DROP | Pension360

Florida Lawmaker Turns to Legislature for Pension Audit

Florida Gov. Rick Scott recently shot down calls by state Rep. Janet Adkins and others for an investigation into Jacksonville’s Police and Fire Pension Fund.

Scott said the issue was a local matter and should be handled locally.

But Rep. Adkins is now asking her colleagues in the state legislature to help her investigate the pension fund and its deferred retirement option program.

From News 4 Jax:

Ongoing problems with the Jacksonville Police and Fire Pension Fund is the subject of a meeting of state lawmakers Monday.

The Joint Legislative Auditing Committee will consider a request by Rep. Janet Adkins, R-Fernandina Beach, for an audit of the pension fund.

Two weeks ago, Gov. Rick Scott’s chief inspector general turn downed Adkins’ request to investigate the pension. That request was joined by City Council President Clay Yarborough and the mayors of Atlantic and Neptune Beach.

Melinda Miguel, chief inspector general, wrote Adkins saying, “It appears that your concerns would be more appropriately handled at the local level.”

[…]

“Clearly, the public trust is broken as it relates to how the Jacksonville Police and Fire Pension Fund has handled its responsibilities,” Adkins said. “While I am disappointed that the Chief Inspector General has decided not to investigate the concerns I raised regarding the Jacksonville Fire and Police Pension Fund, I am committed to seeking a review of the pension fund and the questions that have surfaced over the last year.”

Specifically, Rep. Adkins wants an investigation into whether regulations were broken in the administration of the pension fund’s DROP.

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Florida Gov. Rick Scott Rejects Call for State Investigation Into Jacksonville Pension Fund

A state lawmaker, Jacksonville city council members and others have called repeatedly for a state investigation into the city’s Police and Fire Pension fund since late 2014.

Specifically, they want an investigation into whether regulations were broken in the administration of the fund’s DROP.

Florida Gov. Rick Scott finally addressed the issue on Tuesday, and declined to launch a state investigation. The matter, his office said, should be “handled on the local level”.

Atlantic Beach May Throw Support Behind State Investigation of Jacksonville Pension Fund

There is growing support for a state investigation into Jacksonville’s Police and Fire Pension Fund and its deferred retirement option plan (DROP).

At least one state representative and a handful of others, including city council members and a mayor, have called for a state investigation into whether the fund engaged in regulatory violations in its administration of the DROP.

Now the city of Atlantic Beach is considering joining the calls for an investigation.

From the Jacksonville Business Journal:

The Atlantic Beach City Commission may get behind calls for an investigation into the Police and Fire Pension Fund.

The commission, which meets Monday, could join Rep. Janet Adkins in requesting Gov. Rick Scott to order an investigation of the pension fund.

Atlantic Beach doesn’t contribute to the pension fund, but does contract with Jacksonville for its firefighting service, according to the Florida Times-Union.

In addition, the Atlantic Beach mayor, Carolyn Woods, has said that her constituents have a stake in the pension fund, as contributors to both Jacksonville and Atlantic Beach.

The city commission backing Adkins’ request would mark the first time a government agency has joined the pursuit.

Read more Pension360 coverage of the Jacksonville Police and Fire fund here.

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Jacksonville Mayor Submits New, Updated Reform Bill

Jacksonville Mayor Alvin Brown has submitted a reworked version of the city’s pension reform proposal, which was previously passed by City Council but wasn’t approved by the city’s Police and Fire Pension Fund.

The bill needs to be approved by both entities before it passes into law. The City Council may vote on the new bill next month, according to the Jacksonville Business Journal.

More details from the Jacksonville Business Journal:

Brown’s bill comes in the wake of a City Council version of pension reform legislation, which was approved by a 16-3 margin in December, being sent back by the Police and Fire Pension Fund.

City Council worked with Brown to come up with changes that will, hopefully, appease the board. City Council still expects to make some changes, though, President Clay Yarborough told the Florida Times-Union.

Some of the sticking points of the council-approved bill were the interest rate that firefighters and police officers get on Deferred Retirement Option Program accounts, cost-of-living adjustments and City Council’s power to change benefits.

The council’s agreement with the Police and Fire Pension Fund will go until 2030. After 2030, the city and unions will have to settle all disputes through collective bargaining.

Additionally, City Council will be able to make changes to benefits if the groups are not able to reach an agreement.

The city’s Police and Fire Pension Fund was 43 percent funded at the end of 2013.

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Philadelphia Pension Debt “An Obstacle” to Long-Term Growth, Says City Oversight Board

The Pennsylvania Intergovernmental Cooperation Authority (PICA) has released a report stating that Philadelphia’s pension system will be “an obstacle” to the growth and prosperity of the city.

The report says that pension costs need to be lower and more predictable for the city to grow.

The recommendations provided in the report, as reported by Philly.com:

The report’s recommendations included:

Making all new employees join the city’s hybrid pension plan, called Plan 10, which is similar to a 401(k). Mayor Nutter tried doing this in the last round of negotiations with the municipal unions, but lost.

Abolishing the controversial Deferred Retirement Option Plan (DROP), which allows city employees to pick a retirement date up to four years in the future, then accumulate pension payments in an interest-bearing account while still earning their salary. They collect a lump sum upon retirement. Council would need to pass legislation to abolish DROP.

Increasing employee contributions to the pension fund. Civil employees contribute between 3.95 percent and 4.75 percent of their annual wages. The median employee contribution for the 10 largest American cities is 6 percent, according to the report.

Lowering expectations for the rate of future returns on investments from 7.85 percent to near 7 percent.

The city’s pension system is 47 percent funded.

Read the full report here.

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Philly Broke Law With DROP Changes, Says Labor Board

Philadelphia acted illegally when it made changes to its Deferred Retirement Option Plan (DROP) in 2011 without first negotiation the changes with unions, according to a hearing examiner for the Pennsylvania Labor Relations Board.

The changes were meant to reduce the cost of the DROP, but unions quickly challenged the changes.

Jacksonville Council President Latest to Support State Investigation of Public Safety Pension System

Florida Rep. Janet Adkins last month sent a letter to Gov. Rick Scott calling for an investigation into “impropriety…questionable practices and possible mismanagement” of Jacksonville’s Police and Fire Pension fund.

Specifically, Adkins wanted an investigation into how the fund administered its DROP accounts, and whether they ignored regulations and city auditors.

Shortly thereafter, city Councilman Bill Gulliford sent a letter supporting the idea of an investigation.

On Tuesday, council President Clay Yarborough threw his support behind the investigation.

From the Florida Times-Union:

Jacksonville City Council President Clay Yarborough sent a letter on Tuesday to Gov. Rick Scott supporting a state investigation into the Jacksonville Police and Fire Pension Fund.

In his letter, Yarborough said he stands with state Rep. Janet Adkins, who asked Scott in December for the state’s chief inspector general and the Florida Department of Law Enforcement to conduct a “review and investigation” of the pension fund.

“The Jacksonville City Council recognizes and appreciates the sacrifice and dedication of all public safety personnel,” Yarborough said. “That withstanding, Representative Adkins prudently identified … that restoration of public confidence in the management of the pensions is imperative. This is in the best interest of taxpayers and employees alike.”

The focus of the potential investigation:

The city’s attorneys and the pension fund have disagreed in recent years over several issues, including the creation of a special pension plan for senior staff members, including its longtime executive director, John Keane.

Despite city attorneys saying the pension fund lacked the authority to create the special pension plan, the fund’s own attorneys said they disagreed. As of now, Keane’s special pension plan is fully funded and is set to pay him benefits when he retires.

Adkins, R-Fernandina Beach, has asked Scott to investigate the special pension plan, as well as determine whether state rules and laws were followed in regard to the creation, management and regulation of Deferred Retirement Option Program accounts.

In October, the Times-Union reported how the pension fund ignored findings by the City Council Auditor’s Office and city lawyers that the pension fund incorrectly applied regulations for participation in DROP. The paper found that three individuals who entered DROP will collectively receive about $1.8 million more than they would have under strict interpretation of the code.

The Governor’s Office has remained mum on whether it will begin an investigation.

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Pension Board Changes Might Be “Deal Killer” For Jacksonville Reform

On Monday, the Jacksonville Police and Fire Pension board made several changes to the city’s pending pension reform measure and sent it back to city council for approval.

But the changes could be a “deal killer”, according to one council member.

One major change was the length of time the measure would be in effect. The council wanted three years, but the board changed it to ten.

Reported by the Jacksonville Daily Record:

“If it’s not at least 10 years, I’m not voting for any of it,” said Lt. Richard Tuten III, the firefighter’s representative on the board.

Police representative Chief Larry Schmitt and fifth member Nat Glover also were leaning that way — a majority.

That vote would mean the meat of council’s decisions had been undone, a move board Chair Walt Bussells said might doom reform and leave it for a judge to decide.

So, he asked members to reconsider the benefit components. The board did and approved rates that weren’t what council passed, but did eliminate fixed guarantees.

It didn’t budge on the length of the deal, though. And that could be a “deal killer,” said council member Lori Boyer.

“If that’s the case, then that’s a real big problem for me,” she said.

Boyer maintains state law says such deals can’t extend beyond three years. And like the police and firefighters who uphold the law on a daily basis, she says she took an oath to do the same.

“We can’t start putting politics above the law,” she said.

She said she possibly could handle changes to the benefits side, but without the three-year term it’s a non-issue.

Council member Bill Gulliford authored the amendments to those benefit changes on cost-of-living adjustments and DROP. He said if the only issue had been the former, he probably could have lived with it. But all the tweaks?

“I can’t buy the changes, I’m sorry,” he said.

After council passed what he thinks was the best offer, he said he thought the board’s decisions rendered the deal “dead.”

“I think council pretty much spoke,” he said, referring to the 16-3 vote in December that passed the deal the pension board weighed in recent weeks.

Both the council and the pension board must approve the measure before it is passed into law.

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Jacksonville Pension Board Sends Reform Measure Back to City Council With Changes in Mind

The board of Jacksonville’s Police and Fire Pension fund was set to vote on the city’s pension reform measure on Monday. But instead of an up-or-down vote, the board has requested several changes to the measure and sent it back to the city council for approval.

Both entities need to approve the measure before it is passed into law.

The changes the board is requesting, according to News4Jax.com:

John Keane, executive director of the fund, said the board has several concerns that it will express to the city:

– Calls on city council to guarantee a funding source for its $40 million annual contribution required by the agreement.

– Not willing to accept reduced cost-of-living increase from the agreed 3 percent annual to a variable rate between 0 and 6 percent for active and retired police and firefighters. The board is requesting it be increased to 0 to 6 percent.

– City council approved a 0-10 percent rate for deferred retirement (DROP) each year. Pension board wants higher rate: 2-14.4 percent.

– The original deal with the mayor allowed the terms of the plan to be renegotiated after 10 years. City council changed that to three years, which is not acceptable to the pension board.

The board said a primary concern is making sure current employees are confident that the revised pension plan will give them a secure future.

Members feel the funding deficit was created by the city, so the changes should be made strictly on the backs of the employees.

“We’ve gotten to this point today simply by fact that city has not saved for a rainy day,” said Richard Tuten, a member of the pension fund’s board.

The board and the council have a self-set deadline of January 15 to come up with a final proposal.

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Florida Pension Changes May Unravel As Board Debates Reforms

The Jacksonville City Council and Mayor Alvin Brown spent most of the summer months debating and constructing a pension reform measure that aimed to improve the funding of the city’s Police and Fire Pension Fund.

The Council approved the measure earlier this month. Now, the measure sits in front of the Police and Fire Pension Board, which will vote on it by January 15.

There’s no guarantee the board will approve the measure. From the Florida Times-Union:

It’s always been expected that changes to the 3 percent COLA and the guaranteed 8.4 percent return on DROP accounts for current employees were going to be stumbling blocks.

But the benefit changes for new hires hadn’t caused much of a stir until the board met last week to review the agreement.

Board members Richard Tuten and Larry Schmitt, representing the firefighters and police, said the changes are hard to swallow and will make it difficult to recruit good people needed to protect the city.

A third member of the board, former Sheriff Nat Glover, said he is uncomfortable with the changes and also concerned about the safety of the city.

Walt Bussells, the board’s chairman, said if a vote were taken, it would be 3-2 against.

“If we did do that, it kills the whole deal,” he said.

[…]

Tuten was the most vocal in his criticism of the changes for new hires and current employees.

He offered what he said was a string of broken promises and fear of more changes by politicians that “we can’t trust any farther than we can throw them.”

“If we are going to get keistered here, let’s go to court right now,” he said. “That’s what I get from my members.”

The measure calls for benefit changes for new police and fire hires, as well as COLA changes for current employees. In return, the city would pay an additional $40 million a year into the Police and Fire fund for the next 10 years.

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