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News-Journal: Pension vote a sign that change is on the way

Monday, September 19, 2011

The outcome of a special election in a South Florida city could be a sign of things to come statewide, as local governments grapple with the rising cost of public employee pensions.

On Tuesday, voters in Hollywood approved sweeping changes in the city’s pension benefits for police, firefighters and municipal employees. The referendum questions on pension reform for public safety employees and general employees were approved by about 55 percent of the voters who turned out for the special election.

Public employees in Hollywood now face a significant reduction in their pension benefits, including an increase in retirement ages and the elimination of automatic cost-of-living increases. Union officials quickly raised the possibility of challenging the voter-mandated changes in court.

The unions might prevail with a lawsuit, but it’s significant that they lost this battle in the court of public opinion. Most Hollywood voters are Democrats, and Democrats are generally perceived as sympathetic to the concerns of public employee unions. Moreover, low-turnout special elections are thought to favor highly motivated groups like unionized public employees.

But Hollywood’s voters faced a stark choice: Approve the proposed pension changes, which will save the city more than $8 million, or live with a combination of big pay cuts for city employees and a huge increase in property taxes.

With a budget deficit of $38 million, Hollywood is the California of Florida cities. Hollywood’s leaders have been more or less forced to embrace fiscal responsibility. Mayor Peter Bober told The Sun Sentinel of Fort Lauderdale that “we need to tighten our belt and live within our means and make sure that we are not jeopardizing the future of the city on things we just aren’t able to afford at this time.”

One thing Hollywood can no longer afford is a Cadillac pension plan for police and firefighters and other public employees.

In a report issued last year, the LeRoy Collins Institute mentioned Hollywood and several other Florida cities with retirement costs that exceed 50 percent of their payrolls. However, the nonpartisan, Tallahassee-based think tank didn’t limit its concern about public employee pension obligations to just a few cities. According to the institute, the pension issue is “a ticking time bomb” for many local governments.

In Hollywood, that time bomb already has exploded, forcing the beleaguered city to seek a major retrenchment on employee retirement benefits. It’s still ticking in other cities, including several in Volusia County.

According to a study by the Halifax Area Civic League, Volusia County’s cities have a combined total of $59 million in unfunded pension liabilities. Referring to the pension liabilities of local governments, Jim Cameron, vice president of government affairs for the Daytona Regional Chamber of Commerce, said earlier this year: “That really scares us.”

He’s right: it’s a scary situation. Hollywood let its pension costs get out of hand, and now the city and its employees are paying a stiff price. In cities across the state, pension contributions have soared since 2003, according to the institute.

Local and state officials need to defuse this time bomb. Most Florida cities have their own pension programs — they’re not part of the state system.

The state pension system is in relatively good shape, and the new employee contribution mandated by the Legislature should help guarantee its long-term soundness. But some local governments won’t be able to handle the sharply rising cost of pension benefits as baby boomer employees retire in the next few years.

State Rep. Fred Costello, R-Ormond Beach, has proposed that the state give local governments more flexibility in structuring their pension plans. Some reforms clearly are needed, including a move toward the 401(k)-type “defined contribution” retirement plans prevalent in the private sector.

The Hollywood special election raises red flags that elected officials and union leaders can’t afford to ignore. Change is inevitable, because taxpayers simply won’t accept a staggering bill for public employee benefits.

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