Jacksonville, FL - Just about a week after Jacksonville Mayor Lenny Curry’s senior staff formally rolled out the financial details of their pension reform plan, they’re rolling back some of the saving projections.
The proposal is designed to pay down the City’s more than $2.8 billion debt while moving new hires out of defined benefit pension plans. It does this by re-amortizing, pushing the bulk of the payments to 2031 and later when a half-cent sales tax specifically for the pension debt kicks in. These financial mechanisms are based on certain financial assumptions, and two areas have been reworked following action by the Police and Fire Pension Fund.
The PFPF believed some of the projections- including anticipated sales tax revenue- were too optimistic. They recently voted on a binding change to the payroll growth projects, pushing 1.25% instead of the City’s 1.5%. Finance Director Mike Weinstein says the City could have disputed this and ultimately pushed to arbitration, but it didn’t seem like the right investment or use of time. Instead, the City accepted the adjustment, which bumped next year’s expected contribution up $2 million.
The bigger surprise, according to Weinstein, came from the PFPF’s new actuary, who found COLA was being calculated at the wrong time every year. The impact from that change was another boost in the City’s expected contribution next year, this time by $11 million.
In all, that’s a $13 million blow to next year’s anticipated savings.
“We save less. We still save a lot, but we save less,” Weinstein says.
This still leaves room for some big potential savings under the City’s projections. The contribution under this year’s budget was $290 million. With reform, that would drop to $221 million. Without it, the payment would rise to $360 million. Weinstein says that’s not a sum the City can easily afford.
“We feel this is the least painful of many painful options that have been discussed in the past,” he says.
Chief Administrative Officer Sam Mousa added that the Mayor will “absolutely, positively” not support any proposed property tax increase, meaning the only other potential option is continuing to cut services.
The Property Appraiser is optimistic about the rolls for the upcoming budget, which look right now like they could bring in an additional $40 million or so for the City budget, according to Mousa. That would be completely consumed if there’s no pension reform, though, and in fact the City would still have a $30 million hole- not accounting for any other increase in annual operating expenses. The assumptions baked in to the projections use a more conservative estimate, projecting only about $33 million more coming in through property taxes. That would leave an even bigger hole.
“We will be looking at budget cuts. They will be drastic budget cuts,” Mousa says, of what would happen if the Council doesn’t pass the proposal.
The good news, according to Weinstein and Mousa, is that there should not be any other “surprises” like the PFPF adjustments. The final piece they were waiting for ahead of the City Council’s vote was approval from the Division of Retirement, which signed off Tuesday to the mechanisms the City was using.
Through this larger discussion, the Administration has been harking back on three main goals they’re trying to achieve with this reform plan- create a dedicated revenue stream to fund the pension debt, ensure all three pension funds are financially sound, and give some relief to the annual budget in order to restore services.
Despite Mousa and Weinstein saying they are comfortable with the plan, the assumptions it is built in, and the safeguards that are built in, some Council members continued to question whether the projected savings will stack up.
Councilman Aaron Bowman focused in on the fact that the saving that are being projected under the reform plan don’t account for the annual growth in the City budget. He didn’t seem happy with the “weak” answer from Weinstein, who said it’s up to the Council to determine whether to increase the budget, and they can’t project out what will happen. Bowman, nonetheless wanted some historical data.
Councilwoman Katrina Brown wanted more assurances that the money would be going to infrastructure needs- something the Administration again said would be subject to the annual budget negotiations. Councilwoman Joyce Morgan expressed concern about how she thinks the entire framing of this issue has changed, continually shifting away from talking about helping to free up money to help the community and focusing instead on savings.
Councilman Garrett Dennis probed for “boobytraps” that may come up in the future, asking Weinstein and Mousa what they would warn the Mayor who’s serving in 2031 to look out for. Neither singled in on anything to Dennis’ satisfaction, instead offering reasons why they believe this plan is important, like ensuring the City doesn’t revert to defined benefit plans.
Still others offered fairly full throated endorsements of the plan, though, noting that any questions and reservations that their fellow Council members are having need to be accepted, unless someone can come forward with a better plan, and quickly.
The Council will meet Wednesday as a Committee of the Whole. Weinstein says, while the City can technically take all the time it wants to vote, they need to act quickly if they want to see the impact on the upcoming budget. The Administration has directed all City departments to put together their next budget based on the assumption reform doesn’t pass, so they need enough time to make adjustments before presenting the Mayor’s proposal in July. If, for any reason, the debate prevents the reform from taking effect for the upcoming fiscal year, it would also mean the collective bargaining agreements which were reached with some two dozen unions would be scrapped.
In addition to this public vetting, Mousa and Weinstein have also been meeting individually with Council members to address their specific questions.