City leaders said they will have a tougher time shoring up underfunded police and firefighter pensions under legislation that easily cleared the Florida Senate Wednesday, while union officials touted the bill as a compromise that is fair to both municipal employees and taxpayers.
Senators billed the legislation — expected to pass the House later this week and head to Gov. Rick Scott’s desk — as a “pension reform” proposal designed to help cities get a handle on retirement costs. Critics argue that the bill does exactly the opposite and makes it harder for cities to strike hard bargains with unions.
“This action is NOT pension reform and does nothing to protect the taxpayers around the state from rising and unsustainable pension costs,” Naples assistant city manager Roger Reinke wrote in an email Wednesday to the Herald-Tribune.
Despite such criticism, the legislation passed the Senate 36-0 and has been sailing through the House with little opposition. It is strongly supported by unions such as the Florida Police Benevolent Association and the Florida Professional Firefighters.
It is opposed by the Florida League of Cities and Florida Chamber of Commerce, groups working to give cities more leeway in reducing pension costs.
Municipal pension reform has been a major issue across the nation in recent years as city budgets buckled under the strain of funding retirement benefits.
Florida cities have $10.5 billion in unfunded municipal pension liabilities. Two-thirds of the 15 city pension plans in Sarasota and Manatee counties were considered critically underfunded in 2013. Most local cities have been raising taxes in recent years to keep up with the costs while working to restructure benefits.
While much of the problem can be blamed on poor planning by city leaders, state government also has played a role. Police and firefighter pensions have long been partially funded by a state tax on insurance premiums.
A 1999 law signed by former Gov. Jeb Bush and opposed by city officials required that all increases in premium tax revenue fund additional pension benefits, not unfunded liabilities. Cities that cut benefits below a certain level risked losing the premium tax money. Pension experts say this created a perverse incentive to maintain high benefit levels even as cities struggled to fund retirement plans.
Looking to reduce pension costs but retain their state premium tax money, Naples city leaders challenged how the 1999 law was being interpreted. Scott’s administration sided with the city and issued a ruling in 2012 that essentially reverses how the 1999 law is applied and allows cities to cut benefits without jeopardizing state funding.
The legislation that cleared the Senate would overrule the decision by Scott’s administration. It goes back to restricting how a large portion of the additional premium tax money can be spent, creating a state formula for dividing the money when unions and city leaders can not agree on a contract.
That formula may be more generous than what city leaders are proposing for a particular pension plan during contract negotiations, providing little incentive for the union to reach a deal, experts say. The bill also increases minimum pension benefits.
“Today’s bill passage doesn’t go far enough to reduce the unfunded liability on taxpayers nor does it help ensure long-term financial sustainability,” said Edie Ousley, vice president of public affairs with the Florida Chamber of Commerce.
Union officials say the bill is a compromise between the 1999 law and the position taken by Scott’s administration.
The legislation changes how cities can use some of the premium tax money while also protecting a portion of the additional benefits accumulated by unions over the years, an approach that Florida Police Benevolent Association Executive Director Matt Puckett has described as “incrementally” rolling back benefits.
“All we’re saying is keep a floor” on pension benefits, Puckett said. “Don’t sell out the young guys and the guys who haven’t been hired yet.”
Police and fire unions have historically held more sway in the Republican-controlled Legislature than groups such as teachers, which traditionally align more with Democrats. The pension bill is enjoying broad bipartisan support.
There was little debate on the bill Wednesday.
Sen. Garrett Richter, R-Naples, raised some of the concerns brought up by city leaders in his hometown, noting “everybody doesn’t agree with what this does.”
But Richter voted for the legislation anyway.
The bill’s sponsor, Fleming Island Republican Sen. Rob Bradley, said he has “the utmost respect” for what Naples has done to rein in pension costs.
“I know it didn’t go all the way that perhaps they or others would want,” Bradley said of the bill and opposition from city leaders. “But we listened.”
