City pension plan reform specifics vague
Published by Florida Times-Union on August 6, 2012.
That Mayor Alvin Brown will have a plan for pension reform by the end of the year is clear, with he and his staff both saying the date is firm.
Five months before that deadline, though - and 13 months into Brown's term - everything else about his reform plan is still vague.
Most recently, the issue has been a major focus of Kevin Hyde, the labor attorney serving as the city's $1-a-year chief executive officer, Brown said.
In March, according to his calendar, Hyde discussed pension issue with Tallahassee lawyer and pension expert James Linn. Most recently, he met with city lawyers and others at the end of June to discussion pension configuration.
The city is also looking at what's being done elsewhere in the country - including Rhode Island and California, Baltimore and Atlanta - as it puts its plan together.
The issue is important in Jacksonville because city contributions to the pension funds will hit around $150 million in the coming fiscal year, up almost 50 percent from this year. That number is expected to jump closer to $200 million annually in the next five years.
Nationwide, pensions could be the "sinkhole that swallows state and local finances, " said Olivia Mitchell, executive director of the Pension Research Council at the Wharton School of Business. She said plans nationwide are underfunded by between $1 trillion to $4 trillion.
"Public pension shortfalls are sure to force many cities and states into unpopular choices between raising taxes or filling potholes, " she said.
Five months before the deadline, anything that can be done to lower that number is being considered, Hyde said.
A CHALLENGE AHEAD
But getting that plan - whatever it is - actually put in place is likely to be a challenge, one that few cities or states have managed successfully.
"What's really happening is feeble attempts, nibbling around the edges, " said Jack Dean, who tracks pension issues as editor of PensionTsunami.com.
Even in some cities facing bankruptcy, making substantial changes to pension systems has proven problematic, with either a lack of political will or tough legal regulations standing in the way.
Although alarms about the growing costs of pensions have been sounded in Jacksonville for years, little has been done. Mayor John Peyton made pension reform a major focus as he neared the end of his second term, but a deal reached in the waning days of his administration has never been put in place.
Getting a deal agreed to is even move complicated in Jacksonville than elsewhere because of the role played by the Police and Fire Pension Fund, which both public safety unions have steadfastly maintained is the only entity that can bargain over pension benefits because of an agreement reached with the fund over a decade ago.
That is an unusual, possibly unique, situation for such a fund to be in. In most Florida cities, pension funds' sole job is making sure the trust fund remains healthy; trustees might advise an administration on the costs of benefits, for example, but the city then negotiates with the union.
'A CONFUSING PLACE'
"Jacksonville is a very confusing place, " noted Ray Edmondson, chief executive officer of the Florida Public Pension Trustees Association, a nonprofit that educates fund trustees.
Having the fund act as the unions' agent gives it two, possibly conflicting, goals: To protect the fund and to represent the employees.
"I don't think the pension board should be involved in negotiating benefits, " Edmondson said. "I think what they should do is be consulted and used as advisers."
That in itself is an important role, he said.
"The people that negotiate benefits and grant benefits are the people who know the least about pension systems, " he said. "The people who know the most - pension trustees or pension administrators - are almost never consulted."
That, so far, holds true when it comes to Brown's reform plans. No one in the administration has reached out to the Police and Fire Pension Fund, Executive Director John Keane said, although he's up for any conversation.
The key, Keane said, is that reform must be "comprehensive, " with any cuts in benefits balanced by increases in revenue for the fund, whether that's through pension bonds, permission to invest in a wider array of assets or other changes.
That said, Keane is firm that the fund will not agree to changes affecting existing employees, who have been paying into the system for years.
Such changes are widely seen as necessary if savings are to be achieved in the near term: If changes only affect new employees, any savings will not occur until years in the future.
Brown has said that he wants to "go beyond" the Peyton plan - which only dealt with new employees - and that changes to existing benefits are being considered.
That gap might be the most difficult chasm to cross, with some expectation that the entire issue will end up in court.
GOAL: NEW FISCAL YEAR
Hyde is hopeful such an outcome can be avoided, saying the public safety employees understand what the city is dealing with.
Brown has said that after he proposes a plan, he hopes it can be implemented by Oct. 1 - the beginning of the next fiscal year, a date that provides about nine months for negotiations.
Keane, too, says he's optimistic about reform being possible. All that said, pension troubles have been discussed for several decades now, with no solution even widely accepted, nevermind implemented. Only time will tell if such an agreement can be hammered out in 14 months.