Shady Pension Reform
Is the deal struck by the Mayor's Office and Police & Fire Pension Fund good for taxpayers?
Once again, the Police & Fire Pension Fund has done its work in secrecy.
This time, it teamed up with the mayor's administration behind closed doors to hammer out pension reform — or "retirement reform," as the city is strangely calling it.
Alvin Brown's administration had fought negotiating pension benefits with the PFPF, saying that bargaining should take place with the unions. But a federal lawsuit filed by police and firefighters to validate the PFPF's role in negotiating retirement benefits led the parties to court-ordered mediation.
So the city ended up bargaining with PFPF Executive Director John Keane anyway, out of the sunshine that normal collective bargaining would require — a way of doing business that the pension fund leadership seems to prefer.
The city said the new agreement will save taxpayers approximately $1.1 billion over 30 years, including almost $50 million in the next fiscal year.
Where will that $50 million in savings come from? The PFPF will use $21.3 million of money it receives from the state — which is meant to shore up benefits for public safety workers — to lower the contribution from the city for the next fiscal year. But that's a one-time payment.
Also, the pension agreement keeps the expected rate of return at the current 7.75 percent for the next two years before gradually lowering it to 7 percent by 2017. In March, the PFPF board took steps to lower the rate to 7 percent, which meant the city would have needed to contribute even more money next year.
So the city is sort of saving money there. We'll see what the city auditor has to say.
The long-term savings aren't coming from current police officers and firefighters — they'll keep all their benefits, including the Deferred Retirement Option Plan (DROP), which allows them to deposit retirement checks into a personal account at a guaranteed 8.4 percent rate of return while still collecting pay for the last five years of their careers.
Could this status quo deal for current public safety employees have anything to do with Brown coming up for re-election 2015? Maybe not, but the mayor did back down on several of his tough negotiating stances.
The real savings in this deal are from police officers and firefighters hired after Oct. 1. New employees would be able to retire after 30 years instead of 20, be vested in 10 years instead of five, have an employee pre-tax contribution of 10 percent instead of 7 percent, earn a 1.5 percent cost-of-living increase three years after retirement instead of 3 percent starting three months after retirement, and have an accrual rate of 2.5 percent for all years of service with a maximum of 75 percent instead of 3 percent per year for first 20 years and then 2 percent per year for 10 years with a maximum of 80 percent. Final average compensation for retirement benefits would be based on the average of the last five years of pay, not the last two years. Also, the DROP program would be eliminated.
Is this a good deal? It remains to be seen. The City Council must now examine the proposal, with public scrutiny, and calculate whether the city can afford to pay more than $100 million into the pension fund each year for the foreseeable future. However, some councilmembers may have little appetite for taking on the police and firefighter unions when they face re-election as well.
It seems every time the PFPF makes a decision, it's done in secret and it costs money — a lot of money.
At the end of 2012, Keane sold back 1,200 hours of leave time for $163,400. The PFPF board approved this move unanimously, Chairman Bobby Deal told The Florida Times-Union, because the sale of unused time was allowed under Keane's contract.
Just to put 1,200 hours into perspective: That's 30 weeks of vacation time. Most city employees can accrue up to 480 hours of unused leave, which they can sell back only when they leave city employment. Public safety employees are allowed to sell back unused leave annually.
Keane's annual salary is $291,000. He receives six weeks of vacation a year.
"To compensate someone as well as he is compensated and then give him that kind of leave — it's an insult to the hard-working people of Jacksonville," City Councilmember Bill Gulliford told the Times-Union.
Add that to a laundry list of questionable PFPF decisions: a $44,000 raise for Keane last year; the purchase of a new $43,500 Ford Expedition in June 2012, trading in a 2011 Ford Flex with 25,591 miles on it; a Senior Staff Voluntary Retirement Plan that could pay Keane $200,000 a year when he retires again, on top of the roughly $60,000 pension now being paid yearly for his service on the force; $300,000 in legal fees to fight a six-year battle to reduce a disabled firefighter's benefits which the PFPF lost; more than $300,000 in legal fees fighting a public records request from citizen watchdog Curtis Lee.
Then there's Richard Cannon, the police officer convicted of child molestation, whose pension remains intact because the PFPF board said he didn't use his power as a police officer to commit those crimes.
The PFPF spends more than $8 million a year on expenses, which is twice the norm for pension funds of similar size, according to Lee, a retired attorney and pension fund manager.
This kind of spending shows a lack of care for the money the PFPF is charged with overseeing. Much of that money is supplied by taxpayers. The purpose of that money is to provide benefits to public safety employees who perform difficult jobs for the public good — not for the people who administer it.
Curiously, the new pension deal also includes provisions for selecting future pension fund administrators after Keane retires. The new executive director must have five years of pension or institutional investment experience, advanced degrees and preferably experience directing a retirement system — requirements that would leave Keane out of the pool of qualified candidates.