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Jacksonville's Big Pension Problem

Jacksonville Mayor Lenny Curry called the Van Wie Financial Hour this weekend to discuss his plan to address the grossly underfunded Jacksonville employees’ pension plan.  The mayoral proposal is scheduled for a public vote on August 30, and involves extending a current sales tax of 0.5% that is otherwise set to expire.

Since 27% of Mayor Curry’s current-year budget is already allocated to pension-related expenses, any percentage increase would subtract from other functions of government.  Curry’s proposal not only preserves that budgetary percentage, but also continues sales taxes at the current level, with no increase.

As we pointed out last week, both on-air and in our Blog, we support the Mayor’s plan to fund the pensions.  We invited the Mayor onto the show to make his case because we agree with him that this has to be done.  We tried to get to the “whys” and to cover the “why-nots” of alternative proposals.  He was very clear that there is no appetite for Jacksonville’s problem to be solved in Tallahassee; it must be local.

Some of my points from last week:

  • Pension obligations, whether public or private, are contracts between employers and the employees.
  • Contracts are legally binding agreements, and can only be violated due to the most severe situations, such as bankruptcies.
  • Taxing authorities, like the City of Jacksonville, rarely face bankruptcy (Sure, Detroit and Stockton CA are exceptions).
  • When pension benefits are accrued, it is usually at the expense of wages and salaries that were not higher during the person’s working years.
  • Today, pensions are uncommon, as workers are usually paid more, and then required to fund their own retirements through 401(k) and similar personal plans.
  • Today’s retired workers did not have that opportunity.

The Employee Retirement Income Security Act of 1974 (ERISA) and the Pension Protection Act of 2006 (PPA) were passed to improve pension standards, yet proper Jacksonville pension plan funding was ignored for 30 years.  Under the existing Jacksonville Public Employees Collective Bargaining Agreement, regular and periodic contract negotiations did not occur for decades.  This left little room for course corrections as economic conditions changed.  That has now been resolved by implementation of regular three-year labor contract re-negotiations, allowing and forcing periodic talks regarding wages, hours, and working conditions.

As distasteful as taxes are to most of us, Jacksonville/Duval County has a problem, both legal and financial.  Whenever a governmental body finds a solution involving “no new taxes,” they get our attention.  We believe that there exists a lot of confusion as to that point.  The Mayor’s plan includes no tax increase; only a continuation of the existing sales tax rate in the city/county.

Jacksonville has a need, and Mayor Curry has a solution.  Having discussed the several alternatives we could imagine, Adam and I believe that this Plan is the best, and it deserves passage.  Thanks to Florida’s tremendous tourism industry we can let tourists pick up the tab for a large percentage of our pension-related tax expenditures, simply by spending while they are in Florida.  Sales taxes do that.  Thank a visitor some day.

We recommend that you vote “Yes” on Country Referendum #1 August 30.