A group of citizens studying the future financing of Jacksonville city government met recently in a small room at the Jacksonville Community Council Inc. (JCCI) building on Atlantic Blvd. After a short introduction to the city pension problem, the meeting was opened up for questions and comments. It quickly became apparent from the ensuing dialogue that many were uncomfortable with the taxpayer being on the hook for city pension fund obligations if investments are not sufficient to meet them. As of September 2007, Jacksonville is looking at a half billion dollar unfunded liability for the police and fire pensions alone. Add to that the unfunded liability of the city employee pensions and we are approaching the operating costs for a single year of city government operating expenses. As the moderator of the JCCI discussion asked, who will be expected to assume the risk that these pension plans are not able to meet their financial obligations in the future?
I will make a few observations. For the most part, private industry has moved away from pension plans towards 401(k) defined contribution plans principally due to the immense financial costs associated with pension plans. The question is why has the city not done so? First, the police and fire unions oppose it. They want the guaranteed payouts of a pension system no matter how costly it is to the taxpayer.
