From: HUMAN EVENTS
"Pensions can't be as rich as they have been,'' said Hollywood Commissioner Beam Furr. "When you are in the public service, you shouldn't be expecting to become rich. You shouldn't be expecting to become suddenly a millionaire, and that has happened."
But employees like Khawly, who said he earned only a $16,000 salary when he began his tenure with the Miami Fire Department around 1980, are proud and protective of what they have earned through hard and sometimes dangerous work.
"I take offense to it when someone makes those kind of comments," said Khawly. "I'm out risking my life while everyone is sleeping in bed with their wives."
Jeff Marano, senior vice president of the Broward Police Benevolent Association, said city officials and administrators mismanaged taxpayers' finances during the past decade's property-tax boom and now are scapegoating employees.
"The conspiracy of the day is that we're the villains -- public employees are the villains," Marano said. "But that's not the reality.''
The average retiree doesn't come close to raking in a six-figure pension. But with negotiated formulas that have allowed employees to factor into their pensions overtime, unused vacation and sick days, municipal employees have been retiring far younger and more comfortably than those in private industry.
So young that they can enjoy a second act. Donald De Lucca, the former Miami Beach police chief who retired in his 40s and cashes a $182,000-and-growing yearly retirement benefit, recently was hired as chief of the Golden Beach department at $100,000 a year, according to the town manager.
Pension analysts say city officials and unions both bear responsibility for the current excesses.
"Unions didn't do it, and cities didn't do it alone," said Fred Nesbitt, retired executive director of the National Conference of Public Employee Retirement Systems. "They did it together.''
State pensions vs. city pensions
Although municipal pensions are more generous than those of state employees and teachers, historically there was a key difference. State workers didn't contribute to their pensions, while city employees generally did -- as much as 12 percent of their pay.
While amassing her multimillion-dollar windfall, Kindle paid $119,823 into the pension fund during 25 years on the job.
The contrast between state and city pensions was altered this past summer when new legislation required public employees enrolled in the Florida Retirement System to contribute 3 percent of their pay toward retirement.
While city workers often pay considerably more, those contributions don't come close to covering current costs.
Pension funds are run by trustees helped by consultants who project returns on investment, life expectancies, salary increases and other variables that affect a plan's financial health.
Trustees invest the overall pot -- but cities take the hit if those investments go bad.
In the early 2000s, it wasn't a problem. Investments did so well that some cities barely paid anything into their pension funds. Miami Beach didn't pay a cent into its general employees plan during 2001, 2002 and 2003.
But investment returns have since fallen far short of expectations. The 2008 stock market crash blew a gaping hole in those pension portfolios.
"Obviously nobody possesses the ability to make those kinds of predictions with accuracy," said David Driscoll of Buck Consultants, which advises pension funds in Hialeah and Miami Beach.
Anemic investment returns weren't the only missed assumption that drove up pension costs. Pension managers vastly underestimated elected officials' generosity.
City governments have consistently handed out bigger pay raises than pension managers projected. In 2007, the managers of Miami's police and fire pensions expected the city to grant pay hikes of 5.81 percent to police and firefighters. Instead, the city handed out 18 percent raises. The following year brought another 18 percent increase.
In city after city, similar miscalculations occurred. Taxpayers got stuck with the check:
• In 2001, Miami's annual contribution to its pension program -- the part not covered by employee contributions -- was $14 million. By 2010, it was $79.1 million.
• A decade ago, the taxpayer pension contribution was $3.5 million in Miami Beach. Last year: $49 million.
• Fort Lauderdale's pension contributions have jumped from $10.6 million a decade ago to $52.2 million today.
• Hollywood's taxpayer contribution rose from $8.5 million in 2001 to $36.6 million last year.
Despite those increased taxpayer outlays, some pension programs remain underfunded. In Hollywood, the value of the firefighters' pension fund declined from $121.6 million in 2000 to $92.6 million in 2010, largely because of poor investment returns and increased employee benefits. The fund's projected costs for present and future benefits promised to firefighters as of 2010: $233 million.
'Locked into'
lousy deals
Pembroke Pines provides a case study of employee perks that expanded in lockstep with city revenues. In 2003 and 2004, with the city in the midst of explosive population and property-tax growth, commissioners approved richer benefits for employees. Nonuniformed employees got retroactive pay raises of 2 1/4 percent, longevity pay and merit increases, and a bump in yearly cost-of-living raises for retirees from 2 to 3 percent.
Police and firefighters did even better. New rules allowed them to retire with full benefits after 20 years instead of the previously required 26 years. They were also permitted to apply up to 1,000 hours of unused vacation and sick time toward their pension calculation. The automatic annual increase in pensions went from 3 percent to 4 percent.
That 1,000 hours of accrued time is key. Without it, Deputy Fire Chief Richard Moss would have retired with a pension worth $125,000 -- 80 percent of his highest two years' earnings. With it, Moss was able to retire at 46 with a pension of $154,763.
Pembroke Pines City Manager Charlie Dodge, a pension-receiving retiree who has been hired back as a contract employee, said he wishes he could wipe the slate clean.
"We're locked into it," he said. "In hindsight, maybe it wasn't the best decision."
Police and firefighters can thank former Gov. Jeb Bush for a lot of this.
Cities had long received money from the state for insurance policies sold within their city limits. The money was used to offset municipal pension costs for police and firefighters.
In 1999, in his first act as governor, Bush signed a bill that made that money contingent on improving benefits for first-responders. The Republican governor had promised to back the bill after winning the endorsement of the Florida Police Benevolent Association and Florida Professional Firefighters Association.
The law also stated that any increase in police officers' and firefighters' pension contributions must buy them greater benefits.
Bush's predecessor, Democrat Lawton Chiles, had vetoed a similar bill in 1998, citing the potential cost.
This year, the Florida Legislature ratcheted back some of these benefits, capping pensionable overtime at 300 hours per year, and eliminating unused sick and vacation leave from retirement calculations. The new law, which applies to all collective bargaining agreements enacted on or after July 1, also states that increases in employee contributions need no longer be contingent on expanded benefits.
Although these changes will cut costs, cities will remain saddled for years with the burden of pension benefits awarded to their current retirees.
An epidemic of 'financial urgency'
City officials around the region have recently moved to reduce future benefits, invoking a once rarely used state statute called "financial urgency" that allows city officials to reopen union contracts during troubled times.
Pembroke Pines declared financial urgency in 2009, and after tense negotiations, closed the general employees' pension plan for new hires and froze it for existing staff. The city created a 401(k)-type plan in its place. Those who didn't retire at that time lost their cost-of-living increases and took pay cuts of 4 percent, saving the city about $7 million for 2011 and much more in the future.
Pines officials also froze accrued-leave accounts for police and firefighters, and stretched back to 23 years (26 for new hires) the time required to retire on 80 percent of pay.
"Back in the days when investments were good and everything was up, we gave a little more because things were OK," said Frank Ortis, who works as a lobbyist for labor unions in addition to being the mayor of Pembroke Pines. "Nobody could see the economic downturn that came. Nobody saw that -- not even economic advisors from Washington."
Miami declared financial urgency last year to help close a $105 million budget hole, caused in large part by salary escalation and generous contract terms. At that time, police and firefighters could retire with full benefits after their time of service plus age added up to 68. That meant a firefighter who signed on at 21 could be out the door or in the DROP -- collecting a pension -- at 47. But commissioners slashed salaries and changed the age-plus-service threshold for retiring fully vested from 68 to 70, with a minimum age of 50. The commission also capped pensions at $100,000 for employees not yet eligible for normal retirement, though they can exceed the cap through cost-of-living increases.
Last year's moves were so effective -- they instantly saved the city roughly $80 million, including tens of millions of their upcoming pension contribution -- that city leaders declared financial urgency again this year while simultaneously lowering the tax rate, sparking threats to recall Mayor Tomas Regalado.
Still, three of the city's four unions announced last week that they had agreed to millions in new concessions, marking the third year in a row in which employees have given up compensation and benefits.
One of the fiercest battles has been fought in Hollywood, whose leaders declared financial urgency in May and tried to extract deep concessions from employees through negotiation. But after absorbing layoffs and pay cuts of 7.5 to 12.5 percent earlier this summer, employee unions balked at further concessions proposed by city officials, noting that the city's bungling of its books contributed mightily to Hollywood's financial problems.
Hollywood's charter stipulates that pension changes must be approved by voters when city management and employees can't agree.
Last Tuesday the voters spoke, approving sweeping reductions in benefits -- raising the retirement age, eliminating automatic cost-of-living adjustments, changing the formulas used to calculate pensions, and freezing the DROP program.
"There's no choice," said homeowner Dale Slomoff, 62, who voted in favor of the changes.
The benefit cuts are expected to put an $8.5 million dent in Hollywood's projected $38 million budget gap.
Other cities have worked with their unions to curb costs, but with mixed results.
When Miami Beach demanded its unions cut benefits, forgo raises and contribute more of their salaries toward their pensions during negotiations in 2009 and 2010, police officers boycotted voluntary overtime and off-duty details when massive crowds were in town for the Pro Bowl and Super Bowl.
Although the city negotiated some $15 million in savings from all its unions, police and firefighter pensions were mostly spared. New employees took the brunt of the cuts.
"There was no political will to go against the unions," said Mayor Matti Herrera Bower.
Even those modest police and fire pension reforms have not yet been implemented and a judge has ruled that they require a voter referendum.
A warning that went unheeded
While Frank Ortis, the Pembroke Pines mayor, asserts that no one could have foreseen today's pension crisis, there are those who disagree.
"It's so irresponsible to think that no one anticipated that what goes up must come down," said Victor Diaz Jr., a former Miami Beach commissioner appointed in late 2008.
Diaz was put on the commission as a short-term replacement. With no need to appease unions, he went after the city's rising pension costs. At a public meeting in 2009, Diaz projected onto a big screen the city's accelerating long-term pension debts and detailed retirees' six-figure pensions.
Union leaders accused him of demagoguery, and their attorney said Diaz was hell-bent on slashing benefits because he was upset over a traffic citation.
"Not a single person came to my defense,'' Diaz recalled, pointedly referring to his colleagues on the commission. "Silence. Stone cold dead silence."
To observers like Bill Werther, a University of Miami business professor and labor mediator, it's no surprise that most elected officials are reluctant to challenge the municipal unions.
"The people responsible for the fiscal discipline of the government budget are also the people who are relying on the political support of the people they're providing these benefits to. So you have an inherent conflict of interest," Werther said. "The problem is: Who's representing the interest of the taxpayer?"
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