Brandes bill on tougher pension scrutiny passes first committee
He had to scramble to do it, but Sen. Jeff Brandes, R-St. Petersburg, got his bill for more pension scrutiny passed in a senate committee.
The Senate’s Governmental Oversight and Accountability Committee approved SB 534 by a 7-2 vote Thursday. It requires the state’s 492 publicly funded defined benefit pension plans to report a different type of information to the Florida Department of Management Services then they do now.
Sounds harmless enough, but it’s actually one of the more hotly contested pension bills this year in a year that’s filled with them.
Brandes said his bill is only adding another set of eyes to Florida’s pensions, about 300 of which are below an 80 percent level of funding that is generally considered healthy. Brandes said this new reporting method would use more conservative rates of return, more in line with those used in private companies, of about 4 percent.
Many pension plans use rates of return of more than 8 percent, and Florida’s $136 billion pension plan uses a return of 7.75 percent.
Brandes said his proposed bill is a better model than what’s currently used and would more accurately portray the solvency of plans.
But opponents to the measure, which include groups like the Florida Professional Firefighters and the Fraternal Order of Police, say the method would provide bad information that would only exaggerate the instability of the funds.
“We want disclosure, but we want it to be accurate,” said Robert Suarez, vice president of FPF and a fire lieutenant with the Miami Fire Rescue Department. “There’s a difference between reporting facts and deceiving.”
Suarez and others representing the workers in the plans say the conservative rate of return used by the Brandes approach, which is acceptable in the more fluid world of corporations, where profits must be made on a quarterly basis, doesn’t make sense in government, where public pension plans base returns over 30 year periods.
Often, they have aggressive rates of return because over time, the plans actually reach those marks. If a plan is projected to bring in a return of more than 8 percent, then that lowers a plan’s so-called liabilities, because those returns are projected to meet more of the guaranteed benefits those plans are supposed to pay out.
Beginning in 2007 through 2011, those plans came nowhere near those projection rates, however, and the plans showed growing deficits.
Brandes thinks a 4 percent or 5 percent return would be a more accurate measure, but groups representing workers say returns have risen sharply, so many plans are showing returns of more than 12 percent.
With a projected lower rate of return to match the corporate bond rate, these plans would overnight look much worse than they actually are, Suarez and others say.
The main actuarial method of reporting pensions will be made more stringent next year. While the Florida League of Cities usually disagrees with groups representing workers on pension issues, they oppose the Brandes bill because it doesn’t help fix the problem.
“Give us a tool,” said Craig Conn, a lobbyist for the League. “This shines a light on a problem we already know exists.”
The committee chairman, Sen. Jeremy Ring, D-Margate, bristled at the bill’s approach, of applying the same reporting standards to all pensions and the Florida Retirement System’s very large pension.
“I’m blown away thatt we have an apples-to-apples (approach), that Titusville is the same as the Florida Retirement System,” Ring told Brandes and the bill’s supporters.
Sensing that reluctance, Brandes huddled with committee members Sen. Rob Bradley, R-Orange Park, and Sen. Aaron Bean, R-Fernandina Beach, and removed the FRS pension plan from the bill. Under the amended bill, only cities would have to report using this new measuring stick.
That was enough to get Ring’s measured support.
“You’re trying to do something that makes a lot of sense, it’s just complex,” Ring said. Except for Ring, the vote fell along party lines. Sen. Bill Montford, D-Apalachicola, and Sen. Chris Smith, D-Fort Lauderdale, voted no. Bean, Bradley, Sen. Lizbeth Benacquisto, R-Fort Myers, Sen. Dorothy Hukill, R-Port Orange, and Sen. David Simmons, R-Altamonte Springs, voted yes.
It's companion bill in the House, HB 599, has already cleared its first committee. Its sponsor is Rep. Matt Caldwell, R-Lehigh Acres.