The following is a longer version of articles that have appeared recently in the Folio Weekly and Florida Times Union.

I am a retired attorney, and first started working on private sector pension matters 30 years ago. I have researched Jacksonville’s three public employee pension plans, and am dismayed about the mistakes and fiscal irresponsibility that occurred. Jacksonville is now in the midst of a pension crisis. For example, these public employee pension plans have unfunded liabilities (deficits) totaling about $1.7 billion – about $2,000 per resident. And, in fiscal 2012, more than $140 million will be paid into these plans (over $150 per resident – more than a tripling of costs in about 6 years). About 90% of this payment will come from taxes. The rest will be paid by City residents via JEA bills.

Public pension costs will represent about 14% of Jacksonville’s General Fund budget.

How did things get so bad? There are many reasons, which boil down to the usual suspects – politics, greed, and mediocre investment returns. Let’s now delve deeper.

We’ll start in 1935. The Social Security Act of 1935 (SSA), which has been amended many times, has permitted state and local governments not to pay Social Security (FICA) taxes, and not to have their employees pay FICA taxes or be covered by Social Security. However, many state and local governments then instituted defined benefit pension plans, i.e., traditional pension plans, for their employees. My understanding is that Jacksonville first adopted such a plan in 1937. Jacksonville thus opted out of Social Security and instead provided pension benefits for public employees.

A defined benefit pension plan (DBP) provides benefits that are normally payable under this type of formula: multiply years of credited employment times a stated percentage times final average salary. For long-service employees, DBP plans provide retirement benefits that replace percentages of salary. In Jacksonville, the maximum salary replacement for public employees is 80%, and many public employees retiring in their early to mid 50s get this 80%. Some Jacksonville employees (police, fire and corrections) can and do retire in their 40s at 60% or greater salary replacement levels. Plus, Jacksonville’s retired employees receive what are called cost-of-living adjustments (COLAs). These are, in reality, 3% annual increases, regardless of actual inflation.

And so, in broad brush, this is what Jacksonville’s more than 8,000 public employees get in lieu of Social Security. I will now briefly explain how they greatly benefited because Jacksonville long ago opted out of Social Security.
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In this year’s race for Jacksonville’s top job, pension reform has been a hot topic that no candidate can escape.  Republican candidates Audrey Moran and Rick Mullaney have both pledged to reform a system that according to their platforms will bankrupt Jacksonville if left as is.  Yet both candidates directly benefit from public pensions – Mullaney from his $152,000 annual pension and Moran from her husband, sitting Duval County Judge John A. Moran II’s $6,007.14 monthly pension paycheck.

Moran has relished in recent revelations that a fifth of Mullaney’s $152,000 annual pension is being paid from Jacksonville’s General Fund and says her opponent cannot realistically seek pension reforms with such a decadent retirement setup.  She has vowed reform that will allow current employees to keep their vested pension amounts, but shift future benefits to something akin to a 401K based solely on tenure.  Both Moran and Mullaney have discounted campaign frontrunner Republican Mike Hogan’s abilities to reform local pensions because he sought the endorsement of both local police and fire unions, but yet both candidates benefit from public pension payments themselves.

Although there is common ground that pension system funding and liability needs to be revamped, the approaches from all three leading mayoral candidates are markedly different. In order to build a platform on how best to change public pensions, Hogan embraced local unions, Mullaney ignored them and Moran talked to them without asking for their support.  With current legislation pending in Jacksonville City Council to curtail employees from taking their pension benefits while still working as public “servants”, current mayoral candidates may find themselves having to face a problem that many see as the double-dipping of public salaries.  In order to effectively address the issue, voters should be inclined to choose a chief executive who is not saddled by the bias of their own benefits from the pension system.

Residents are carefully considering the issue, but many voters are confused by some of the candidate’s pension platforms; as one put it “how can I trust anyone to reform a system who pads their own bankroll from it – but I’d sure like to have Moran and Mullaney’s pension problems.” With Duval County voters heading to the polls, the mayoral race may boil down to who best can be trusted to follow through on finance reform.  However, with large pension payouts benefiting Audrey Moran and Rick Mullaney, many residents are wondering just how impartial they can be when it comes to making difficult changes.

Nick Callahan