State pension squeeze to hit all 67 counties hard

Herald/Times Tallahassee BureauMay 31, 2013 

TALLAHASSEE -- A bill passed in the waning moments of the 2013 legislative session with little discussion and signed two weeks later by Gov. Rick Scott will cost state and local governments almost $900 million in additional expenses next year, hitting county governments especially hard as they struggle to emerge from a prolonged economic slump.

The bill raised the rates employers must pay into Florida's $135 billion pension fund so that the state could more aggressively manage a deficit in the retirement system. Though the higher level will please Scott, who wants the pension fully funded, it comes at a cost some say is unnecessary when the stock market is hitting record highs.

The new rates will force 1,000 state, county and local employers to pay more into the system: $177 million from state agencies, $100 million from universities and colleges, $300 million from school districts, $50 million from cities and special districts, and $264 million from Florida's 67 counties.

Unlike state agencies and school districts, however, counties were not given additional revenue to cover the new expense. Some county officials say they resent having to scramble now to find ways to cover the cost at a time when they are finally seeing modest gains in tax receipts.

Miami-Dade, the largest county in the state, will have to contribute an additional $21.2 million toward the Florida Retirement System, Mayor Carlos Gimenez told labor unions in a budget presentation earlier this month. The unexpected hike is the biggest increase in the county's expenses for the upcoming budget year.

Broward County will have to pay an extra $17 million, but much of that is expected to be covered by enterprise funds.

"I'll be looking to see if this is another shell game," said Hillsborough County Commissioner Victor Crist, a Republican former state House

and Senate member. "That's an old game that's been played for decades. It's called cost-shifting."

Pinellas County Administrator Bob LaSala told commissioners in April he might need to increase property taxes a slight amount to cover the additional cost. On Thursday, Mark Woodard, the county's assistant county administrator, said the total cost would come to about $5.5 million, and is part of the reason for a proposed tax increase.

Hillsborough County's bill from the pension contribution hike: $7 million.

State Rep. Mike Fasano, R-New Port Richey, said he would not have voted for the bill, which passed unanimously May 3, the final day of session, if he knew that counties would feel this pain later.

During debate May 2, he said he asked one of the bill's sponsors, state Rep. Seth McKeel, R-Lakeland, whether counties would end up paying more.

"Can you tell me if those rates are staying the same, are they going up?" Fasano asked. "What impact will they have as far as a trickle-down effect to our counties and those that contribute to the Florida retirement system?"

"They are the same rates that they were originally, sir," McKeel replied.

On Thursday, Fasano said the answer confused him into voting yes.

"If he had said rates were going up, it wouldn't have just been me voting against it," Fasano said Thursday. "It's hypocritical that the Legislature and governor say they don't want tax increases but are pushing a bill through the backdoor that would require a tax increase on the local level."

State Rep. Dwayne Taylor, D-Daytona Beach, also said McKeel's response to Fasano convinced him to vote for the bill.

"I thought McKeel assured him that there were none," Taylor said. "And that's why I voted for it."

But McKeel said Fasano and others misunderstood him. When asked by Fasano whether the rates were changing, McKeel said he thought Fasano was asking if there had been any changes in the bill that had been first approved in April. "If he didn't understand what he was voting on, I'm sorry," McKeel said.

"It's irritating that on May 30, when the number that counties will pay has been out there since April, all of a sudden there is this consternation," McKeel said. "If Fasano and the counties didn't read the bill analysis, I'm sorry."

The April 3 bill analysis said only that counties would owe $264 million. It did not break down what each county would owe.

Two years ago, the Legislature moved to have government employees to ostensibly pay 3 percent of their pension costs. This past session, state House members approved a measure to stop offering pensions to new hires and move them into 401(k)-style retirement plans. That was rejected by the Senate.

Recently elected Hillsborough County Property Appraiser Bob Henriquez, a Democrat and former state House member, said he was skeptical that lawmakers were trying to improve the pension system's status. He wondered whether it was motivated to create a backlash and provide momentum for the elimination of government pensions in Florida.

"We all know this is one of the more solid pension programs in the country," Henriquez said. "Is that money going to FRS to actually shore it up? Or is it a long-term strategy to pressure those of us at the local level to say we can't sustain these increases?"

The state's pension investments had reached a high of $136 billion in 2007. By March 2009, they had fallen to just more than $83 billion, said Ash Williams, State Board of Administration executive director and chief investment officer.

Still, as the markets tanked, and tax revenues fell with it, legislators declined to make the state and local governments contribute more to the plans to offset the losses. Now that money is coming due.

"It's like if you had a credit card maxed out and you skipped making payments for three months," Williams said.

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