workers pay 3 percent and shift the money to the state’s pension fund broke the state’s contract with employees, a Leon County circuit judge told lawyers for Gov. Rick Scott and the Florida Legislature on Wednesday.

But was the move illegal? That’s the question Circuit Judge Jackie Fulford left undecided as she ended the day-long hearing on the lawsuit brought by the Florida Education Association and other state and local government unions.

The unions sued the state for changing the rules of the game on pensions for current employees when it cut worker salaries 3 percent, eliminated cost of living adjustments, or COLAs, for retirement benefits, and shifted the money into the Florida Retirement System to save the state $1 billion during the last legislative session.

The state argues that it was entitled to make the changes, which it called “modifications,” under its budgetary authority and denies it violated the collective bargaining rights of state workers when it made the changes without renegotiating employee contracts.

Fulford wasn’t buying it. “The more you work, the longer there is a reduction in the COLA,’’ she said. Read more here.

October 13, 2011

Union battle brews as Teamsters try to usurp the PBA

First, the Teamsters filed an ethics complaint against Gov. Rick Scott for signing a bill to privatize 19 Florida prisons after accepting campaign cash for his inaugural committee from the two largest companies that could benefit from the deal, the GEO Group and Corrections Corp. of America.

The Police Benevolent Association, the union that represents 13,000 of the state's 20,000 correctional and probation officers, had already filed suit against the gov for that very issue. (It won the case, by the way, and Scott hasn't asked for an appeal.)

Now comes a complaint by the Teamsters on behalf of prison workers and against the Department of Corrections. The complaint, to be filed today with the U.S. Labor Department, alleges that the department "systematically short changes workers out of pay" and asks the labor department to investigate.

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October 03, 2011

Legislature OKs audit of city of Hollywood

TALLAHASSEE -- The Legislature on Monday approved a request by Sen. Eleanor Sobel to step in and audit the city of Hollywood's shaky finances. Sobel appeared at a meeting of the Joint Legislative Auditing Committee in the Capitol to ask for the audit, citing the city's declaration of a state of "financial urgency," a recent 11 percent property tax increase, lucrative pension and health benefits for city employees and overly optimistic revenue projections.

Sobel questioned the work of Munilytics, an Illinois-based financial consulting firm hired by the city. She also questioned the city's administrative set up, which she said separates the city's budget and finance departments, resulting in accountability problems. 

"An independent, unbiased additional set of eyes will promote greater responsibility, accountability and accuracy," Sobel,a former Hollywood city commissioner, told committee members. "My ultimate goal is to restore faith in our local government." 

Sobel's request for an audit was endorsed by a spokesman for the city's Police Benevolent Association chapter. The auditing panel is chaired by Sen. Jim Norman, a Tampa Republican.

-- Steve Bousquet