Lawmakers are again working to overhaul how local police and firefighter pensions are bankrolled, allowing cities to use more money from a tax on insurance premiums to back up retirement systems that are in some cases badly underfunded.
The new push comes even after the state agency that oversees the law has overturned its longstanding reading of the statute to move it closer to what cities would like.
Local governments have long pushed for the state to reverse a law requiring the growth in premium taxes over the last 15 years to be used to pay for benefits for police and firefighters beyond those provided in 1999. Many of those pensions need to be reinforced with new premium tax money, they say.
“It just gives us more flexibility to stabilize those plans that have an unfunded liability,” said John Thomas, director of communications and political initiatives with the Florida League of Cities.
But reopening the issue after efforts to strike an agreement two years ago is likely to cause a new battle between law-enforcement unions and cities.
“It’s a third-rail sort of issue,” said Senate Government Oversight and Accountability Chairman Jeremy Ring, D-Margate.
One of the state’s key police unions said a deal was close to approval in 2011 before it fell apart. They say any change to the premium tax language needs to acknowledge the differences between cities with well-funded plans and those that are troubled.
“Not every city is sick,” said Matt Puckett, executive director of the Police Benevolent Association.
Ring is working to craft a bill along the same lines as a plan that emerged when lawmakers tried to tackle the issue in 2011. That would allow cities to use some of the funding to shore up their unfunded pension liabilities, then move the rest of the funds into a 401(k)-style “share” plan.
At the same time, the extra benefits language would go away. Ring hopes to have a copy of the legislation available for his committee to workshop next week. But compromise could still prove elusive.
“I think [Ring] very smartly made the choice that he’s not going to try to do this, ‘let’s all get together and sing kumbaya and try to come up with an agreement,'” Puckett said.
Gov. Rick Scott indicated in an interview last week with the News Service of Florida that he would support efforts to allow cities to use premium tax dollars more freely.
“I think we ought to give the local communities as much flexibility to deal with their pension plans – because they have significant pension-plan issues – as we can,” Scott said.
Cities won a victory on that front with a reinterpretation of state law by the Florida Division of Retirement last summer would allow local governments more freedom in how they use those premium taxes.
“The Naples Letter,” as some local-government advocates and attorneys are calling it, was in response to a request from the city of Naples, which was looking to overhaul its pension plan. After state officials told Naples the changes would disqualify it from collecting its share of insurance premium taxes from the state, Mayor John Sorey III wrote a letter to Scott asking him to have the division reconsider.
State officials had previously said the law required states to use the tax revenues above those collected in 1997 to be used for “extra benefits,” or those beyond the minimum benefits required by state law and any other benefits offered by the city as of March 12, 1999. That meant any extra money couldn’t be used to cover the other expenses of the plan, even if the minimum benefits were proving too costly.
“However, upon receiving your letter and reviewing the law again, this interpretation appears inaccurate,” wrote Keith Brinkman, chief of the Bureau of Local Retirement Systems, to Sorey.
Under the new interpretation, cities would still be required to provide extra benefits if premium tax revenues were left over after paying for the legally required benefits. But that caveat might not mean much, according to a memorandum issued by the Florida League of Cities on Aug. 17.
“Very few, if any, cities would be required to provide ‘extra benefits’ under this interpretation,” Kraig Conn, legislative counsel for the league, wrote to Executive Director Michael Sittig.
A memo from a pair of attorneys at Lewis Longman & Walker, a Florida law firm which has a practice dealing with public pensions, came to a similar conclusion. A copy of the memo is available on the firm’s website.
“The Naples letter appears to open the door to pension reform for many Florida cities, without the threat of loss of all future premium taxes,” wrote Jim Linn and Glenn Thomas.
But supporters say changing the law is important regardless of the Naples letter. The new interpretation of the law could be undone by a future administration.
“It would be important to have that clarified by law so there will be no issues down the road,” Thomas said
Court challenges are also possible, though Puckett said his group doesn’t plan to file a lawsuit.
“I’m not sure that’s going to hold up in court,” Ring said of the new interpretation.
Via Brandon Larrabee of the News Service of Florida.