Feeling the heavy pinch of employee pension costs, Florida counties are warning Tallahassee not to balance the faltering fund on their shoulders.
Indian River County Commissioner Peter O'Bryan this month urged the state to bring the Florida Retirement System "more into line with the private sector" by requiring contributions from new hires. Currently, local and state governments fully fund FRS.
O'Bryan further proposed that counties be permitted to set their own levels of contributions while curbing what he called "lavish benefits."
The Florida Association of Counties -- noting that the state's collective unfunded pension liability has risen to $17 billion (including $2 billion in the Deferred Retirement Option Program) -- opposes any effort to increase local governments' contribution rates.
Counties, cities and school districts paid $2.6 billion in employee pension costs last year.
Senate President Mike Haridopolos is sympathetic to the local concerns.
"The state could save hundreds of millions of dollars through defined contributions (by employees)," he said.
But reform won't come easily. O'Bryan points out that Washington must move first because federal law restricts the use of 401ks and other contributory programs in the public sector. Then FRS and state contractual provisions must be overcome.
While the Florida Association of Counties says it's "not at the head of this train," FAC realizes that something must be done as the retirement system heads deeper into the red.
Last session, legislation that would reduced the rate of return individuals received from the DROP program was vetoed by Gov. Charlie Crist. Revival of that bill would likely be signed by incoming Gov. Rick Scott.
Scott has said he wants to cut $1.4 billion next year from taxpayer contributions to the pension program.
A Florida TaxWatch study estimated that requiring new public employees to pitch in 5 percent of their salaries -- a policy in many other states -- would save state government about $250 million a year and trim local expenses by $950 million.
Other suggested legislative remedies include eliminating health subsidies and trimming retirees' cost-of-living adjustment.
TaxWatch calculated that limiting COLAs to inflation could save state and local governments $135 million in benefit payouts the first year.
Noting that Florida's retirement system had a surplus as recently as the mid-2000s, FAC legislative advocate Sarrah Carroll said the association does not have an official position on requiring employee contributions.
"We haven't gotten to that point. We are neither for nor against," she says. The FAC website says simply that the association supports "some level of grandfathering to existing employees."
"Our members are sensitive to this," Carroll said.
Kraig Conn, legislative counsel for the Florida League of Cities, said, We want some flexibility, we want to get out of the structural problems that have been created over the last 40 years."
Conn said numerous cities in Florida -- such as Pembroke Pines, Miami, Jacksonville and Hollywood -- send more than 50 percent of their payroll to the FRS.
O'Bryan says something has to give -- and that it shouldn't be local governments.
One of the big drivers of FRS costs is employees' ability to cash out vacation and sick leave, he said. This can tack $50,000 or more onto the salary figure used to calculate an individual's pension going forward.
"If pensions were based solely on base pay, we would avoid this spiking," O'Bryan said.
While union leaders decry any reforms that would in any way curb compensation, Girard Miller, adviser to the Chicago-based Government Finance Officers Association, says old-style public-sector pension programs are badly out of balance.
"One of the most visible and controversial shortcomings of the defined-benefit pension plan is its vulnerability to abuse by savvy and cynical employees who gin up their pensions by spiking their final compensation with overtime, accrued sick and vacation pay, bonuses and other nonrecurring compensation," he said.
"It's not fair, and the taxpayers almost always come out on the short end of the stick."
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Reach Kenric Ward at kward@sunshinestatenews.com or at (772) 801-5341.
