Pension Clips Nov 2009

CITY OF FORT LAUDERDALE  POLICE AND FIREFIGHTERS’   RETIREMENT SYSTEM 

FLORIDA PENSION NEWS STORIES ON POLICE AND FIREFIGHTERS Prepared by Fred Nesbitt, Director of Public Information [email protected] November 30, 2009

Florida legislator pursues switch to DC plan for new hires Bill Cotterell, Tallahassee Democrat, November 16, 2009 Fasano says goodbye pensions, hello savings Mike Fasano wants to get state government out of the pension business. The Republican state senator from New Port Richey has re-filed his bill that would rename the Public Employee Optional Retirement Program the "Retirement Investment Program" for public workers. The name change signals a new pension philosophy — leaving the safe, relatively lowpaying assurance of a "defined benefit" pension for the market-driven, possibly more profitable "defined contribution" retirement system. Under Fasano's 91-page bill (SB 660), all new employees would have to join the defined contribution plan after Jan. 1, 2011 . All current Florida Retirement System members, whether they work for the state or one of the hundreds of school boards and local governmental units whose pension funds are invested by the State Board of Administration, would still be guaranteed their regular pension benefits. The PEOPR allows employees to manage their own retirement money in 20 investment options — including safe money market and bond funds or riskier stocks. In the traditional defined-benefit system, the state calculates your monthly pension as a percentage of salary multiplied by years of service. Employers make pension contributions ranging from 9.85 percent of payroll for regular workers to 20.92 percent for special-risk employees. About 123,000 public employees at all levels of government, roughly 14 percent of the FRS membership, are now in the optional plan and — despite last year's market convulsions — membership continues to grow. There was a stagnant period around October and November of 2008, and PEORP members tended to take cover in the bonds and money market funds. But the SBA reports a trend back toward equities this year. So why does Fasano, an investments executive by trade, want everybody to put everybody in the market? Two reasons — he figures the state, counties, school boards and other public employers will be able to reduce their contribution rates, eventually, and the SBA will have some cushion on its necessary investment earnings rates. "It will save, in the short run, not much money," Fasano said. "But in the long run, it will save literally hundreds of millions of dollars for the taxpayers." Like the state, Fasano said, counties and cities all over Florida are having to look for places to cut their spending. Fasano was the sponsor of this year's law, taking effect next year, forbidding more "double dippers" to retire and go back to work for the state while drawing pensions. His new bill, he said, will phase out the Deferred Retirement Option Plan, once every employee is in the investment system. "Eventually, you will no longer have a DROP program. That'll be long after you and I are gone, but eventually, everyone will be in the defined contribution plan," said Fasano. Meeting pension payouts requires a 7.75-percent rate of return on SBA investments. Except for last year's fiasco, going back to 1976, the long-term earning rate has comfortably exceeded requirements. That can't

last, says Fasano. "There is no way the State Board of Administration can keep up with what they need to earn in the retirement system on an annual basis, to pay the benefits that people have been promised," he said. Fasano filed the bill last session but didn't move it. He said he wanted an actuarial study of what it would mean, which will be completed before the 2010 session in March. He said this is the trend of the future in government employment. "I believe as you see new leadership come in both chambers in the next couple of years," Fasano said, "you're going to see both the Senate and the House move in a direction that would put new employees into the defined-contribution plan." (This article even appeared in the Cayman Islands newspaper, Cayman Compass)

Florida pension system on the rebound South Florida Business Journal, November 5, 2009 The Florida Retirement System pension fund posted a 19 percent negative return for the fiscal year ended June 30. Improving financial markets for the quarter that ended Sept. 30 helped the fund recover some of its losses. For the just-ended quarter, the pension fund showed an 11.9 percent return, and assets increased to $110 billion from $99.6 billion during the period, a news release said.

Derail Florida's pension gravy train Editorial, The Tampa Tribune, November 22, 2009 State Sen. Mike Fasano of New Port Richey is right to once again target for change how the state rewards employees for years of service when they retire - a program that has exposed taxpayers to financial risk for too long. Most private industries and businesses have phased out pensions because of the risks. Taxpayers, through their elected Legislature, should do the same.

Town Council's consultant proffers several options to reduce pension costs By William Kelly, Palm Beach Daily News, November 7, 2009 A town consultant has produced a menu of options, from moderate to major, for reining in the town's escalating pension costs. The Oct. 31 report from Cavanaugh Macdonald Consulting also looks at how the town's retirement benefits stack up against those of other governments in Palm Beach County. Out of 13 plans surveyed for firefighters, Palm Beach ranked third. West Palm Beach was first, with a multiplier of 4 percent. Palm Beach's multiplier for firefighters and police is 3.5 percent. But the report noted that West Palm Beach requires firefighters to contribute 19.2 percent of their pay into the system, nearly triple the 6.8 percent Palm Beach firefighters pay. Of the 14 police agencies surveyed, three matched the town's 3.5 percent multiplier. None exceeded it. Two of the three, Boca Raton and Palm Beach Gardens, require employee contributions of 9.2 percent and 8.6 percent, slightly higher than Palm Beach's 7 percent.

Burdened with rising costs, firefighters' retirement board hears consultant's report on ways to save money By William Kelly, Palm Beach Daily News, November 11, 2009 The pension boards do not determine benefits, but they've been asked to give recommendations to the Town Council, which meets Dec. 3 to discuss a town consultant's report outlining ways to reduce costs. The town paid Cavanaugh Macdonald Consulting $75,000 to outline ways to reduce costs. On Wednesday, Jose Fernandez, principal and consulting actuary with the company, led the retirement board

through the suggestions. Options include reducing a multiplier used to calculate benefit levels, cutting or eliminating the plan's 2 percent annual inflation increases, and increasing employee pay contributions from 7 percent to 10 percent. Other, more drastic changes include: * Joining the Florida Retirement System, a change the consultant suggested be applied only to future employees because of benefit reductions to existing workers for the years they've already served. * Creating a defined contribution plan for all future employees while leaving current employees in the existing system. In this plan, the town and future employees would contribute to individual investment accounts and their retirement payments would be subject to market performance.

Guest commentary: Florida cities need pension-relief legislation from Tallahassee Penny Taylor, Member, Naples City Council, Naples Daily News, November 22, 2009 Consider this: the city spends almost 50 cents of every salary dollar on the pensions of the firefighters. And, despite recent improvements in the investment markets, those dollars are harder and harder to come by because pension investment portfolios have underperformed anticipated returns. We are not pointing fingers. No one could have foreseen the economic tsunami that swept the world. Rather, we seek to find solutions that will benefit all, and the changes must begin with state law. The Florida League of Cities has been a strong advocate of statewide pension reform. Currently, the league is circulating a bill outlining needed pension reform in Tallahassee.

Jacksonville police, fire unions ready to tackle contracts By Matt Galnor, Florida Times-Union, November 30, 2009 Jacksonville's police and fire unions are fighting against pay cuts, health insurance increases and pension reform at the bargaining table with city labor officials. Now, the unions' members are planning to pony up their own money - increasing dues to fund the fight. The 2,400-member Fraternal Order of Police approved a $10 monthly increase for a year, which is expected to generate more than $300,000. The firefighter union's 1,200 members will be asked in January to kick in an extra $30 a month for three months to raise $100,000 for negotiations and legal counsel.

Miami’s New Mayor Seeks Pension Revamp to Help Budget By Jerry Hart, Bloomberg News, November 6, 2009 Miami’s new mayor, Tomas Regalado, wants to tear up a 24-year-old legal settlement with municipal unions that swelled the city’s pension obligations and imperils its credit rating. “The first priority of the administration has to be pensions, an issue that could break the city down,” he said. “We can accommodate a $20 million decline in property taxes, but we can’t deal with a $100 million pension payment.

Jacksonville Firefighters Won't Negotiate On Pensions Firefighter Hourly.com, November 23, 2009 Randy Wyse, IAFF Local 122 President, states the union doesn't have to negotiate because there are other ways to help the city save money. None of those involve pilfering from the retirements of firefighters who have spent their lives battling to protect citizens.

Not a good time to seek funds, Duval delegation warns By Tia Mitchell, Florida Times-Union, November 12, 2009 The newly elected chairwoman of the Duval County Legislative Delegation warned dozens of government and nonprofit leaders Monday that this is not the year to ask for new funding for their agencies. John Keane, executive director of the Jacksonville Police and Fire Pension Fund, asked for legislators’ help in easing investment restrictions that he said has cost similar funds around the state hundreds of millions of dollars. “We don’t want your money,” he said. “What we do want is your help to make money.”

Town Council to focus on pensions at Dec. 3 meeting; no changes expected that day By William Kelly, Palm Beach Daily News, November 13, 2009 The Town Council won't make changes to the town's pension plans at its Dec. 3 special meeting focusing on that topic, Town Manager Peter Elwell and two council members said Friday. "The purpose of the meeting is to hear the consultant's presentation and to receive input from citizens and employees," Elwell said. "Decisions would come later." The council is considering cuts to the pension plans for general employees, firefighters and police officers to bring down escalating costs. Cavanaugh Macdonald Consulting presented its plan outlining cost-saving options to the town's three retirement boards this week, and will appear before the council at the Dec. 3 meeting.

Report: Fla. investment agency under investigation (AP), St. Petersburg Times, November 6, 2009 The Florida agency that manages $132 billion in pension and local government investments is under investigation by the Securities and Exchange Commission. The St. Petersburg Times reported Friday that the Florida State Board of Administration has been subpoenaed to turn over documents. The newspaper says the agency and three Wall Street companies may have misled the public about the risk and liquidity of some investments. Billions began flowing out of the SBA's local government pool after its subprime holdings became clear in late 2007. The agency also had shaky investments in Florida's retirement fund, the hurricane catastrophe fund and two other accounts.

Small businesses make cuts; local governments give perks DeVoe Moore, Tallahassee Democrat, November 25, 2009 Overly generous pension benefits have exploded since 1979, when the Legislature saddled cities with increasing pension costs that will eventually bankrupt Florida. Lawmakers did this because publicemployee unions promised generous pension perks for those plans that guarantee a set amount for fire and police for life, yet from Miami to Jacksonville the pension systems are straining resources. These pension costs for municipal workers throughout Florida — particularly fire and police pensions that grant extra benefits — are a luxury taxpayers can no longer afford. Perks that pose a threat to our financial problems are widespread throughout government — DROP, cell phones, driving cars home at the taxpayer's expense.

2010 - Interesting times for legislature Historic City News (St Augustine), November 30, 2009 For instance, the debate on retirement plans opposed to pensions is one example that is beginning to start a buzz in Tallahassee. Some folks want to re-evaluate the traditional “defined benefit” Florida Retirement System model. The defined benefit model has been under the microscope for some time.