Florida Municipal Pensions:
Not Yet Stockton but For Some,
Moving That Way
University of North Florida - Foundations of Local Government
August 17, 2012
Carol S. Weissert, PhD
Director and Professor of Political Science, Florida State University
David S. T. Matkin, PhD
Research Fellow and
Assistant Professor of Public Administration, Florida State University
LeRoy Collins Institute
• State-Local Relationships
• Pensions and Health Benefits First Issue
• Early work (Feb. 2011) retirement benefits as
percent of local spending
LeRoy Collins Institute and Florida
Municipal Pensions
• In 2009 average annual retirement obligations
for cities accounted for 8.3 percent of
spending—and growing
• Includes both pensions and OPEBs (mostly
health benefits)
Total Pension Contributions as a Proportion of Total Governmental
Expenditures Cities and Counties 2003-2009
But in Florida There are some cities in
Trouble
• Nearly one-third of Florida’s 100 largest
municipalities have funding ratios of less than
70 percent.
• Variation whether plans are general employee
or public safety ones
Grades & Participant Type
Costs Per Participant
• “A” Plans
• “F” Plans
$5,786
$26,305
•
•
•
•
$9,297
$15,245
$17,819
$21,738
General Employees
Police
Firefighters
Police&Fire
•
•
•
•
Jacksonville general employees “C”
Jacksonville police and fire
“F”
Jacksonville Beach police, fire “C”
Jacksonville Beach general employees “B”
•
•
•
•
•
Jacksonville General Employees
Jacksonville Police&Fire
Jacksonville Beach General
Jacksonville Beach Fire
Jacksonville Beach Police
$5,725
$26,323
$2,572
$6,272
$6,076
Why the Variation?
• Mismanagement of pension plans
– Pension holidays
– Poor investment decisions
– Miscalculation of expected returns
• Spiking
• Difficulties with renegotiating contracts
Pension Holidays
• Miami Beach --no funding 2001-2003
• Jacksonville
Poor Investment Decisions
• Auburndale—solely in currency
• Winter Springs—overestimated expected
returns
Spiking
• Miami Beach
• Coral Gables
Actions Will Be Taken
• Hollywood special election
• New Smyrna Beach special election
• Pembroke Pines, Miami, Hollywood filed for
financial urgency
Reforms to Reduce Costs
•
•
•
•
•
•
Increasing employee contributions
Cutting pension benefits
Eliminating Cost of Living adjustment
Changing calculation of final benefits
Increasing retirement age
Switching from DB to DC
Increasing Contributions
• New and old employees (Bradenton, Cape
Coral and Winter Springs)
• Along with a pay increase (Delray Beach and
Lakeland and Coral Springs)
• For new hires only (Palm Beach Gardens)
Altering COLs
• Elimination (Hollywood, New Smyrna Beach)
• Frozen COL (Temple Terrace)
• Lowered (Coral Springs; Palm Beach Gardens)
Calculation of AFC
• Limit overtime (Winter Springs)
• Decrease multiplier (Winter Springs, Coral
Springs)
• Base salary only (Coral Springs)
• Reduce maximum benefit (Palm Beach
Gardens)
Age Requirements
• Raise retirement age (Hollywood and New
Smyrna Beach)
• Increase number of years to be eligible (Palm
Beach Gardens)
Switch to Defined Contribution
• Lakeland (optional for current employees)
Indirect Activities
•
•
•
•
Reducing payroll expenses
Reducing staff
Cut salaries of new hires
Reducing holiday pay
Collins Institute Recommendations
• Eliminate spiking
• Age can receive retirement benefits should be
60
• Municipalities need to contribute in good
economic times and bad.
• State premium tax allocation should be
revised
• Public informed early and easily
Details on Pension Trends
• How much of problem due to stock market
fall?
• What trends are evident that political leaders
should be aware of?
Funding Ratio
Entry Age Normal Cost Method
130
120
110
100
90
80
70
60
50
40
30
2001 2002
2003
excludes outside values
2004
2005 2006
2007
2008
2009 2010
Market Value of Assets
Median Dollars by Asset Type for General Employee Plans
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
2004
2005
2006
2007
2008
Equities
Cash & Equivalents
Fixed Income
2012 Dollars
2009
2010
Market Value of Assets
Median Dollars by Asset Type for Public Safety Plans
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
2004
2005
2006
2007
2008
Equities
Cash & Equivalents
Fixed Income
2012 Dollars
2009
2010
Annual Pension Contribution
Median Share of Payroll for General Employee Plans
.6
.4
.2
0
2004
2005
excludes outside values
2006
2007
2008
2009
2010
Annual Pension Contribution
Median Share of Payroll for Public Safety Plans
.8
.6
.4
.2
0
2004
2005
excludes outside values
2006
2007
2008
2009
2010
Annual Pension Contribution
Median Share of Payroll by Contribution Source for General Employee Plans
.3
.25
.2
.15
.1
.05
2004
2005
2006
City Portion
2007
2008
2009
Employee Portion
2010
Annual Pension Contribution
Median Share of Payroll by Contribution Source for Police Plans
.3
.25
.2
.15
.1
.05
2004
2005
City Portion
2006
2007
2008
Employee Portion
2009
2010
Other Portion
Annual Pension Contribution
Median Share of Payroll by Contribution Source for Firefighter Plans
.3
.25
.2
.15
.1
.05
2004
2005
City Portion
2006
2007
2008
Employee Portion
2009
2010
Other Portion
Normal and UAAL Contributions
Median Dollars by Contribution Source
800,000
600,000
400,000
200,000
0
2004
2005
2006
2007
2008
Normal Contribution
UAAL Contribution
2012 Dollars
2009
2010
Trends?
• Underfunding not new in Florida
municipalities
• Pension contributions increased substantially
• Local governments are picking up more of the
pension costs, especially public safety
• Growth in proportion of pension plan retirees
Contact LeRoy Collins Institute
• Office, 850-644-1441
• Carol Weissert, cweissert@fsu.edu
• David Matkin, dmatkin@fsu.edu
• http://collinsinstitute.fsu.edu/