For Jacksonville police and firefighters, retirement benefits come early and often.
A Jacksonville police officer, for instance, can reap $3 million in pension payments for himself and his surviving spouse over a 40-year period — a payout that’s driven by annual 3 percent cost-of-living adjustments that keep pension checks growing.
Jacksonville police and firefighters are able to retire after 20 years on the job, meaning they can start drawing a pension equal to 60 percent of their final salary while still in their 40s. Automatic COLA increases then kick in, multiplying the original pension amount.
As Mayor Alvin Brown gears up to try once again for comprehensive pension reform, changing those benefits will be a core part of his pitch — not only for future hires, but also for current police and firefighters.
"We need to have a financially sustainable set of pension benefits, both for current and future employees, in order to make sure over time the city can meet its financial obligations," said Chris Hand, chief of staff for Brown.
Police and firefighters say the pension plan fits the high-stress, physically demanding nature of their jobs, which requires them to willingly go into dangerous situations. Other cities and counties also gear their pensions to encourage retirement from police and firefighters jobs earlier than other occupations.
"It’s real simple — you don’t want 65-year-old police officers and firefighters trying to protect the citizens of Jacksonville," said Randy Wyse, president of the Jacksonville Association of Fire Fighters.
"People want to think it’s selfishness, the firefighters are greedy, all of those things," Wyse said. "It’s not. It really relates back to public safety — if those firefighters feel like if something happens to them, their families are going to be protected, then they’re willing to go that extra mile to save the citizens."
"If you’re working for anything else and there’s something that’s dangerous and you don’t want to do it, you turn and leave," said Steve Amos, president of the Jacksonville Fraternal Order of Police. "We can’t. We signed on to do it. We’re sworn to do it. We go to the danger, not away from it."
In his first shot at reform, Brown and the Police and Fire Pension Fund reached agreement last year on sharp reductions in benefits for new hires. The proposal would have resulted in some of the lowest pension benefits for public safety workers in Florida. But City Council shot down the deal, saying it didn’t go far enough.
A high-profile pension reform task force recently put forward a "shared sacrifice" framework that calls for current police and firefighters to also bear some pain from pension benefit cuts, coupled with a half-cent sales tax increase to pay down the long-term, $1.65 billion debt the city owes the Police and Fire Pension Fund.
Last year, the average pension for all retired Jacksonville police and firefighters was $54,460. In comparison, the annual average wage earned by workers in all occupations in Duval County 2012 was $47,000, according to state statistics.
The gap didn’t always exist. In 2006, the average pension for retired police and firefighters was $42,700, roughly the same as the average $42,250 wage for all Duval County occupations.
Then the Great Recession struck. Workers worried more about losing their jobs than getting pay raises.
For retired police and firefighters, the picture was brighter. A 3 percent cost-of-living adjustment automatically boosted the value of their pensions each year, regardless of the city government’s deteriorating financial condition.
That kind of retirement stability is the hallmark of a pension, which guarantees lifetime payouts.
But the burden of paying the tab for those ever-rising pension payments has destabilized City Hall’s budgets. The city’s annual contribution to the Police and Fire Pension Fund is $144 million this year, double what it was just two years ago. Next year, the tab will be $153 million, roughly 15 percent of the city’s general fund.
PENSIONS IN THE MILLIONS
The deal Brown struck previously with the Police and Fire Pension Fund board would have clamped down on pensions for newly-hired police and firefighters.
In the current benefit system, for instance, a police officer who retires at the age of 45 after notching 20 years of service can pull in about $3.1 million in pension payments over the course of his lifetime and his surviving spouse’s lifetime, according to a Times-Union analysis.
Under Brown’s proposal for new hires, an officer who worked 20 years would only get about $747,000 in lifetime pension payments, according to the Times-Union analysis of how benefit changes would affect pension payouts.
Even if a new hire worked 30 years as a police officer, his lifetime payout would be $1.76 million — far less than what he or she would get under the current benefits.
The Police and Fire Pension Fund board signed off on the changes for new hires after talks with Brown last year.
"The fund’s board and its members recognize that people are living longer and working longer," said John Keane, the fund’s executive director.
Keane said changing benefits for current police and firefighters is different because they’re already paying toward their retirements, based on benefits City Council voted to put into a 30-year agreement with the fund, spelling out pension benefits. That agreement runs through 2030.
That agreement "is not going to disappear with a wink and a hope, no more than the solution to this issue is going to appear with a wink and hope," Keane said. "It’s a long-term effort to work our way out of it."
Still, he said he’s ready to discuss all proposals and isn’t ruling out anything in advance.
MAYOR WANTS CURRENT WORKERS TO PAY MORE
In the second round of talks, Brown wants current police and firefighters to pay more for their pensions and get less in retirement:
■ They would get a 1.5 percent COLA on any pension benefits earned after the change in the plan takes effect. Benefits earned up until that time would still get a 3 percent COLA. The impact would fall heaviest on younger police and firefighters — the 1.5 percent COLA would apply to a higher share of their service than it would to longer-serving workers.
■ Police and firefighters would contribute 8 percent of their pay toward their retirement, up from 7 percent now. After recent pay cuts are restored (firefighters took a 2 percent cut in 2010 and police got a 3 percent cut in 2012), the contribution rate would rise to 10 percent of pay. The fund previously agreed to a 9 percent contribution rate after pay cuts are restored, so this also would go beyond last year’s deal.
■ Police and firefighters would not get a guaranteed 8.4 percent growth on their retirement accounts when they enter the Deferred Retirement Option Program, known as DROP. Instead, the growth rate would be zero to 10 percent, based on the fund’s overall investment returns.
DROP programs are widely used in government pension plans — the Florida Retirement System and major cities offer them. Employees who enter DROP technically retire and start receiving their pensions in a DROP account, but meanwhile, they keep working their same jobs and still get their regular paychecks.
In Jacksonville, police and firefighters can remain in DROP for up to five years. For instance, a retiree whose beginning pension equates to $36,000 a year would accumulate about $224,000 in his DROP account after five years because of the 8.4 percent per year growth rate.
In addition, the 3 percent COLAs bump up pension amounts during the DROP period.
After stepping down from their jobs, police and firefighters get access to their DROP accounts by taking the money all at once or in monthly distributions.
Brown proposes to abolish DROP for new hires. Instead, they would get a benefit called Back-DROP, geared toward workers with at least 30 years of service. The worker could retroactively get up to five years of benefits as if he or she previously entered DROP, but the trade-off would be a smaller pension.
WHAT’S IMPACT ON HIRING?
The wild card in Brown’s proposals is how they would affect Jacksonville’s ability to hire and keep well-qualified police and firefighters.
The city enacted the DROP program in 1999 as an incentive to keep police and firefighters working after they put in 20 years of service.
If there’s no guaranteed interest rate for DROP accounts, would police turn in their badges and firefighters their boots at 20 years, costing the city experienced workers?
If the city reduces the COLA benefit to 1.5 percent for service earned by current workers, would younger workers seek out a city with better pension benefits — Orlando, Ft. Lauderdale, Miami, Tampa — leaving Jacksonville holding the bag for the cost of training them?
"We strongly believe this will continue to be a competitive benefits package," Hand said. "We think we’ll continue to be competitive with other counties and municipalities."
He said the city decided to keep a full-fledged pension plan — rather than go to a 401 (k) plan or hybrid combining features of a pension with a 401(k) — so it would remain competitive.
Sheriff Johns Rutherford and Fire Chief Martin Senterfitt said Jacksonville would face a tough time recruiting if it couldn’t tell prospects they would get a full-fledged pension in retirement.
Rutherford called it an "essential tool for law enforcement" that encourages officers to leave the force after 25 years when their bodies are wearing down, opening up spots for younger recruits.
Wyse said scaling back pension benefits will make it harder to recruit because job-seekers evaluate pensions as part of the overall compensation at one agency versus another.
"There are groups (of people) who say the fire department never comes to me, so I don’t care that much," Wyse said. "The day you call 911, you want it (emergency response) to be the best that ever walked the face of the Earth, because that’s a life-or-death situation. You want the most trained most qualified, most motivate people to be responding to you."
Source The Florida Times Union
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