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Small-Town Florida Mayor Takes Up Pension Reform Fight

Tuesday, January 29, 2013

MIAMI-Comprehensive municipal pension reform isn’t coming fast enough in Florida, and it could wind up triggering a deep financial crisis.

“Something needs to be done,” said Manny Maroño, mayor of the city of Sweetwater and president of the Florida League of Cities, an organization leading the charge to reform retirement plans for public employees in cities across Florida.

He points to Florida State University’s LeRoy Collins Institute study showing that more than a third of the 100 largest cities in the state have public pensions that are only 60 to 70 percent funded, below what is considered financially healthy

“The current pension system financed by taxpayers is unstable, unsustainable and unreliable for future police officers and firefighters,” reads a statement from the League’s website. “It’s time to enact pension reform that curbs abuse, protects local taxpayers and ensures good pensions will be available for current and future generations of police officers and firefighters.”

The Florida Department of Management Services also raised alarms last week about the state of municipal pensions at the Senate Governmental Oversight and Accountability Committee.

The committee discussed a bill by chairman and state Sen. Jeremy Ring, D-Margate, which would have required cities to put more money into failing pensions.“We’re trying to work together with the Board of Trustees to solve this,” said Maroño. “My city’s pensions are operated by the board and they hand it off to a single person who is responsible for daily investment.”

Sweetwater, with a population of about 14,000, has a semi-private pension plan similar to a 401(k), also known as a “hybrid plan.”

Roberto Filgueira, the city’s police chief, said Sweetwater always has contributed to public employees’ retirement plan.

“The police pay 6 percent of their salary money, but money is short everywhere and it’s difficult to maintain these pensions which, in the end, pay out a lot of money,” he told Florida Watchdog.

Maroño added that efficient reform is needed to prevent waste caused by risky investments, a point often brought up by independent analysts.

Pension experts claim that millions of dollars of pension funds are squandered by poor administration and management by people who have little to no experience.

“Approximately $1 billion has so far been lost in Florida’s state pension fund as a result of conflicting pension (advisers),” said Edward Siedle, a former money manager and Securities and Exchange Commission lawyer known as the “Pension Detective.”

He told Florida Watchdog that cities should be careful of the influence exerted by fund managers and consultants, which often stand to benefit from mismanaged retirement funds.

According to the agenda of the Florida Public Pension Trustees Association’s annual meeting now under way in Ponte Vedra Beach, the majority of the information sessions will be given by pension consultants from large investment firms.

Proposals in Florida:

Jorge Salazar Carrillo, a professor at of Florida International University, said that pensions already are being limited in many cities.

“They’re starting a process of renegotiating pensions while unions are losing power,” he told Florida Watchdog.

Unions across the country have challenged changes to the public retirement plans covered under existing contracts, but officials and courts have tended to disagree.

On Jan. 17, the Florida Supreme Court ruled in favor of requiring public employees to contribute 3 percent of their salary toward their own pensions, upsetting unions and marking a huge win for Gov. Rick Scott, who first proposed the reform.

Other reforms that have been offered by the Florida League of Cities and similar groups are modifying benefits for current employees, raising the retirement age, implementing hybrid plans, freezing cost-of-living adjustments for retirees and giving the state more power to “police” local pensions.

House Speaker Will Weatherford, an advocate for reform, has called Florida’s Retirement System, the state’s pension plan, a ticking “time bomb.”

He said he hopes to introduce more 401(k)-style pension plans, where beneficiaries would negotiate investments and taxpayers would be left out of the mix. It’s something the League of Cities says is a good start.

“We cannot keep cutting taxes on the one hand and increasing wages on the other,” said Maroño.

Contact Marianela Toledo at Marianela.Toledo@FloridaWatchdog.org.

 

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