Florida Benefit Spending a Major Cash Drain, Study Says

BRADENTON, Fla. — A new study of pension and health care liabilities confronting Florida’s cities and counties found that those annual combined costs made up an average of 8.1% of the spending by the state’s 67 counties and 8.3% of spending by 50 cities.

In 2009, the year the most recent actuarial studies were done, Florida county pension contributions averaged more than $21 million, up from contributions of $12 million six years earlier, according to the Florida State University-based LeRoy Collins Institute, a nonprofit policy issue think tank.

A representative sample of 50 cities out of more than 400 in Florida found pension contributions averaged $2.28 million in 2009 — up from $800,000 in 2003.

“If action is not taken now to change these often law-bound pension promises, fundamental services could be put in jeopardy as cities and counties will be forced to fund contractual retirement obligations that research shows are substantial and increasing,” the LCI study said.

Additionally, the study found that other post-employment benefits, such as state-mandated subsidized health insurance, are a “largely overlooked component of local retirement obligations.” In fiscal 2009, a typical Florida county had an outstanding liability of nearly $30 million for health insurance and other non-pension benefits.

“The issues in Florida, as they are across the country, are not just the unfunded liability but also the budgetary pressure that governments are in now and that means their annual contributions are significant,” said David Matkin, lead researcher for the study and assistant professor in FSU’s Askew School of Public Administration and Policy.

Matkin said researchers worked on creating the comprehensive database on local governments’ pensions and OPEBs for at least 18 months and studied growing unfunded liabilities in a “very deliberative process.”

“We feel like this is a crossroads for making an important decision that will influence the sustainability of local government in Florida and provide for the benefits of their employees,” he said. It’s “recognizing that service delivery needs that must be met are real financial obligations we can’t just hope will go away because we want to pass the buck down the road.”

The study said there is a lack of transparency about pension and health care obligations and the public should have easier access to information about how tax dollars are spent.

On Wednesday, several federal lawmakers said they would renew a push to pass legislation requiring more disclosure of local government obligations and the assumptions on which they are based. Failure to follow the disclosure requirements would result in the suspension of a jurisdiction’s federal tax-exempt bonding authority.

The LCI study said cities and special districts, in particular, should make “clear and easily understood” information about their pensions and health care obligations easily accessible to the public on their websites.

One reason cities were cited is that their participation in the state-run Florida Retirement System, or FRS, is voluntary. Approximately 150 cities out of more than 400 participate in the state system, while the rest negotiate their own benefits often as a function of collective bargaining, and those plans vary widely, according to the study.

By contrast, all counties and school systems, as well as most state employees, are required to participate in the FRS so benefit levels and contribution rates are essentially uniform, the study said. The state maintains websites where FRS information is available.

The study recommendations included raising the minimum age to 60 to begin receiving benefits, not including overtime or bonuses in the base salary to calculate pension benefits, repealing the state law that requires local governments to provide retirees with health care subsidies, and better state oversight of local health care obligations and their funding levels.

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