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June, 1998

Stephen H. Cypen, Esq., Editor

GOVERNOR TRIES TO EXPLAIN VETO OF HOUSE BILL 3075: As set forth in our Special Supplement dated May 28, 1998, Governor Chiles vetoed HB 3075 on the last day it could be vetoed. We printed his entire veto message. Now, the Governor has sent a letter of "explanation" to us, and presumably others who indicated their support of HB 3075. The June 16, 1998 letter, which is obviously a form, draws upon the veto message. However, because some new language does not seem to be consistent with the Governor's veto, the complete letter follows:

Dear Stephen:

Thanks for your letter in support of House Bill 3075, relating to municipal firefighters' pension and police officers' retirement trust funds. Lieutenant Governor Buddy MacKay and I recognize the exceptional service firefighters and police officers provide and want them to receive a corresponding level of compensation and benefits.

I agree with the need for improvements to the current law, and HB 3075 provided a useful framework within which to resolve pension policy issues for firefighters and police officers. Unfortunately, it contained serious defects and I had to veto it. I proposed changes I believe would have helped to avoid future litigation and establish a sound basis for state oversight, but they were not adopted by the legislature.

The parts of the bill regarding the use of the insurance premium tax and how "extra benefits" would be measured weren't clear. Also not clarified was how revenues currently used to fund local plans would be affected and how growth in insurance premium taxes would be treated. I was troubled by the exemption of 16 municipalities, for reasons unclear, from complying with the definition of "compensation" and the provisions regarding the composition of pension boards. This undercut the effort of the legislation to establish uniform policies and accountability for these pension plans.

I was concerned this legislation would open up a whole new round of litigation and wrangling between local governments and the representatives of firefighters and police officers. It would have colored the tone of collective bargaining and muddied local finances for officials, employees and taxpayers. It might even have caused some governments to opt out of participation in the insurance premium tax, with the possible diminution of benefits.

These possibilities can be avoided through additional work and further refinement of this legislation. I feel sure you will tell your legislators how you feel in case this issue is addressed during the 1999 session.


Actions speak louder than words.

GFOA PUBLISHES BOOK ON INVESTING PUBLIC FUNDS: The Government Finance Officers Association (GFOA) has published the second edition of Investing Public Funds. The original edition of Investing Public Funds, published in 1986, was the first book to provide a comprehensive overview of the public-sector investment function. Now, containing 400 pages, the second edition reflects the changes in public cash management and investment practices over the previous decade. As stated in the introduction, state and local government investors manage hundreds of billions of public dollars. The environment in which these public investors operate is fundamentally different from the private sector, yet most of the investment information available has been generated without consideration of the public sector. The book is a survey of basic investment concepts and practices for the public professional who lacks considerable experience in money market and portfolio management. GFOA is a major professional association serving the needs of over 13,000 elected and appointed state and local government officials and other finance practitioners. For $49.95 (plus $6.00 freight) the book can be obtained from GFOA, 180 North Michigan Avenue, Suite 800, Chicago, Illinois 60601-9967.

ELEVENTH AMENDMENT DOES NOT IMMUNIZE SCHOOL BOARD FROM FLSA ACTION: A trial court dismissed an action by an employee against The School Board of Highlands County for unpaid overtime pursuant to the Fair Labor Standards Act. The trial court granted the school board's motion to dismiss based upon sovereign immunity of the states as provided by the Eleventh Amendment to the United States Constitution. The Eleventh Amendment, ratified February 7, 1795, provides that the judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by citizens of another state, or by citizens of any foreign state. In reversing, the appellate court found that the Eleventh Amendment does not immunize the school board from an FLSA action brought in state court because the amendment restrains only the judicial power of the United States. Ribitzki v. The School Board of Highlands County, 23 Fla. Weekly D1211 (Fla. 2d DCA, May 13, 1998).

ARBITRATION AWARDS DIFFICULT TO OVERTURN: An employer sought review of a final court order confirming the report of an arbitrator in a grievance proceeding. The city argued that the trial court failed to comply with the essential requirements of law in refusing to vacate the arbitrator's decision. The city's contention was that the arbitrator exceeded his authority by using the clear and convincing standard of proof rather than the preponderance of evidence standard. Although the court did not decide which standard was applicable, it affirmed the trial court's confirmation of the arbitrator's report because application of the wrong evidentiary standard is not a basis for vacating an arbitration award. The very limited grounds therefor are set forth in Section 682.13(1), Florida Statutes: (a) the award was procured by corruption, fraud or other undue means; (b) there was evident partiality by an arbitrator; (c) the arbitrator exceeded his powers; (d) the arbitrator refused to postpone the hearing upon sufficient cause, refused to hear material evidence or conducted the hearing contrary to law; or (e) there was no agreement or provision for arbitration. City of Tallahassee v. The Big Bend Police Benevolent Association, 23 Fla. L. Weekly D1138 (Fla. 1st DCA, May 5, 1998).

LIPPER WILL PUBLISH NEW RANKING STATISTIC: Did you ever notice how your money manager performs inconsistently yet remains on the top of the charts? Well, the answer is simple: traditional ranking statistics provide only a snapshot of performance from a fixed starting date to a fixed ending date, revealing little about what happens in between. Thus, a money manager who has one outstanding year in a five-year period can shine during the whole period even if his performance is poor during one or more of those years. Lipper Analytical Services has the answer, a new statistic called the "success ratio." By using rolling one-year returns, the success ratio can capture the ups and downs of a manager's performance. A rolling period covers each month-by-month starting point -- for example January 1997 to January 1998, February 1997 to February 1998 and so on. The result is a percentage success ratio, indicating the percent of time a particular money manager has beaten his peers during the relevant period.

NEW YORK STATE PASSES $100 BILLION MARK: According to a front page story in Pensions & Investments, the New York State Common Retirement Fund at $105 Billion in assets has joined $140 Billion CalPERS as the only two United States defined benefit pension funds in the $100 Billion category. (At over $81 Billion, FRS is number four.) In the last eight calendar years New York's fund has outperformed CalPERS six times. Although CalPERS has a higher overall commitment to equities (66% vs. 60%), New York has more committed to domestic equities (50% vs. 46%). One other point of interest: the New York fund is run by one trustee, the elected State Comptroller; CalPERS is overseen by thirteen trustees, some serving ex-officio, some appointed and others elected by members of the system.

CLIENT'S NEGLIGENCE DOES NOT PRECLUDE ACTION FOR ACTUARY'S NEGLIGENCE: According to a case reported in the International Foundation of Employee Benefit Plans Legal/Legislative Reporter, an actuary may not assert its client's negligence as a defense to its own subsequent negligence in performance of its professional responsibilities. The client argued that a professional holding itself out to serve clients is liable for negligent performance of duties undertaken and may not be relieved of such liability by the client's actions in causing the very conditions which the professional was employed and undertook to remedy. The federal appellate court agreed, and observed that to hold otherwise would be like allowing a physician to defend a malpractice claim because the patient was negligent not having sought treatment sooner. Steiner Corporation v. Johnson & Higgins of California, Case No. 96-4044 (10th Cir., January 13, 1998).

FLORIDA LEGISLATURE GRANTS YEAR 2000 IMMUNITY: On May 30, 1998 House Bill 3619 became law without the Governor's signature. Among other things, the legislature makes the finding that the state and units of local government have taken due care to prepare for the date change that will accompany the year 2000. State agencies will spend an estimated $75 Million to $90 Million in remediation costs to prevent computer failures and date miscalculations. All of these actions have been taken in an effort to ensure the continuity of state services to the citizens of Florida as the 20th Century nears an end. Thus, "there shall be no cause of action at law, nor administrative actions maintained, against the state, its agencies or instrumentalities, or any unit of local government for actions or inactions that are attributable to a year 2000 computer date calculation failure, and there shall be no waiver of sovereign immunity with respect to the same." We would not rely on a pension board's being considered a "unit of local government" for Y2K immunity. In fact, we are in process of preparing Y2K questionnaires for our clients to send to their vendors, in an attempt to determine Y2K preparedness.

IS MICROSOFT TOO BIG FOR ITS OWN BOOTS: While we certainly do not intend to get embroiled in the ongoing dispute between Microsoft and the Justice Department, we did read a cute one the other day. If the Justice Department is successful in breaking up Microsoft -- which officials deny is contemplated -- what will the new entities be called? Similar to the last big corporate breakup, AT&T, the new companies will probably be dubbed "Baby Bills."

NEWSLETTER GOES HIGH-TECH: Our readers will probably notice that this issue is a little on the lean side. A good observation, because we spent much of this month developing our new website on the Internet, which was "released" on June 19, 1998. Generally, the Newsletter will be posted to the website toward the end of each month. In addition, prior Newsletters will be archived for reference. Finally, the site provides automatic "links" to other useful Internet sources such as FPPTA, GFOA and NCPERS. Happy surfing and see you at

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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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