TALLAHASSEE, Florida (February 9, 2011) – The LeRoy Collins Institute (LCI) released their latest report, Trouble Ahead: Florida Local Governments and Retirement Obligations, which reveals that local government employee retirement obligations are a bigger, more complex ticking time bomb than previously recognized.
Findings show pension costs combined with the costs for health insurance benefits promised to retirees make up an average of approximately 8.1 percent of county spending and an average of approximately 8.3 percent of the sample 50 cities spending.
“Our goal with this research was to look objectively into the local public retirement system in Florida and make recommendations,” said Carol Weissert, Florida State University (FSU) political science professor and LCI director. “For more than a year, we’ve been compiling a pension and health insurance database for counties and the state’s largest cities that spans the last five years. In short, we have the most comprehensive data on Florida local governmental retirement benefits that exists.”
Through their efforts, LCI researchers and board quickly identified a major, but largely overlooked, component of local retirement obligations involved health insurance benefits, otherwise known as other post-employment benefits (OPEBs).
In FY 2009, a typical Florida county had an outstanding liability of nearly $30 million to cover health insurance and other non-pension benefits. Although these health insurance expenses are significant and growing, OPEB obligations are currently not reported to or overseen by any state agency. In contrast, pension funding is reported to the Florida Department of Management Services (DMS) and reviewed by state actuaries at least every three years.
“More people are becoming aware public pensions need reform, but have no idea about these growing OPEB agreements. This lack of transparency led the LCI board to recommend the public have easier access to the contractual obligations their tax dollars are on the hook for in a form that taxpayers can easily understand,” said David Matkin, assistant professor in FSU’s Askew School of Public Administration and Policy and lead LCI researcher on Trouble Ahead.
“It’s worrisome that neither cities nor counties are investing much money to fund the promises made to their retiring employees. Counties are only investing approximately 40 percent of what they need to and large cities only 31 percent.”
Trouble Ahead also reports in FY 2009, Florida county pension contributions alone averaged more than $21 million, a sharp uptick from contributions made only six years earlier of nearly $12 million. Figures in the report show costs have risen from 3.5 cents on every dollar to nearly 5 cents – a 42 percent increase in pension’s share of county governmental expenditures.
Similarly, a reviewed representative sample of 50 Florida cities found pension contributions averaged $2.28 million in 2009 – up from $800,000 in 2003, accounting for more than 5.6 percent of governmental expenditures compared to 4.2 percent in 2003.
For more than 20 years, LCI has studied and promoted creative solutions to key private and public issues.
Beginning in 2005, the Institute published several reports in a series called, Tough Choices: Shaping Florida’s Future. These publications provided an in-depth analysis of Florida tax and spending policy including Medicaid, PreK-12 education, higher education, and children’s health and welfare. The research concluded Florida’s pattern of low spending and low taxes conflicted with the growing demands of the state’s residents, predicting trouble may be ahead.
LCI’s newest research series, Tough Choices: Facing Florida’s Governments is focused on state and local government relationships.
The Tough Choices research series is made possible by funding from the Jessie Ball duPont Fund.
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