Nearly one in three municipal pension plans in Florida are severely underfunded while another 30 percent received high praise Wednesday from a political think tank connected to Florida State University that looked at the state’s largest local government retirement funds.
In a report released Tuesday, the LeRoy Collins Institute graded 208 pension plans offered by the state’s 100 largest cities, giving letter grades to local governments based on pending costs and the percentage of future costs in the bank.
In all, the study found 53 percent of all local pensions falling into the “B” and “C” categories, but the range of fiscal health was wide.
“Our findings show great variation among municipal pension plans,” said David Matkin, assistant professor in FSU’s Askew School of Public Administration and Policy. “Some plans are well funded with costs below the median; others are in more tenuous positions with high costs and low sustainability.”
Among the healthiest pensions earning “A’s” are nine funds in eight cities that have collected more money than they need to pay out future benefits. Topping the list was the city of Melbourne, where the general employee pension is funded at 190 percent of expected payouts.
Other well-funded pensions include the fund for firefighters in the city of Plantation (130 percent) and the fund for all city employees in Tallahassee (108 percent.) Also rated highly was the Gainesville retirement fund, which achieved 130 percent rating in part by bonding its obligations. They all earned “A” rankings.
Among the most poorly funded pensions is Cooper City’s, which is only 35 percent funded. Cooper City was among 21 municipalities to receives failing, “F” grades. Other troubled pension plans included Jacksonville police and firefighter funds, at 48 and 49 percent respectively. Miami’s general and sanitation pension fund was 0 percent funded when audited in 2008, though other city of Miami-backed pension plans were more highly rated.
Researchers said the financial woes of some of the pensions could not be attributed solely to a poor economy. Instead, poorly funded pensions have as much to do with unrealistically generous benefits and less than actuarially sound pension contributions, the study noted.
“It is not likely that the problems of “D” or “F” pension plans cannot be primarily attributed to the troubled economy and, therefore, a full market recovery should not be expected to fundamentally improve the condition of these pension plans,” the report concluded.
Local pensions have come under fire, while state officials also find themselves in the spotlight. The Florida Retirement System is at about $120 billion. In June, Gov. Rick Scott signed into law a set of changes to pension plans, including limiting how much overtime can be counted toward benefits.
Earlier, the Legislature approved SB 2100, which made more sweeping changes to the state employee pension plan, including the requirement that employees contribute 3 percent of their salaries to their retirement funds. The law retains the popular DROP early retirement program but reduces the accrual rate of benefits.
For rank and file employees, the bill raised the retirement age from 62 to 65 or 33 years of service. The retirement age for law enforcement and other high risk employees increased from 55 to 60, or 57 years of age with 30 years of service.
By Michael Peltier
