TALLAHASSEE — Lawmakers may have found a solution to the longstanding problem of trying to financially strengthen city retirement plans for police officers and firefighters, while keeping both the cities and unions happy about the resolution.
“It’s been a long time coming,” Matt Puckett, a lobbyist for the Florida Police Benevolent Association, said before the Senate Appropriations Committee unanimously backed the measure (SB 246) last week.
“It hasn’t been the easiest thing,” he said. “But I think everybody can walk out of here and say they got something in this bill and they lost something in this bill. That’s probably the definition of a good compromise.”
The compromise on the municipal pension funds was forged by Sens. Jeremy Ring, D-Margate, and Rob Bradley, R-Fleming Island, negotiating the deal with the Florida League of Cities and the police and firefighter unions.
Bradley has called the nearly 400 local pension funds “a ticking time bomb” given that more than a majority may be underfunded — defined as the inability to pay at least 80 percent of the future retirement costs.
“What we have seen is benefit levels have grown and grown and revenues are not sufficient to support this growth in benefit levels in many cities,” Bradley said.
Bradley said the Legislature itself was at fault for some of the problem as lawmakers mandated in 1999 that growth in the cities’ share of the state tax on insurance premiums — which has historically been used to fund police and firefighter pension plans — had to be used on “extra benefits.”
The compromise now gives the cities more flexibility in using the insurance premium tax to strengthen the pension funds, while at the same time requiring the cities maintain a set of “minimum benefits” to the workers.
As an incentive, the minimum benefits now include a provision allowing police and firefighters to accrue their pension benefits at a rate of 2.75 percent of their salaries per year — as opposed to the current 2 percent rate. However, approximately 84 percent of the police and fire pension funds already have accrual rates of 3 percent or greater, according to the League of Cities.
Bradley said the bill would let cities and the unions negotiate the new pension plans and the use of the insurance premium taxes. If the cities and unions cannot agree on a plan, the bill provides a complicated formula that will determine how those funds would be used.
“They aren’t the funnest rules to deal with,” Bradley said. “That’s OK because it encourages the parties to come to an agreement.”
Bradley said the proposal is also designed to take the state out of the local decisions on the pension plans by giving the cities the “tools” to deal with the issue.
“They need to use those tools,” Bradley said. “We’re out of the way now. They now have the tools to move forward to fix it.”
A key player in the legislation is the Florida League of Cities. The lobbying group for the city governments opposed two earlier versions of the bill as it moved through the Senate committees.
But Kraig Conn, a lobbyist for the cities, said the group supported passage of the bill by the Senate Appropriations Committee, the measure’s last stop before heading to the Senate floor.
Sen. Garrett Richter, R-Naples, noted that it was his city that helped spark the current debate when Naples officials won approval from the state Department of Management Services for a plan on revising the way the insurance premium funds were being used in the local pension plan.
“I think everybody knows that over the years the pension costs have run wild and run out of control, threatening the financial solvency and fiscal stability of our cities,” Richter said.
But the so-called “Naples letter” became an issue of contention as some critics said the agency decision could not trump the 1999 state law outlining the use of the tax on insurance premiums.
The compromise plan advanced last week essentially codifies the Naples letter into the law for the next three years.
Ring, the South Florida lawmaker who also helped negotiate the deal, said the problems with some of the municipal pension funds was directly akin to the situation in Detroit, where pension costs led to a municipal bankruptcy.
Ring called the problems with some of the local pension funds in Florida “a great crisis” for the state. He said the bill now moving forward in the last two weeks of the 2014 Legislature will benefit “all the taxpayers in the state of Florida.”
