Fla. study says markets not to blame for pensions
TALLAHASSEE, Fla. (AP) — The stock market decline that began nearly five years ago is not to blame for Florida cities' underfunded pension systems, a Florida State University think tank said in a report Wednesday.
The university's LeRoy Collins Institute conducted the study to follow up on a "report card" it issued last year on pension plans in Florida's 100 largest cities, giving grades of D and F to a third of those municipalities.
Florida League of Cities legislative counsel Kraig Conn noted at the time that the report card was based on data from 2009 when the stock market was still depressed.
The new report includes data from 2005 through 2011 on all 492 local government pension plans. It concludes that underfunding began before the market fell, although dropping stock prices did make the problem worse.
"It's not necessarily the economy that's really the issue here," said Carol Weissert, the institute's director and a political science professor. "There are a lot of decisions that have been made in the municipalities and the unions that are problematic."
Conn did not immediately respond to a telephone message seeking comment.
The new report makes no recommendations but warns that underfunding likely will get worse before it gets better unless local governments take such steps as reducing benefits or increasing employee and taxpayer contributions.
That's because the ratio of retirees to active workers is increasing. The report also notes that 2010 was the first year in recent history when the amount paid to retirees in the typical plan exceeded contributions.
Neither the report card nor the follow up study included the Florida Retirement System because it's considered on solid financial footing with sufficient assets to cover more than 80 percent of its obligations, which is widely considered the benchmark for public pension plans, Weissert said.
The state system covers state and county employees including teachers. Some municipalities also participate in the state system, but the institute's studies covered only those that have their own plans. In some cases cities have multiple plans for different types of workers such as firefighters and police.
The 100-city report card gave an A to plans there were at least 90 percent funded, a B to those between 80 and 90 percent and a C to those between 70 and 80 percent. About a third of the cities were below 70 percent and received grades of D or F. Retirement systems need not be 100 percent funded to be considered sound because their obligations are for long periods, typically 30 years.
David Matkin, an institute research fellow and assistant professor at Florida State's Reubin Askew School of Public Administration, said the new report reinforces past recommendations changes are needed to strengthen underfunded pension plans.
"There are a lot of people wanting to sit on sideline and say 'Well, let's just wait this little market winter out and when the spring hits everything will be fine again,' "Matkin said.
As for state lawmakers, Weissert said, "There are a lot of people who think the Legislature probably should stay out of this issue, that they really cause more problems."
Notably, the Legislature, with strong support from then-Gov. Jeb Bush, increased retirement benefits for police and firefighters, whose unions had endorsed Bush, a Republican, in the 1998 election. That also increased the cost of those retirement plans for local taxpayers.
"We view this as just a municipal issue," Weissert said. "What we're trying to do let citizens know what the issues are so that they then can go to their municipalities and have their municipalities take charge of this."