Pension bill stuns counties, could force tax increases

Rep. Seth McKeel, 
R-Lakeland, a sponsor of the bill, says he was misunderstood.
Rep. Seth McKeel, R-Lakeland, a sponsor of the bill, says he was misunderstood.
Published May 31, 2013

TALLAHASSEE — A bill passed in the waning moments of the 2013 legislative session with little discussion and signed two weeks later by Gov. Rick Scott will cost state and local governments nearly $900 million in additional expenses next year, hitting county governments especially hard as they struggle to emerge from a prolonged economic slump.

The bill, SB 1810, raised the rates employers must pay into Florida's $135 billion pension fund so that the state could more aggressively manage a deficit in the retirement system. Though the higher level will please conservatives like Scott who want the pension fully funded, it comes at a cost that some say is unnecessary when the stock market is hitting record highs.

The new rates will force 1,000 state, county and local employers to pay more into the system: $177 million from state agencies, $100 million from universities and colleges, $300 million from school districts, $50 million from cities and special districts, and $264 million from Florida's 67 counties.

Unlike state agencies and school districts, however, counties weren't given additional revenue to cover the new expense. Some county officials say they resent having to scramble now to find ways to cover the cost at a time when they are finally seeing modest gains in tax receipts.

"I'll be looking to see if this is another shell game," said Republican Hillsborough Commissioner Victor Crist, a former state House and Senate member. "That's an old game that's been played for decades. It's called cost-shifting."

Miami-Dade, the largest county in the state, will have to contribute an additional $21.2 million toward the Florida Retirement System. The unanticipated increase is the biggest increase in the county's expenses for the upcoming budget year.

Pinellas County Administrator Bob LaSala told commissioners in April that he might need to increase property taxes by a tenth of a mill to cover the additional cost. On Thursday, Mark Woodard, the county's assistant county administrator, said the total cost would come to about $5.5 million and is part of the reason for a proposed tax increase.

Hillsborough County's bill from the pension contribution increase: $7 million.

Rep. Mike Fasano, R-New Port Richey, said he would not have voted for the bill, which passed unanimously on May 3, the final day of session, if he knew the impact to counties.

During debate on May 2, he said he asked one of the bill's sponsors, Rep. Seth McKeel, R-Lakeland, if counties would end up paying more.

"Can you tell me if those rates are staying the same, are they going up?" Fasano asked. "What impact will they have as far as a trickle down effect to our counties and those that contribute to the Florida retirement system?"

"They are the same rates that they were originally, sir," Mc­Keel replied.

On Thursday, Fasano said the answer confused him into voting yes.

"If he had said rates were going up, it wouldn't have just been me voting against it," Fasano said Thursday. "It's hypocritical that the Legislature and governor say they don't want tax increases but are pushing a bill through the back door that would require a tax increase on the local level."

Rep. Dwayne Taylor, D-Daytona Beach, also said McKeel's response to Fasano convinced him to vote for the bill.

"I thought McKeel assured him that there were none," Taylor said. "And that's why I voted for it."

But McKeel said Fasano and others misunderstood him. When asked by Fasano if the rates were changing, Mc­Keel said he thought Fasano was asking if there had been any changes in the bill that had been first approved in April. "If he didn't understand what he was voting on, I'm sorry," Mc­Keel said.

"It's irritating that on May 30, when the number that counties will pay has been out there since April, all of a sudden there is this consternation," McKeel said. "If Fasano and the counties didn't read the bill analysis, I'm sorry."

The April 3 bill analysis only says that counties will owe $264 million. It doesn't break down what each county will owe.

The sharp spike in pension payments has some local officials questioning what's really going on. Two years ago, the Legislature moved to have government employees to ostensibly pay 3 percent of their pension costs. This past session, state House members approved a measure to stop offering pensions to new hires and move them into 401(k)-style retirement plans. That was rejected by the Senate.

Recently elected Hillsborough County Property Appraiser Bob Henriquez, a Democrat and former state House member, said he was skeptical that lawmakers were trying to improve the pension. He wondered whether its motivated to create a backlash and provide momentum for the elimination of government pensions in Florida.

"We all know this is one of the more solid pension programs in the country," Henriquez said. "Is that money going to FRS to actually shore it up? Or is it a long-term strategy to pressure those of us at the local level to say we can't sustain these increases?"

The state's pension investments had reached a high of $136 billion in 2007. By March of 2009, it had fallen to just more than $83 billion, said Ash Williams, the State Board of Administration's executive director and chief investment officer. Still, as the markets tanked, and tax revenues fell with it, legislators declined to make the state and local governments contribute more to the plans to offset the losses. Now that money is coming due.

"It's like if you had a credit card maxed out and you skipped making payments for three months," Williams said.

Miami Herald staff writers Patricia Mazzei and Amy Sherman and Times staff writer Anna Phillips contributed to this story.