What Happened?
Pew Charitable Trusts calculated changing the cost-of-living adjustments for Jacksonville public employees could save the taxpayers millions over the next 30 years. The research was released after new numbers indicated the city’s police and fire pension fund enjoyed double-digit returns on investments last year.
The Findings
According to the Pew Charitable Trusts research, a proposal to change the cost-of-living adjustments for Jacksonville’s police and fire pension funds could save $95 million in taxpayer dollars over a 30-year period by slowing the rise in pension payments for retirees, The Florida Times-Union reported.
Each year police and firefighter pensions are granted an automatic 3 percent COLAs no matter what the actual cost-of-living increases turn out to be. In 2014, Jacksonville officials and pension fund representatives agreed that all new hires would receive the less of either 1.5 percent COLAs or the Social Security cost-of-living index - which is set at 1.7 percent for 2015. It has now been proposed to change the COLA for existing police and firefighters to generate even more significant savings, The Florida Times-Union reported.
The Pew Charitable Trusts analysis used 2.4 percent annual COLAs for pension benefits that current police and firefighters would earn under the Social Security cost-of-living index. The calculations found lowering COLA increases along would generate $95 million in annual savings. Moreover, if Jacksonville cut benefits and implemented a financing plan with an extra $300 million in the police and firefighter pension fund, the city would stand to save $1.63 billion over the next 30 years, The Florida Times-Union reported.
Fund Growth
Despite uncertainty on how the police and firefighter pension fund will operate moving forward, recent numbers indicate the fund gathered enough assets to cover 46 percent of future pension obligations, an improvement from 43 percent the year prior. For the 2013-2014 fiscal year, the Jacksonville police and firefighter pension fund generated 10.7 percent returns on investments, well exceeding its goal of 7 percent, The Florida Times-Union reported.
Aside from solid returns, Jacksonville has doubled its annual payment toward the pension fund over the past four years. This year, the city will contribute $153 million toward the unfunded liabilities, followed by an anticipated $155.1 million the follow year, marking a 1.4 percent increase, The Florida Times-Union reported.
Making the Grade
The American Academy of Actuaries recently started grading public and private retirement systems, as well as different proposals to reform them. The grading system used was designed to provide a general assessment of how well a pension system is able to achieve the retirement income needed to stay funded. Factors considered when grading the system included:
- Sustainability
- Support of good governance and decision making
- Avoidance of imposing undue burden on stakeholders
The Academy released the grading assessment as part of a larger initiative framework to identify strengths and weaknesses of retirement systems or reforms based on their alignment, governance, efficiency and sustainability.
Pension Headaches
Gov1 has followed the persistent struggles of municipalities to find a pension plan that works while avoiding costly mistakes.