It's Your Money

The funds that pay retirement, health benefits and other “entitlements” to Florida’s local government employees such as county administrators, law enforcement, Fire/EMS, teachers and other public employees are facing a State shortfall that may exceed $500 million.

The problem is that the accounting techniques used by many local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay these deferred costs.  The Post-Employment Benefit Report (July1, 2005) indicates that Martin County was, at that time, confronting a deficit of at least $80 million in covering the cost of the retirement benefits they have promised. That figure likely underestimates the actual shortfall because of the range of methods used to make their calculations include practices that have been barred in the private sector for decades.

Local governments that use these techniques for their pension funds face deficits that further contribute to what may be shaping up to be a massive breach of faith with a generation of public employees (Washington Post, 5/11/08). This previously under-funded liability has already presented Martin County taxpayers with over $8 million in annual appropriations at the cost of other needed services. Eventually, the County’s officials responsible for the funds will have to choose whether to continue paying or reneging on benefits promised to retirees.

By their own assessment, many state and local governments acknowledge that their funds for retiree benefits are increasingly falling behind, with the number that are severely under-funded soared to 40 percent in 2006, a five-fold increase from 2000, according to the U.S. Government Accountability Office. Even these grim projections are based on assumptions that some analysts consider too aggressive; including projections about how the investments of pension funds will fare and how long retirees will live. Very small changes in these actuarial assumptions can generate huge additional liabilities over time. And other under funded entitlement costs continue to increase. For example, the School District’s liability for “paid leave” is currently some $15 million. Our first cursory look at the County’s banked time account shows over 53,000 hours (1,337 work weeks – nearly 26 years) for just the top 30 (of 300) Fire/Rescue personnel. While these are probably the most extreme examples we will find, there are another 270 Firefighter/Paramedics, 600 Sheriff’s personnel and another 600 County employees on the list. We will be analyzing and quantifying the total liability and publicizing our findings in the next few weeks

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