Research from the LeRoy Collins Institute (LCI) found pension costs combined with the costs for health insurance benefits promised to retirees make up an average of approximately 8.1% of county spending in Florida and an average of approximately 8.3% of governmental spending for a sample of 50 cities.
The Institute’s report said in FY 2009, a typical Florida county had an outstanding liability of nearly $30 million to cover health insurance and other non-pension benefits. The report noted that OPEB obligations are currently not reported to or overseen by any state agency, while pension funding is reported to the Florida Department of Management Services (DMS) and reviewed by state actuaries at least every three years.
According to a press release, recommendations in the report included:
Recommendations for local governments on retiree benefits:
- The minimum age before a retiree qualifies for benefits should be gradually raised. A reasonable age to begin receiving benefits could be approximately 60.
- Localities should not include overtime or additional earnings/bonus pay in the base salary used to calculate pension benefits.
Recommendations for state government on health benefits:
- Among other options, Florida lawmakers should give much consideration to repealing current Florida law requiring the implicit subsidization of health care benefits for Florida local governmental retirees.
- State oversight by a relevant state agency should be provided in statute to manage local retiree health benefit obligations. This agency should establish standards and provide technical assistance, if desired, to local government staff and local officials.
Recommendations for state and local governments on administration and transparency:
- Municipalities should set a minimum contribution rate to ensure minimal contribution levels during good years and reduce the need to significantly increase contributions during periods of fiscal stress.
- The statutory restrictions on the use of premium tax dollars that link increases in tax premium funds to the provision of additional benefits should be reduced or removed. Municipalities and counties should be able to use premium tax dollars to cover their current pension obligations.
- Localities should improve the accessibility of funding, actuarial reporting and liabilities information to its taxpayers.
The study found in FY 2009, Florida county pension contributions alone averaged more than $21 million, a sharp uptick from contributions made only six years earlier of nearly $12 million. Figures in the report show costs have risen from 3.5 cents on every dollar to nearly 5 cents – a 42% increase in pension’s share of county governmental expenditures. Similarly, a reviewed representative sample of 50 Florida cities found pension contributions averaged $2.28 million in 2009 – up from $800,000 in 2003, accounting for more than 5.6% of governmental expenditures compared to 4.2% in 2003.
“Since abolishing the State Legislative Committee on Intergovernmental Relations, policymakers have less access to data, expert analysis and policy recommendations on these matters. We hope to fill that void in some part,” said Allison DeFoor, LCI board chair and managing partner at Go Green Strategies, in the press release. “Changes need to be made now to ensure Florida’s local governments can get back on a path toward sustainability. LCI’s recommendations map out the high-priority issues that should be considered as we work toward that goal.”
Established in 1988, the LeRoy Collins Institute is an independent, nonpartisan, non-profit organization which studies and promotes solutions to key private and public issues facing the people of Florida and the nation.The Institute’s report is here.