Why Was Alvin Brown's Pension Reform a Bad Deal?

August 15, 2013 143 comments Open printer friendly version of this article Print Article

The idea of pension reform in Jacksonville for civil service is something that should have been done ten years ago. Former mayors such as John Peyton wanted to reform pensions so why didn't it get done? There are many factors that is holding back pension reform and much of it has to do with egos and bad ideas. What can be done to reform pensions for our civil service and what should the Mayor and the City Council be focusing on instead of what amounts to a bad play of politics.

According to a study by JCCI, among Florida's ten largest cities, Jacksonville's city pension plans are the worst funded. What does that mean? Our problems due to prior lack of interest in addressing this issue that, it is believed, that no investment strategy will turn our problems around without a massive bill being handed to taxpayers at some point. And, with the average person only having $1200 a month in social security income to look forward to, this is a very important issue.

Since 1991 the city has taken several "pension holidays" in times when the economy was stronger to reduce tax burden by making a "minimum" contribution to pension funds. What this amounts to is simply making a minimum payment on the credit card bill while the balance continues to grow with interest. Basically what happened was that the city used funds from reserves to make up the imbalance it wasn't collecting in taxes until this practice was banned by proposal by Councilperson Stephen Joost. In other words, they paid for pension contributions with pension fund money in lieu of keeping taxes low.

As mentioned reforming the city's pension plan is not real news. John Peyton wanted to reform the pension plan for city workers starting with cutting back DROP benefits for early retirement. Lump sum, up front payments - though popular with employees - create expenses up front for city government. For example, for top level city employees it means walking away at retirement with $478,229 like Richard Lundy did and a pension of $5900 a month for the rest of his life.

In the Mayor's pension reform proposal, new hires would not be able to participate in the DROP program but anyone currently employed with the city would. Thus DROP payments of up to $600,000 for top level city employees would continue for the next 30 years with many of the payments going to top ranking officials in the JSO such as Micheal P Edwards, Director of Patrol and Enforcement(http://jacksonville.com/news/metro/2012-04-03/story/drop-good-deal-city-employees-adds-jacksonvilles-pension-woes) scheduled to retire in early 2015. Moreover, anyone in the line of succession, in the foreseeable future as "new hires" work their way up the ranks, will continue to benefit from the DROP program as the city doesn't pay into social security. The Mayor hardly dealt with this issue at all in his proposed pension reform.

In addition to lump sum payments not really being addressed by the Mayor, there is the issue of stacking pensions such as the case of John Keane who's past attempts at "profiteering" at the expense of taxpayers was, for all intents and purposes, consolidated and reassigned as if he had been enrolled in the state's high risk plan. And therein lie another issue the Mayor didn't really address although the activity was shut down: the stacking of pensions. In all fairness to the taxpayer the idea of paying someone for service to the city is not something people would object to, however, the idea that taxpayers pay not only a comfortable city pension plus a salary for, say, holding office on top of a pension is very unreasonable.

This is an issue a future discussion of pension reform should include: the idea of suspending a pension should a retired city employee hold another position in city government whether it is by appointment or an elected position. Keane for example at one point was positioned to earn a $60,000 a year pension on top of a salary of $283,000 a year as the pension fund's executive director. That has since been addressed on an individual basis, however the issue of taxpayers funding salaries for positions in city government on top of pensions is an issue that needs to be addressed in terms that deal with current issues that are contributing to the challenges we are facing as a city in the post 2007 economic situation we are facing as a community. Ultimately the income Keane is going to make is comparable to what he was making before and works out to be no different than any other city employee who runs for city council or get appointed to the mayor's staff; it only compounds the problem.

What the pension reform proposal submitted by Alvin Brown does is basically create a platform for the city to operate on a "business as usual" basis while attempting to shift the cost of paying for current pension commitments onto future civil service employees. With unfunded pension liabilities projected to increase $1.3 to 1.7 billion, the Mayor would have raised the retirement age - or period of tenure - from 20 to 30 years. The idea is that new civil servants will have to stay in service longer to pay for tenured civil servants plus pay for their own time in position still doesn't address current challenges adequately and makes no attempts to.

In addition to increased time in service, benefit accrual rates of 3% a year won't change for current city employees, dropping to 2% after the first 20 years capped at 80%. For new city employees the percentages will stay the same at 2.5 with a maximum of 75%. Ultimately, the fallacy of this situation is that is that new employees will contribute to a comfortable retirement for current city employees with no "shared sacrifice" being incurred by tenured employees as pre-tax contributions will increase from 7 to 10%. And with proposed cuts to essential city services likely, coupled with the likelihood of less hiring being done by the city, means that unfunded liabilities will, at some point, call for more taxes which the Mayor stands firm on not doing.

People who would have been hired under "Brown's pension reform" would have also found themselves, at time of retirement, having to wait three years for a cost of living increase while current employees would have gotten one at the same 3 month period of eligibility after retirement. Ultimately the only thing that Brown's reform would do is pull more contributions from funds - provided taxes are never raised appropriately - from a smaller pool of funds possibly calling for another "pension reform plan" in the future or for a bailout from either the state or federal government.

Clearly the City Council was right in being critical of Mayor Alvin Brown's pension reform proposal and voting down both that and his proposed austerity budget. But now it is important that the council and the mayor sit down and create a new plan to address the eminent need for reform free of the narrowmindedness of party and ideological stance. There need to be more hearings on this issue and the public needs a direct line of communication with their institutions to insure that there is reinforced the idea that, as a community, we are all in this together.

Also, we need to understand that the problems of the past can be addressed if we as a community embrace the idea of "shared sacrifice". We can't get back the money squandered yesteryear, but we can contribute to creating a better city tomorrow. As well city employees who have tenure can contribute to a better situation for future city employees by understanding that an austere plan for them will not only deprive our city of being able to entice the best and brightest into government service, but that their future security in retirement depends on fiscally stable Jacksonville as well.

Robert Montgomerie