Chris Christie on Public Sector Salaries
This man tells it like it is.
TAB Legislative Wish-List – an Update
Since we published our “Legislative Wish List” last month, the outlook for the coming session has come into focus. Two of the 4 items appear to be off the table, while one of them – FRS reform, has been exceeded by the just announced proposal by Governor Scott. Here is an update.
FRS Reform
We support the county’s desire to require employee contributions to FRS, modify the fixed 3% COLA, reduce the DROP program, explore Defined Contribution plans, and tighten the calculation of AFC (Average Final Compensation), but consider their “things to avoid” as too restrictive.
The Governor’s plan on the other hand jumps to a full 5% participant contribution, ends the COLA on accruals after July of this year, drops the DROP altogether, and offers new hires a Defined Contribution plan only. Furthermore, the plan would cut the accrual rate for the “special risk” class from 3% to 2%. He estimates this plan will save the state’s taxpayers about $2.8B over two years. In TAB’s quick calculation, just two of these changes – the special risk accrual rate and the 5% contribution, would save Palm Beach County about $17M per year from Fire/Rescue pension contributions, and about $21M from PBSO.
We therefore much prefer the Governor’s proposal to the county’s agenda and hope that the county Delegation can support it against the significant opposition that is sure to come.
The opposition that will follow this proposal needs to be put in perspective. When the FRS statute was first introduced, the “special risk” class accrual was 2%. Meant to apply to police, corrections officers and firefighters whose physically demanding jobs required them to retire at an earlier age, the differential was to provide them with a roughly equivalent pension at 25 years that a “general class” employee would get at 30 years (approximately 50% of AFC). During 2000, Special Risk Class accrual rates were increased from 2% to 3% for all years between 1978 and 1993 for all members retiring on or after July 1, 2000; the Legislature funded this $696.8 million change from an actuarial surplus in the FRS trust fund over a three-year period.
The following is from 121.0515 FS:
LEGISLATIVE INTENT.—In creating the Special Risk Class of membership within the Florida Retirement System, it is the intent and purpose of the Legislature to recognize that persons employed in certain categories of law enforcement, firefighting, criminal detention, and emergency medical care positions are required as one of the essential functions of their positions to perform work that is physically demanding or arduous, or work that requires extraordinary agility and mental acuity, and that such persons, because of diminishing physical and mental faculties, may find that they are not able, without risk to the health and safety of themselves, the public, or their coworkers, to continue performing such duties and thus enjoy the full career and retirement benefits enjoyed by persons employed in other positions and that, if they find it necessary, due to the physical and mental limitations of their age, to retire at an earlier age and usually with less service, they will suffer an economic deprivation therefrom. Therefore, as a means of recognizing the peculiar and special problems of this class of employees, it is the intent and purpose of the Legislature to establish a class of retirement membership that awards more retirement credit per year of service than that awarded to other employees; however, nothing contained herein shall require ineligibility for special risk membership upon reaching age 55.
We think returning to the original intent of the statute is appropriate.
The following table illustrates the current FRS attributes, the county agenda, and the Governor’s Proposal. An excellent summary can be found in the Sun-Sentinel HERE.
| Current FRS | County Agenda | Rick Scott Proposal | |
|---|---|---|---|
| Accrual Rates | 1.6% general 3% special risk |
No Change | 1.6% general 2% special risk |
| Participant Contributions | None | “Modest Amount”, indexed cap, sliding scale, “offsets” | 5% across the board |
| Defined Contribution Plan | Offered with few takers | Incentives, but not mandatory | Only option for new hires |
| COLA | fixed 3% / year | Indexed to inflation | Eliminated for accruals past July 2011 (protects current retirees and accumulated benefits) |
| DROP Program | Continue working for 5 years while pension accumulates, then lump sum | Wait time lengthened, credit for federal employment | Eliminated after July, 2011 |
Palm Beach County Sheriff Career Service Legislation
The county wants to modify this statute to allow changes to current benefits during collective bargaining. Currently, no existing employer-paid benefits and emoluments to all certified and non-certified employees of the Sheriff with regard to the pay plan, longevity plan, tuition-reimbursement plan, career-path program, health insurance, life insurance, and disability benefits may be reduced except in the case of exigent operation necessity”. We support this change, but have been told by county staff and several commissioners that it is dead in the water. As it is a local bill, unanimous support in the Delegation is needed and the politics are just not there for a measure that would have union opposition.
Neither this item nor the following one were discussed at the recent joint meeting between County Commission and staff and the Legislative Delegation.
Fire/Rescue Sales Tax Surcharge Fix
The county wants to fix 212.055 FS to enable a return of a ballot initiative to raise the sales tax in the county to fund Fire/Rescue. We would prefer to repeal the provision and save us the trouble of a ballot initiative fight. Fire/Rescue should have to justify their budget every year, just like other county departments.
A bill was introduced to limit the use of revenues so collected, but was withdrawn when it was pointed out that amendments could have enabled the tax. As far as we know, no further action is pending and no bill had been introduced by the deadline last Friday by any of the county delegation.
Local Accountablility
HB107, “Local Government Accountability”, was introduced by Representative Jimmie Smith, FH43, Citrus County, and is now in committee, along with the companion Senate Bill SB224. We like it for its provisions on budget detail to be supplied by the Sheriff. The bill does the following:
Revises provisions relating to procedures for declaring special districts inactive; specifies level of detail required for local governmental entity’s proposed budget; revises provisions for local governmental entity’s audit & annual financial reports; requires local governmental entity’s budget to be posted online; revises budgetary guidelines for district school boards.
Effective Date: October 1, 2011
This was brought to our attention by the Clerk’s Office and we believe it deserves support by the local Delegation.
FRS Pension Reform Options and their Possible Savings
The Office of Program Policy Analysis and Government Accountability (oppaga) published a report a year ago, laying out options and their savings for reforming FRS. In light of possible legislative action in this area, it is a good primer on the system, its history, and how it could be changed.
CLICK HERE for the report.
Abstract
The Florida Retirement System has evolved since its creation, which has increased state and local government costs. The Legislature could consider several options for modifying the system’s retirement class structure to reduce system costs, including consolidating employee retirement classes, restricting class membership, modifying benefits for some classes, and requiring employees to contribute to the retirement system. These options would generally shift FRS back to the model that existed when the system was established in 1970, move the system closer to the model used by most other states, and recognize the longer life expectancy of current employees. By doing so, the options would reduce benefits for affected employees. Therefore, when considering these options, the Legislature should consider the overall system of employee compensation and how changing the Pension Plan and the Investment Plan would affect that system.
A related report on a Defined Contribution Plan option and the enhanced predictability of such a plan is HERE
Joint BCC / Legislative Delegation Workshop
This morning (1/28), the Palm Beach County Commission and staff met with 9 of the 18 members of the Palm Beach County Legislative Delegation. Present were Senators Lizbeth Benacquisto (R, FS27) and Maria Sachs (D, FS30), Representative (and delegation chair) Joseph Abruzzo (D, FH85), Steve Perman (D, FH78), Pat Rooney (R, FH83), Lori Berman (D, FH86), Mark Pafford (D, FH88), Jeff Clemens (D, FH89), and Irv Slosberg (D, FH90).
After opening remarks from Chairman Abruzzo and Commission Chair Karen Marcus, PBSC President Dennis Gallon welcomed the groups to his facility, and Legislative Affairs Director Todd Bonlarron began the agenda with a recap of the successful 2010 legislative session and introduced two Powerpoint presentations of particular interest.
In the first, newly appointed Budget Director John Wilson gave a crisp overview of sources of revenue and the property tax supported appropriations. Some of the charts used, as in the past, highlighted the size of the Sheriff’s budget compared to the county departments, and their divergence. PBSO growth in spending has far exceeded county department ad-valorem requirements for the last 3-4 years, and now is almost 70% higher ($394M vs $233M in the 2011 budget).
Another chart showed the trend versus the “TABOR” line, which they show as 28.3% above 2006 levels. (TABOR stands for “Taxpayer Bill of Rights” and refers to a Colorado implementation that constrained the rate of spending growth to population and inflation.) By their measure, PBSO is up 67% over 2003 while county staff has only increased 11%.
(TAB NOTE: Although we do not dispute these numbers, they are a bit misleading and not totally fair to the Sheriff. Since 2003, PBSO has been absorbing new service areas, including the Glades cities, Royal Palm Beach, and Lake Worth. Population growth in the county was about 6%, but the PBSO service area grew by 19% from 2003-2009, requiring a different TABOR baseline. Furthermore, if the 2012 budget comes in with unchanged 4.75 millage, by some measures the county will have converged on the TABOR trend with the Sheriff included. We will be doing an article about this in the near future.)
Regarding TABOR, there was some indication that similar measurements may be discussed in the legislative session. Todd Bonlarron laid down a marker for the county that city and county governments should be exempt from such measurements. Commissioner Marcus pointed out that if we had TABOR here, “we never would have been able to do Scripps.” Given the debt incurred and likely losses surrounding Mecca Farm, maybe that would have been a good thing.
Next up was Assistant County Administrator Brad Merriman who presented a pension overview. Brad is the county’s acknowledged expert on the subject with a background in HR, and gave an excellent summary of the types of pensions, organization and statistics about FRS, and its current status. Hitting on the key aspects of the Defined Benefit plans which the overwhelming majority of employees select, he pointed out the accrual factors (1.6% /year for most, 3.0% for “special risk” classes), and the guaranteed 3% COLA for retirees, then showed an example of a 30 year employee at the “average AFC” of $42K/year receiving a modest retirement income of $19K. While this may be average state-wide, our calculations show higher averages in this county, but still not too excessive. It is the “special risk” categories that are excessive. You can infer this by noting that the pension contribution made for regular employees is mandated at 10.77%, while for special risk it is 23.25%). It was noted by Representative Perman that elected officials also get the same 3%/year as special risk classes. Seems like that is excessive too.
Leading with a comparison to other states’s plans (one of only 5 with no employee contribution, lower accrual but longer AFC calculation, only 40% index COLA), Brad laid out the county recommendations and things to avoid as FRS reform is discussed in Tallahassee. This can be found in depth elsewhere (CLICK HERE) and TAB supports the FRS recommendations for the most part.
Moving along, former Senator Dave Aronberg, now working for the Attorney General, gave an overview of steps being taken to curb the growth of pain clinics, Todd touched briefly on the other items in the county legislative agenda, and the senators and representatives talked about the bills with which they are personally engaged.
It should be noted that two of the areas of particular interest to TAB – namely the “Fire/Rescue Sales Tax Fix” and changes to the “PBSO career service protection act”, were not mentioned at all. It is our understanding that neither area will be pursued in this session. The first would be necessary to enable a sales tax ballot item in 2012 and could presumably be introduced later, so we will continue to scan for that one. The second is a disappointment, as no substantive changes to the PBSO contracts can be made without it, even during collective bargaining sessions for the next contract. We have been told by multiple sources that since it is a local bill requiring unanimous agreement in the delegation, the politics are not there to challenge the unions.
Near the end, Commissioner Aaronson asked that someone in the delegation take on the task to make “31 bullet magazines” illegal. Although there were no takers, Senator Sachs has already introduced a bill that would limit gun rights, and both Commissioners Taylor and Vana want to see guns restricted within the county, particularly in parks and public buildings. If any of you reading this are passionate about second amendment issues, it is time to pay attention.
It should be noted that the delegation is split 10 Democrats to 7 Republicans, as befits the county registration ratios, but the split of the attendees was 7:2 among the state level folks and 5:1 for the commissioners. This is not to imply that there is any partisan clash among the delegation (there doesn’t appear to be), but it makes one wonder how the delegation will succeed in the overwhelmingly Republican legislature.