General News

You are here

City Council says yes to Curry’s pension reform package

Apr 24, 2017

On his second day as mayor, Lenny Curry ate sandwiches with City Council members who heard him drop a cliff-hanger of a tease: Curry told them he was working on a plan that would loosen the chokehold of rising pension costs on city budgets.

Twenty-two months later, City Council unanimously voted Monday for Curry’s first-of-its-kind pension reform legislation, putting the wheels in motion for money to flow in 14 years from a half-cent sales tax that voters approved in August for the city’s massive pension debt.

“This is not a perfect plan,” Councilman Al Ferraro said in comments repeated often by other members. “This is the best we can do.”

Council also unanimously agreed to end pensions as a retirement benefit for future city employees, including police officers and firefighters, who will go into 401(k)-style retirement accounts if hired after Sept. 30.

Curry, who sat in the front row of council chambers during the vote, called it a bold change.

“Ladies and gentlemen, do not let this be lost on us today,” Curry told council in brief remarks after its vote. “When you solve the problem, you want to make sure it doesn’t happen again. This is history. We are out of the pension business.”

The outcome was never in doubt, but council members brought up various concerns: the impact on the next generation of taxpayers who will pay for costs deferred to them, the uncertainty of projecting sales tax revenue, the size of pay raises going to city employees as part of negotiations that won union support for ending pensions as a benefit for future hires.

Even though the city will stop putting more employees into pension plans, Jacksonville still faces $2.86 billion of unfunded liability for benefits earned by current employees and retirees over the coming decades. The sales tax is aimed at helping the city get out from under the weight of that debt, which has driven annual city pension costs from $78 million in 2008 to $290 million this year.

The costs were on track to hit $360 million in next year’s budget, but that figure will instead be $221 million.

The half-cent sales tax, which is dedicated to paying off the city’s pension debt, will start after the Better Jacksonville Plan’s sales tax expires around 2030. Although the tax money won’t kick in until then, the city will start reaping financial relief next year because it will shift a big chunk of the city’s unfunded pension obligations into the future.

The approach of pay less now, pay more later will result in the city spending about $4.5 billion more in pension costs through 2049, just as stringing out payment of credit card debt or extending a home mortgage will cost more in the long run.

Putting less into the pension plans on the front end also will weaken the financial strength of those plans, though the legislation has some triggers intended to keep the pension plans solvent, even if market downturns hammer investment assets used to pay pension obligations.

“While this legislation represents a great leap forward in Jacksonville, it does not come without expense and risk,” Councilman Greg Anderson said. “To say that our solution is unique is an understatement.”
He said future councils “should tread carefully” to stick with necessary payments “even when it hurts.”

Councilman John Crescimbeni said he’s been searching for a pension solution since 2008. He said he would have preferred a sales tax that started right away for pension costs, but he’s satisfied by a City Council Auditor’s report that found Curry’s framework is based on reasonable assumptions.

“I think this speaks volumes,” Crescimbeni said as he held up the auditor’s report. “So I’m going to be supportive of this going forward, and I’ll just keep my fingers crossed that all the math is correct and gets us where we want to go.”

Councilman Bill Gulliford also said he wanted a sales tax for pension costs that starts immediately. But Gulliford said when he travelled a few years ago to Tallahassee, a Senate leader rejected his request for the Legislature to authorize a voter referendum on such a sales tax.

“He didn’t say no,” Gulliford said. “He put an expletive in front of it.”

Curry got the Legislature to allow the half-cent sales tax that starts after the Better Jacksonville Plan expires, which enabled lawmakers and Curry to say it’s not a tax increase because the overall sales tax rate will stay the same.

Duval County voters approved the sales tax in August with 65 percent in support. The city then entered into negotiations with unions about closing the plans to new hires. To help win support, the city agreed to boost pay for police and firefighters by 20 percent over three years. General employees will see their paychecks rise 14 percent in that time.

The city will pay into the 401(k)-style accounts for new hires at a rate of 25 percent of pay for public safety workers and 12 percent of pay for general employees. City workers don’t get Social Security, so the individual investment accounts would be their nest egg in retirement.

Councilman Aaron Bowman said he has concerns about the size of the pay raises and the city’s contributions to the retirement plans. Bowman also disliked the restoration of some benefits that were modified by a 2015 pension reform agreement.

But Bowman said when he fielded calls from critics of the pension reform plan, “nobody came close to solving the problem like we’ve got today.” He said if the city abandoned using the half-cent sales tax, the options would be drastic cuts in city services and “substantial property tax increases.”

Councilwoman Anna Brosche, who heads the Finance Committee, echoed the refrain that it’s not a perfect solution. “There are parts of it that make me cringe a little bit,” she said. “At the same time, there’s nothing more important than the dedicated funding source that can be used for nothing else.”

David Bauerlein: (904) 359-4581

Go Back