FOLIO
Lenny Curry is trying to pull off a bait-and-switch on pension reform.
While campaigning, first for mayor, then for the pension tax, he correctly said the city was “crippled” by pension debt that is “breaking our backs.” The estimated unfunded $2.85 billion liability for Jacksonville’s pension debts is unmanageable, particularly for the Police and Fire Pension Fund, which, due to low returns courtesy of the recession and the financial wizardry of John Keane, who had about as much experience managing investments as I do (read: none), is dragging the city deep in the red, binding the purse strings so tight that even basic services are jeopardized.
The best solution, Curry said, was a half-cent sales tax beginning in 2030 when the Better Jacksonville Plan half-cent sales tax expires. It wouldn’t cost us anything in the short term and, as it would just extend a current tax, we wouldn’t really notice it. With a dedicated revenue stream, the city would no longer have to pay stiff penalties for the unfunded liability. The plan also required closing one of the three pension funds.
It made enough sense to attract broad bipartisan support, including from yours truly. In August, voters overwhelmingly ratified it.
Work soon began on brokering a deal with the seven collective bargaining units that represent public servants in Duval County, whose figureheads had been uncharacteristically cooperative with the mayor while he campaigned for the tax and promised to reduce benefits for new hires.
The negotiations, as many were expecting and the figureheads themselves may have been plotting, went south when powerful public safety unions rejected the 401(k) plan Curry offered.
So he sweetened the pot. Boy, oh boy, did he sweeten the pot.
In the most recent offer, public safety workers would receive 20 percent raises over the next three years, plus a 3 percent lump sum payment (read: payoff) if they agree to the mayor’s terms, and the city would contribute 25 percent of employees’ salaries to their 401(k) while employees contribute 8 percent.
If that sounds high to you, it should; the mayor originally offered to contribute 10 percent of employees’ base salaries (employees would contribute 8 percent) to a 401(k) for 16 years, then bumping it up to 12 percent. Now he’s refusing to reveal how much more that honey pot might cost the taxpayers who elected an accountant who blathered on about fiscal responsibility on the campaign trail.
Curry doesn’t seem to care that the referendum required closing only one pension fund, not all three. (The referundum does require closing any pension plan that will receive proceeds from the tax.) Nor is he willing to enroll new hires in the Florida Retirement System, as the unions request. Curry doesn’t want to do that because it relinquishes the city’s control; of course, if the city had done such a great job controlling the plans in the first place, we wouldn’t be in this position.
And no one seems to care very much that we could save a helluva lot of money if Jacksonville stopped letting pension recipients retire after 20 years’ service, when they’re young enough to go work for another city for 20 years, retire again and collect two pensions for the next 20 years of their lives.
That’s not on the table, maybe because it’s not industry standard. Well, neither is canning pensions in favor of 401(k)s.
We should take heed of the lessons learned by other cities — many of which pay public safety workers far more than Jacksonville does — that doing away with pensions spells disaster in terms of recruitment and retention.
On “First Coast Connect” on Jan. 9, pension expert Bob Klausner did an excellent job explaining the situation and analyzing the options available to the city and the unions. I encourage anyone interested in understanding the issue to podcast the show.
On the show, Klausner said that in his opinion, it would be a “wiser course” to enroll the public safety workers in FRS.
“It would require employees to work a little bit longer than they do now. But it is a very well-funded, secure system,” Klausner said. He also pointed out that converting new hires to 401(k)s may add to the costs because the city could also be required to enroll them in Social Security, which it is currently exempt from doing because they have a pension plan. And, if the city does convert to 401(k)s, he warned, it could have an extremely costly and potentially dangerous problem on its hands.
“Jacksonville turns into a training ground [for public safety workers],” Klausner said, adding that it costs “about $100,000 per person to train a firefighter or police officer.”
Like others before him, all the mayor seems to want is to score the win on getting a pension “solution,” regardless of whether it solves anything long term, when he’ll be long gone and, one imagines, chasing his dreams to the governor’s mansion, the House of Representatives or as a lobbyist. “Solved Jacksonville’s pension crisis” reads pretty well on a list of accomplishments — no matter if it’s true or not.
Clearly, the men and women who sacrifice making more money in the private sector to work for the city, or who protect us from crime and chaos, deserve to be compensated for that sacrifice and their service. They do not deserve to bankrupt the city.
Nor do they — or we — deserve to baited-and-switched and left holding the bill for what may be an even more expensive plan that puts our very lives at risk.
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Editor’s note: This article has been updated to reflect the fact that pension plans must be closed to new hires in order to apply proceeds from the tax to the liability.
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