Mayor Alvin Brown promised earlier this year that he would unveil a retirement reform initiative no later than the end of 2012. In October and November, the City of Jacksonville negotiating team unveiled his reform proposal for police employees in the Police and Fire Pension Fund (PFPF) and for non-public safety employees in the General Employees Retirement Plan (GERP).
Today, Mayor Brown completed the unveiling of his retirement reform initiative when City negotiators presented his proposal for fire employees in the PFPF at a meeting with the Jacksonville Association of Fire Fighters (JAFF).
“I greatly respect our brave firefighters and the important work they do for our community,” said Mayor Brown. “In this period of financial challenge, our current retirement system is no longer sustainable. It is broken and we have to fix it so we can protect the long-term economic security of public safety employees while also protecting taxpayers.”
The numbers tell the story of the need for retirement reform. Currently, the Police and Fire Pension Fund (PFPF) has a high level of unfunded liability. In October 2003, assets in the PFPF were worth $400 million less than its total pension obligations. By October 2011, that deficit had grown to nearly $1.4 billion. Under-funding earned the PFPF an “F” grade in a 2011 study by the LeRoy Collins Institute at Florida State University.
The City’s retirement challenges also have huge budget implications. In Fiscal Year 2010/2011, the City’s annual contribution to the PFPF for employee pension benefits was $76.1 million. In the budget that City Council passed for Fiscal Year 2012/2013, that obligation had grown to $121.3 million – a nearly 60% increase over just two years ago. The City will devote almost 13 percent of the City’s entire general fund budget for 2012/2013 to PFPF pension obligations – more than twice the amount that taxpayers spend to operate the Department of Public Works.
“For years, the City of Jacksonville has done public safety employees and taxpayers a disservice,” said Mayor Brown. “Public safety officers were promised retirement benefits but those benefits were never fully funded. As a result, taxpayers have been asked to carry an increasing burden of city retirement benefits. We have to get real and solve these problems if we want to ensure financial sustainability for our city.”
Mayor Brown’s plan would address these challenges in two ways. First, it would address the chronic underfunding of pension benefits by utilizing a more realistic assumed rate of return on PFPF investments. Right now, the PFPF assumes that its investments will earn a 7.75 percent return – an assumption that experts agree is too optimistic in the current economic climate. Mayor Brown’s proposal utilizes an assumed rate of return of 6.9 percent – a rate that PFPF investment advisors project is more realistic.
Second, Mayor Brown proposes benefit changes that would apply to all new employees and many current employees. His proposal will not affect any former City of Jacksonville employees who are already retired or any current employees who are already eligible for full retirement at the time the new plan is implemented. It will not affect retirement benefits already earned by any current employees through the date the plan is implemented, although it will modify the future benefits they earn after the new plan is implemented.
In 2012, Mayor Brown and four unions – the Fraternal Order of Police (FOP), American Federation of State County and Municipal Employees (AFSCME), JAFF, and Jacksonville Supervisors Association (JSA) – reached agreement on four new labor contracts that are projected to produce nearly $33 million in combined savings for the next three years. Those agreements, ratified by City Council, did not specifically address retirement benefits but required that the City and unions hold meetings over the balance of 2012 to reopen and discuss that subject to see if agreement is possible.
The City and the FOP are currently at impasse over retirement benefits for police employees in the PFPF. The Florida Public Employees Relations Commission (PERC) recently appointed Mark Lurie to serve as Special Magistrate for the impasse proceeding. Mr. Lurie has offered dates in early 2013 for his special magistrate hearing on retirement reform.
The City has additional negotiation sessions scheduled with the four non-public safety unions – AFSCME, the Communications Workers of America (CWA), JSA, and the Laborers International Union of North America (LIUNA) – in January 2013.
“When my administration took office, we were able to work with the unions on new contracts that protect both dedicated public safety officers and hardworking taxpayers,” said Mayor Brown. “Those successful negotiations proved that anything is possible when we work together. Given what is at stake for Jacksonville, I am hopeful that we will use the same spirit of teamwork to accomplish retirement reform that protects our employees and our citizens.”