Imagine retiring at age 46 with a lump sum of $700,000 and an annual pension of $120,000. How about retiring with $1 million plus a monthly pension plus health insurance for the rest of your life?
Now imagine having to be the one to pay for all of this.
Hard to fathom?
It? reality for many city taxpayers, although most don? know it. Florida? cities know it and have been trying to change it. But state law won? let them.
Before 1999, cities were largely free to collectively bargain with their police and fire unions for pension benefits that were affordable to taxpayers and responsive to employee needs. This changed in 1999 when the Legislature passed a law mandating minimum city police and fire pension benefit levels and mandating the use of certain revenues to fund even higher levels of pension benefits.
Statewide, the cost of this mandate to city taxpayers is $400 million and growing.
To make matters worse, under state regulatory policies, cities can raise pension benefits, but cannot lower them ?even if approved by the union ?without jeopardizing the receipt of revenues used to pay for pension benefits. State law also provides that employee pension contributions cannot be increased ?even if approved by the union ?unless additional pension benefits are adopted at the same time.
The 1999 law and similar state pension mandates have massively increased cities?funding liabilities and have created a structural deficit that worsens with every passing year.
Most city tax bases have shrunk in half, while police and fire pension costs have doubled and in some cases tripled. Many cities are paying amounts equal to 50, 60 and even 70 percent of a police officer or firefighter? salary toward funding their pensions. By comparison, the State of Florida typically pays only 20 to 25 percent of a state police officer? salary toward the Florida Retirement System.
It? time to tackle this problem and cities are ready to take the political heat to right-size these supersized pension packages. For that to happen, however, the Legislature must first revisit the restrictions imposed in 1999.
Fortunately, the Legislature has started to do so with HB 7241 and SB 1128. The House bill is especially noteworthy because it provides cities more flexibility to deal with their problems locally and negotiate pensions that taxpayers can afford.
The House bill allows cities to use growth in insurance premium tax revenues to pay down their unfunded pension liabilities. It allows cities to use these revenues to pay for existing benefits instead of just new or increased benefits. It would limit the use of overtime pay and unused leave time for purposes of calculating pension benefits.
HB 7241 is not an anti-union bill. It does not interfere with the rights of unions to collectively bargain with cities. In fact, it removes restrictions and requirements on the collective bargaining process that have caused pension costs to skyrocket.
HB 7241 bill is a long needed step along the road to reform. It does not take away anyone? accrued benefits. It simply changes the game going forward so that city taxpayers don? remain on the hook for a system that has spiraled out of control.
Police officers and firefighters deserve good benefits, but not benefits that will bankrupt us all. It? time for the state to ease restrictions on city pensions and remove itself from the local collective bargaining process. Cities must have the freedom to ensure pension benefits remain within the realm of fiscal reality.