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Cypen & Cypen
JANUARY 28, 2011

Stephen H. Cypen, Esq., Editor


Florida Representative Fred Costello, through his Legislative Aide, has issued the following statement:

Members, Legislative Aides and Interested Parties:

While I remain fully committed to comprehensive, equitable and sustainable pension reform, by now you may be aware that I have pulled HB 303. So why did I pull it? Two reasons:

1) I am advised there will likely be a proposed committee bill from the Government Operations Subcommittee addressing pension reform. Had I known that six weeks ago, I would have presented the pension reform draft directly to Chairman Patronis rather than filing such a significant bill as a Rookie Representative. In case you wonder about my appetite for and willingness to be a lightning rod to advocate for significant pension reform, I have been working with Kraig Conn, Deputy General Counsel, Florida League of Cities, on pension reform for many years while serving as Mayor of Ormond Beach. Be assured that my appetite for pension reform has not diminished!

2) Volusia County Sheriff Ben Johnson (incoming President of the Florida Sheriffs Association) suggested compromises that the PBA and FOP representatives accepted that will hopefully work for all parties. Obviously I have no authority to accept such compromises on behalf of the House ... but I can recommend them! Sheriff Johnson is a valuable resource and I’m confident he will make himself available should the Committee need additional input. In return for the PBA’s agreement to jointly present the significant compromise reforms (briefly outlined below) we discussed to Chairman Patronis, I told the PBA and FOP representatives I would pull the bill to show my good faith. Obviously, I fully expect the PBA to complete our good faith partnership and formally agree to those compromises. If they don’t, in addition to being greatly disappointed at their lack of following through on what they agreed to do, I will advocate those reforms directly to Chairman Patronis and to members of the Committee. Obviously, there are many other stakeholders from whom we need to hear, but I believe the reforms discussed will benefit all employee groups.

Please note that a significant provision of the HB 303 was that all benefits earned to date would remain unchanged. That should be obvious. Beyond that, in such matters the beginning point on both sides is exaggerated. While much of the criticism of HB 303 came from reducing the multiplier to 1.6 for all employees, the same as our teachers and many of our State employees currently receive, you should know that the bill authorized the State or local government employer to add a defined contribution for our high hazard employees. That seems to have been routinely missed. I continue to believe that this hybrid of a defined benefit plan with additional contributions offers the best plan for our employees. But that is up to the Committee and House to decide. The 401k style investment plan would remain an option for those who may prefer more portability and immediate vesting ... and it is entirely possible that the ultimate House Bill, Senate Bill and/or Governor’s proposal will be solely a defined contribution plan. Additionally, HB 303 was designed to force correction of the abuses of the DROP plan and excessive overtime loading by eliminating them. I believe reasonable compromises have been proposed and agreed to and thus (if the Committee, House, Senate and Governor agree) we will not have to totally eliminate those benefits. Lastly, we have discussed 15% of payroll as a consistent pension funding amount for our high hazard employees (and less for our other employee classes) so governments can budget for future expenses. Any necessary funding to meet current unfunded liabilities would be additional. With such a plan, employees will be fully confident that the benefits will be there when they need them. I highly recommend that we adopt a plan based upon a fixed percentage of payroll for our various employment classes to limit our exposure. In the good times, the pension fund excess gains will create a buffer for the bad times. When there is enough of a buffer, additional one time pension contributions could be made without increasing the potential for future unfunded liabilities by increasing the multiplier.

¬†While the significant reforms outlined in HB 303 are in line with the recommendations of several policy groups (including FSU’s LeRoy Collins Institute for Public Policy, Florida Tax Watch and the James Madison Institute) that have studied the matter extensively, my purpose in outlining what some considered optimal and others considered extreme measures was to get the attention of the union negotiators so they would know it is time to get serious. That initial mission has been accomplished. Now, it's up to the Committee, House, Senate and Governor ... “let’s get to work!”

We certainly hope this is the beginning of a beautiful friendship.



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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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