Study that faults health of local pension funds is criticized
Published: Wednesday, February 13, 2013 at 7:29 p.m.
Last Modified: Wednesday, February 13, 2013 at 7:29 p.m.
TALLAHASSEE — A major study questioning the financial health of local governments' pension programs came under fire in a Florida House committee Wednesday, with one analyst saying it was "way off."
The debate came as a House panel took up the issue of shoring up the finances of local pension funds.
Carol Weissert, director of the LeRoy Collins Institute and a political scientist at Florida State University, told the House Government Operations Subcommittee that an updated study of the nearly 500 municipal and special district pension plans showed 38 percent received a "D" or an "F" in the review since they were funding 70 percent or less of their future retirement obligations.
However, Weissert said the most recent report, which was done in conjunction with Florida TaxWatch, also showed a number of local governments were taking steps to improve their pension plans, such as requiring more contributions from employees and limiting benefits.
The report also urged lawmakers to improve the financial health of the plans by pushing efforts to raise the minimum retirement age to 60, limit the use of overtime or bonus pay in calculating benefits and giving the cities more flexibility in using their share of the state tax on insurance premiums for pension funding.
"A lot of the municipalities have recognized the kinds of problems I've shown you here, and they're acting to make changes to deal with that," Weissert said.
But Weissert's report came under fire from an actuary who advises roughly 200 of the local pension plans in the state.
Brad Heinrichs of Foster & Foster said Weissert's analysis was faulty since it was using future projections of salary increases and benefits. A more accurate survey of the local pension plans' financial health should use current benefits and salaries, Heinrichs said.
Under that scenario, Heinrichs said the funding levels would rise by 10 to 20 percent.
"It's too severe of a grading scale," Heinrichs said.
State Rep. Irv Slosberg, D-Boca Raton, pressed Heinrichs to acknowledge that, in his opinion, Weissert's numbers were "way off," which Heinrichs did.
After the meeting, Government Operations Chairman Jason Brodeur, R-Sanford, defended Weissert's report, noting that there is disagreement among the actuaries about what standards to use in evaluating each plan.
Brodeur said the Collins Institute study will only be one of the factors the House will use in deciding its course on local government pension funds.
Currently, the House is pressing ahead with its plan to move new public employees in the Florida Retirement System — the state's main pension fund — into 401(k)-type plans beginning in January 2014. House leaders are waiting on an actuarial study that is expected to outline the cost of that move.
Meanwhile, the Senate has taken the lead on the local government pension funds, with the Senate Governmental Oversight and Accountability Committee considering legislation that would give cities more leeway in using the insurance premium tax funds to shore up their pension plans.
Lawmakers are trying to resolve a dispute that has arisen since state retirement officials reinterpreted a 1999 law that restricted how the municipalities can use those funds.
The Florida League of Cities is lobbying lawmakers to lift those restrictions, allowing broader use of the premium tax to improve their pension plans.