Taxpayers face a pension bill mountain

[mtraininjax]

Taken from the 6/24 Metro section of the Florida Times Union: (JeffreyS, yes no one was minding this store either)

At the heart of the city’s morass of overly generous and underfunded pensions is an independent Police and Fire Pension Board that has operated irresponsibly and unchecked for years.
 
Several changes will affect the pension fund: City Council is about to replace its appointments to the board for the first time in two decades; the council auditor has started an audit of the pension fund’s operations; and Mayor Alvin Brown has promised to release pension reform plans. None of those can be completed too soon.

The balance sheet at the end of last year is not pretty:
■ $2.43 billion in accrued liabilities.
■ $1.04 billion in assets.

With just 43 percent of the future pension obligations funded, it’s among the worst in the state, according to a study by the LeRoy Collins Institute. Healthy plans should have coverage of about 80 percent.

GENEROSITY GONE AMOK
Pension costs have soared in recent years, in part because of generous changes in benefits, poor performance of fund assets and high costs of administration.

Riding high on the taxpayer dime is the management of the Police and Fire Pension Fund itself.

Executive Director John Keane is paid $283,000, the highest in the state for such state administrators, after receiving an 18 percent raise in a year in which city employees have taken pay cuts. Keane says his pay reflects long years of service, that he took no pay raise in recent years and that he handles multiple jobs.

Oddly, his contract calls for his salary to be the average of three of the city’s highest paid agency heads — the Jacksonville Port Authority, the Jacksonville Transportation Authority and the Jacksonville Aviation Authority.
That the pension board accepted that ludicrous formula reflects a breathtaking level of irresponsibility and the need for new blood on the board. In fact, the entire board should be replaced.

Moreover, a separate and lucrative pension plan exists for Keane and others in his small department. One estimate is that if he retired soon, he would draw more than $155,000 annually to go with the $60,000 in annual retirement from earlier years in public safety.

Although he has worked for the fund for 22 years, his pension will be based on the highest two years of salary.

WHO’S MINDING THE STORE?
While the pension fund drains tax money, no elected officials have direct responsibility over the board. Finally, the City Council, which appoints two of the board’s five members, is taking steps to strengthen its influence.
A bill sponsored by council members John Crescimbeni and Bill Gulliford would allow the council to appoint three board members.

Council President Stephen Joost has designated former JEA chief executive Walt Bussells; former University of North Florida President Adam Herbert; and Randi Shoemaker-Crump, senior vice president for Fidelity National Title Group.
All three bring experience and admirable records of public service. Not surprisingly, Keane and the pension board are fighting the change, calling it illegal.

Taxpayers should hope that the council will get to make all three appointments — and that the council and mayor will have the willpower lacking in recent administrations to seriously address pensions.

Though not as far out of kilter as the police and fire pension fund, the city’s general employees plan has liabilities of $2.3 billion. It was funded at a decent 71 percent last year. The much smaller corrections officers fund was funded at the low 46 percent. The latter two funds are administered by the city.

Brown will have to choose from among several unpleasant options to reduce the pension burden. But he should have wide support from a general public that can only view the generous benefits with amazement.
 
DIFFICULT CHOICES
Options listed in the mayor’s transition report:
■ Reduce benefits for new and current employees, including increasing the retirement age.
■ Increase employee contributions, now at 7 percent for police and fire and 8 percent for other employees.
■ Terminate or freeze current pension plans and set up lower cost plans such as a 401(k) for new employees.
■ Increase taxes.

Whatever the solutions, they are likely to be painful for taxpayers and for workers with diminished benefits.
Jacksonville’s public safety workers and other city employees should have equitable pensions, but the Brown administration and City Council will have to be aggressive if sanity is to be restored to the retirement systems.

Any delay would be irresponsible.

[JeffreyS]

I think we should attack this by doing a little on all of these fronts.
■ Reduce benefits for new and current employees, including increasing the retirement age.
■ Increase employee contributions, now at 7 percent for police and fire and 8 percent for other employees.(a schedule of small steps instead of one big increase)
■ Terminate or freeze current pension plans and set up lower cost plans such as a 401(k) for new employees.
■ Increase taxes.(I know you will get politically killed in Jacksonville Florida for this but if you want services you pay)

[officerk]

■ Reduce benefits for new and current employees, including increasing the retirement age.
■ Increase employee contributions, now at 7 percent for police and fire and 8 percent for other employees.(a schedule of small steps instead of one big increase)
■ Terminate or freeze current pension plans and set up lower cost plans such as a 401(k) for new employees.
■ Increase taxes.(I know you will get politically killed in Jacksonville Florida for this but if you want services you pay)

The above sounds great EXCEPT there are those city employees NOT making hundreds of thousands of dollars a year in an appointed position that took their jobs under the understanding that they went into public service with the understanding that part of the agreement for them working was the benefit package that both employer and employee agreed to at time of hiring.  Any changes for employees hired from X date forward with employees understanding what their benefits are is completely fair but to pull the rug out from under current employees who often went to work in the public sector at a pay sacrifice BECAUSE of the benefit package is not right.

I am a State Employee and my benefits have been changing over the last year or so continually.  I have not had a pay raise in going on 6 years yet we just had a 3% pay cut last year that was disguised as a "retirement contribution."  Our employer contribution to our retirement was just cut by a percentage that I am sorry to admit I don't recall as it just further irritates me.  Our Holiday leave (we don't get paid for working holiday in my department, we bank hours - hour for hour) has been adjusted so that we now have to use if we have more than a certain number of hours on the books where as previously we were encouraged to never use that time as it was "like a retirement fund on its own" as it was paid out at 100% when we separated. Remember, we work holidays for the same rate as working any other day of the week.  Now they are trying to put further restrictions on those hours, but how that is going to play out, we are waiting to see.  Those are the big things I can think of of the top of my head that have happened to State employees... and these are all things that are contrary to what I agreed to when I went to work for the State... Trust me, I am not making even $40k a year let alone what Mr. Keane is making.. these changes that the State hurt me a tad but not terribly HOWEVER some of my coworkers really ended up in a bind especially where both worked for the State.

I do not think it is right to do the same thing that the State has done to its employees to the City's employees also.   BUT to make the changes for new hires forward is completely fair.  Those that get hired know what they are signing on for.

[mtraininjax]

A group known as Pew came out with a report on all 50 states and their pension funding as well as healthcare funding, Florida fared pretty well in terms of the Pension, but was not so good in healthcare funding. You can google Pew report and I am sure you will find it. Shows every state. I think Maryland and Rhode Island were in the worst shape.

If you want to get an idea each week of what is on the mind of "some" economists, I recommend John Mauldin's free information, this week he discusses Pension issues, and the key here is that most Pension funds have been investing the money of the retirees at the rate of 60% stocks and 40% bonds. Well, it does not take a rocket scientist to see that if the Fed leaves interest rates at almost zero, as they have for the last few years, and will for the forseable future, those returns we saw in the 90s and early 2000s will not be there. All at a time when more and more of the pension participants are wanting to retire. Sort of a perfect storm for older americans who have savings and a pension looking at what they need in retirement. If the Fed raises rates, it will surely kill the 2.2% GDP we are swimming in, and while it may help the savers, will turn off any sort of recovery. Nice!

[officerk]

The other "storm" that the changes create are the people that are leaving/retiring early as they are not happy with the changes and are in a position to comfortably leave and cash out before the proposed changes go into effect that they are not willing to work through.  Some of this has helped with the attrition rate in that jobs that would have been lost through down sizing are cut through "natural" attrition.. however, these are retirements, annual leave balances, sick leave balances and holiday leave balance that must be paid out.  I am sure many of you saw the piece that Chanel 47? did on these pay outs and how much they can cost.  Getting time off is not always (usually) easy so many public employees bank a LOT of time that they EARNED and therefore have the right to be paid for it as they were not previously paid for it by taking the time off of work.... If the City had a fairly large group of employees get upset with the drastic change in benefits and decide to leave it would be extremely bad.. The State was pretty much counting on though it was still a fiscal blow.

[NotNow]

The current problem is a combination of underfunding during the good years and the current paltry return on investment.  All pension funds are struggling with the current returns.  It is bad, but it is temporary.  The increased funding required of the city (i.e. taxpayers) is largely caused by previous city administrations underfunding the pensions.  These pension funds are not new, and have effectively operated since the early twentienth century.  Current benefits are based on a range of laws and conditions and any change will certainly result in lawsuits and increased costs to the city.  This is a complicated area of law that cannot be adequately covered in this forum, but the city would do well to rely on wise counsel and not make ill fated "pronouncements" as it has been doing lately.  This has resulted in embarassment and a loss of confidence in the current administration.

[JeffreyS]

+1

[mtraininjax]

It is bad, but it is temporary.

How do you figure? Interest rates at next to nill and treasuries around 2%, how do you see the 11% average returns that the pensions need? Bet on the stock market? Junk Bonds? Tax increases are the only way to see enough revenue coming in to cover the shortfall.

Don't look for interest rates to rise the rest of this year and a while down the road, we need some growth before we can see interest rates rise.

[NotNow]

It is bad, but it is temporary.

How do you figure? Interest rates at next to nill and treasuries around 2%, how do you see the 11% average returns that the pensions need? Bet on the stock market? Junk Bonds? Tax increases are the only way to see enough revenue coming in to cover the shortfall.

Don't look for interest rates to rise the rest of this year and a while down the road, we need some growth before we can see interest rates rise.

These interest rates wont last forever.  Hopefully, the war on capitalism will subside soon and the current glut sitting on the sidelines will become active again. 

It is just patently wrong to wean back contributions during good times because it "seems" that the money is not needed, then screw the employees when times get hard.

Disclaimer- I am a member of one of these pension funds.

[Noone]

Taken from the 6/24 Metro section of the Florida Times Union: (JeffreyS, yes no one was minding this store either)

At the heart of the city’s morass of overly generous and underfunded pensions is an independent Police and Fire Pension Board that has operated irresponsibly and unchecked for years.
 
Several changes will affect the pension fund: City Council is about to replace its appointments to the board for the first time in two decades; the council auditor has started an audit of the pension fund’s operations; and Mayor Alvin Brown has promised to release pension reform plans. None of those can be completed too soon.

The balance sheet at the end of last year is not pretty:
■ $2.43 billion in accrued liabilities.
■ $1.04 billion in assets.

With just 43 percent of the future pension obligations funded, it’s among the worst in the state, according to a study by the LeRoy Collins Institute. Healthy plans should have coverage of about 80 percent.

GENEROSITY GONE AMOK
Pension costs have soared in recent years, in part because of generous changes in benefits, poor performance of fund assets and high costs of administration.

Riding high on the taxpayer dime is the management of the Police and Fire Pension Fund itself.

Executive Director John Keane is paid $283,000, the highest in the state for such state administrators, after receiving an 18 percent raise in a year in which city employees have taken pay cuts. Keane says his pay reflects long years of service, that he took no pay raise in recent years and that he handles multiple jobs.

Oddly, his contract calls for his salary to be the average of three of the city’s highest paid agency heads — the Jacksonville Port Authority, the Jacksonville Transportation Authority and the Jacksonville Aviation Authority.
That the pension board accepted that ludicrous formula reflects a breathtaking level of irresponsibility and the need for new blood on the board. In fact, the entire board should be replaced.

Moreover, a separate and lucrative pension plan exists for Keane and others in his small department. One estimate is that if he retired soon, he would draw more than $155,000 annually to go with the $60,000 in annual retirement from earlier years in public safety.

Although he has worked for the fund for 22 years, his pension will be based on the highest two years of salary.

WHO’S MINDING THE STORE?
While the pension fund drains tax money, no elected officials have direct responsibility over the board. Finally, the City Council, which appoints two of the board’s five members, is taking steps to strengthen its influence.
A bill sponsored by council members John Crescimbeni and Bill Gulliford would allow the council to appoint three board members.

Council President Stephen Joost has designated former JEA chief executive Walt Bussells; former University of North Florida President Adam Herbert; and Randi Shoemaker-Crump, senior vice president for Fidelity National Title Group.
All three bring experience and admirable records of public service. Not surprisingly, Keane and the pension board are fighting the change, calling it illegal.

Taxpayers should hope that the council will get to make all three appointments — and that the council and mayor will have the willpower lacking in recent administrations to seriously address pensions.

Though not as far out of kilter as the police and fire pension fund, the city’s general employees plan has liabilities of $2.3 billion. It was funded at a decent 71 percent last year. The much smaller corrections officers fund was funded at the low 46 percent. The latter two funds are administered by the city.

Brown will have to choose from among several unpleasant options to reduce the pension burden. But he should have wide support from a general public that can only view the generous benefits with amazement.
 
DIFFICULT CHOICES
Options listed in the mayor’s transition report:
■ Reduce benefits for new and current employees, including increasing the retirement age.
■ Increase employee contributions, now at 7 percent for police and fire and 8 percent for other employees.
■ Terminate or freeze current pension plans and set up lower cost plans such as a 401(k) for new employees.
■ Increase taxes.

Whatever the solutions, they are likely to be painful for taxpayers and for workers with diminished benefits.
Jacksonville’s public safety workers and other city employees should have equitable pensions, but the Brown administration and City Council will have to be aggressive if sanity is to be restored to the retirement systems.

Any delay would be irresponsible.

Welfare-The Government will pay you if you don't work.

Glorified Welfare-2005-1007

Did any MJ'er participate in the JCCI study Our Money, Our City, Financing Jacksonville's Future?

Everyone doing high 5's for the golden parachute of outgoing JTA director Michael Blaylock?

Now we want to create another Authority? Who are the 9 new Board members? Our city is so broke and it has been both Republican and Democrat members of city council through legislative actions that have created this Public, Private, Partnership. The Public Trust just destroyed.

67 counties in Florida. Do any of our Regional county partners Clay, St. Johns, Flagler, Nassau, Putnam county have a similar benny package? 

Disclaimer- I am one of millions being asked to fund and maintain Welfare and Glorified Welfare packages.

[NotNow]

Noone, I agree that some of the administrators packages have gotten out of hand.  But I encourage you to compare Jacksonville's pay and benefits package with any other  major Florida city.  Jax is by far the lowest paid with the worst benefit package and the least in pension benefits.  The Jacksonville taxpayer is not overpaying working class employees.  This is the first time I have ever seen JSO Officers resigning and starting over at other agencies.  Morale has completely crashed and we are hemorraging experienced young Officers. 

[DuvalHusky]

I see three issues here, two that are recurring and one new.

First, the people of Jacksonville are significantly under taxed. While I'm loathe to agree with him, Peyton was right in that we are engaging in the worst form of government on the cheap. Our parks, libraries, adult service, recreation services, animal control and other basic services are becoming genuinely awful. If this pattern continues, we will truly reach a point where no one will want to live here due to our misguided attempts to make this an affordable, alluring place to live! Go cheap, get cheap.

Two, we have a constitutionally elected Sheriff capable of whipping any Mayor who attempts to reign in spending in law enforcement. It may seem small but the JSO continues to grow while the rest of government continues to shrink. JSO continues to gobble up millions of dollars for programs like reentry, while successful nonprofits like Operation New Hope do it more effectively and for far less.

Three, poor leadership. Delaney handed this pension problem off to Peyton who in turn passed it off to Brown. Problem for the taxpayer is that each mayor has been less capable of handling the pension problems than the person before him.  Even more grizzly is that Brown is demonstrating complete incompetence in most of his dealings while refusing to be transparent and get input. Peyton to his credit went all over town showing our budget and telling us "this is what you give up if we fail to do X,Y, or Z". Brown simply continues to talk in vague generalities and talks about grand plans in partnership with the private sector. Who in the private sector is going to at this City's budget and leader and then leverage their dollars against the City's for large scale development?

Lastly, where is Kevin Hyde? When not practicing law for a private firm as if there is no conflict of interest or even a chance look of impropriety, Hyde could not have guided this Mayor to turn over public documents to avoid the threat of grand jury? He could not have assisted him in wasting HUGE amounts of political capital over courthouse furniture?

I bring up these things and the examples in the last paragraph only to illustrate the mountains of obstacles we must climb in not ending up with public services and amenities similar to Jesup, GA. Literally.
   

[vicupstate]

While I'm loathe to agree with him, Peyton was right in that we are engaging in the worst form of government on the cheap. Our parks, libraries, adult service, recreation services, animal control and other basic services are becoming genuinely awful. If this pattern continues, we will truly reach a point where no one will want to live here due to our misguided attempts to make this an affordable, alluring place to live! Go cheap, get cheap.

I wish he had thought of that before he ran for election on a 'no new taxes' platform.   

[DuvalHusky]

Big differences between Brown and Peyton.

Peyton came to office in rosier times when the U.S. economy was propped up on a housing bubble doomed to crash. He had to eat his mistake but instituting solid waste and stormwater fees (taxes in sheep's clothing).

Brown took office knowing we were in a economic pit, knowing the City was desperately in need of new revenue for basic services, and still promised no new taxes or fees! He rode his tired cliches past Hogan and became our accidental Mayor.

This budget is going to be ugly.

[Elwood]

Accidental mayor? Did we, the voters "accidentally" choose him? Agree with his views or not, we, as a city chose to believe what he stated concerning taxes. It's easy to point the finger at Alvin Brown; harder to point it at ourselves. Anyone that actually believes we can survive as a functioning city, without an increase in tax revenue, has been living under a rock.