The Jacksonville, Florida City Council Finance Committee is debating how to pay for $1.7 billion in unfunded pension liabilities in the city’s Police and Fire Pension Fund. Elected officials remain unable to agree how to reform the city’s public pension programs, after rejecting three separate plans.
James Madison Institute Vice President of Policy Sal Nuzzo says city leaders will have to make tough decisions in order to make the pension funds solvent.
“Addressing the real problem means making difficult choices,” Nuzzo said. “One policy reform would be to freeze the current system for existing employees and develop a new, more-reasonable retirement program for new hires. Over time, normal attrition would bring the system into greater levels of sanity.”
Don Ohannes, a former municipal financial analyst for Allstate Insurance Company and current member of the National Federation of Municipal Analysts, says Jacksonville’s elected officials promised more than they were capable of delivering to workers. Ohannes is also a policy advisor for the Heartland Institute, which publishes Budget & Tax News.
“Where are [the Jacksonville city committee members] going to get the extra money to meet [the estimated future costs?]” he said. “There is where the problem really comes in. … [T]hey were too optimistic in terms of what their returns would be on that money, and therefore they can’t meet the expectations.”
Tough Choices Ahead
Ohannes says making Jacksonville’s pension plans solvent after years of mismanagement will not be painless.
“People are going to get hurt either way,” Ohannes said. “Either the taxpayer or the recipient is going to get hurt.”
That pain can be averted by making reforms sooner, Nuzzo says.
“The alternative looks like Detroit,” Nuzzo said. “City leaders need to decide which future they want for their city.”
Kelsey Hackem ([email protected]) writes from Columbus, Ohio.
Robert Novy-Marx and Joshua D. Rauh, “The Intergenerational Transfer of Public Pension Promises,” National Bureau of Economic Research: https://www.heartland.org/policy-documents/intergenerational-transfer-public-pension-promises/