By Michael Hallett
After participating in WJCT’s First Coast Forum on Jacksonville’s pension crisis last week, two things were abundantly clear: 1) the complexity of the issue fogs the public’s brain and inhibits comprehensive dialogue; and 2) the conversation is headed in the wrong direction, with positions already hardened to such an extent that timely resolution of the pension crisis in Jacksonville seems unlikely. With Jacksonville leading the state in both homicide and violent crime committed by assailants using firearms, this does not bode well for the City. So I took the opportunity to sit down with UNF President John Delaney to dig deeper into his unique understanding of the issues–and to get his take on how the City should move forward at this critical time.
Delaney had a lot to say, including: that if he were mayor he would sit down with the Police and Fire Pension Fund to negotiate benefits; that those promoting the notion Jacksonville took a “pension holiday” during his tenure “don’t know what they’re talking about”; and that talk of Jacksonville falling into bankruptcy is “hyperbole.” Also John Keane, President of the Police and Fire Pension Fund, is a “decent man” and a “deal maker” who is “not the devil he is being made out to be.”
Delaney mapped out a vision showing optimism and commitment to employee fairness, albeit while maintaining a pretty laissez-faire attitude about what looks like high turnover in JSO due to fears about pension reform. As to the Sheriff’s and others’ claims about a pension holiday: ”The Sheriff is really a great sheriff and a friend, but he doesn’t know much about pensions or how they work. If the Sheriff thinks we ought to raise taxes and give him that money, then let him make that case. Is he real efficient, I don’t know if he is or isn’t.” Overall, however, Delaney thinks that a protracted dispute on the pension would hurt Jacksonville.
Big Picture. To frame the interview, I offered four prominent constructions about what has caused Jacksonville’s pension crisis: 1) city government took a “pension holiday” and failed to meet its fiscal obligations by paying sufficiently into the fund to keep it solvent (and by some accounts, even “raided” the fund of its reserves when times were good); 2) Jacksonville’s pathologically-low millage rate reflects a “government on the cheap” philosophy and has long been inadequate for meeting the needs of its citizens; 3) the near unprecedented market crash of 2008 is entirely to blame for the pension crisis, with stocks losing half their value and Jacksonville property valuations falling to levels insufficient for generating sufficient revenue; and 4) mismanagement of the pension fund by its managers and board led to both weak performance and waste of resources.
Pension Holiday. A pension holiday “never happened,” says Delaney. While both JCCI and the PFPF frequently point to an actuarial table published by JCCI (frequently referred to as “Exhibit A” by both JCCI and Keane), Delaney has no way of digesting the numbers. Delaney doesn’t know where the numbers used for Exhibit A come from, he says, but it appears the authors mixed and matched numbers into “combined rates” and “budgeted rates” in ways never actually used by city budget managers in practice.
While the supposed “pension holiday” occurred mostly prior to Delaney’s time in office–the table is still completely inaccurate, he says. While it is true that Delaney spent less on government during his tenure–achieving a 10% tax cut over time while actually increasing benefits in the 2000 Settlement Agreement–he did so only by first reducing starting pay for city employees by 3% and reducing the overall number of city employees by about one third. This produced “compounded savings” over many years, generating far more in savings than paying for employee benefits. This fact never gets reported in revisitations of fiscal Jacksonville during his tenure as mayor and he finds that frustrating. In addition, retrospectives on the pension debt also fail to adequately capture how large the pension fund reserves really were relative to taxation and property values, he says –and that it was Keane who offered access to these reserves as part of the restated settlement agreements of 2000 – 2001. Today he feels some salaries at the top are too high and that these disproportionately exacerbate pension debt, but that overall some salaries at the bottom are probably too low.
Sit Down with PFPF. In the current dispute, a major contention of both FOP and the PFPF is that pension benefits need to be negotiated with the Pension Fund and not the FOP. On WJCT, Delaney explained in an exchange with Tad Delegal– Jacksonville FOP’s former lead attorney–that while he never negotiated pension benefits formally at the FOP table, they would simply move out in the hall to discuss it because the membership was essentially exactly the same. While legally they are separate bodies, the FOP and PFPF “speak with one voice” and have literally almost 100% overlap in membership. “The membership of the FOP always knows exactly what’s in the PFPF benefits package and you’re talking to the same people.” While both sides may try to use semantics for tactical advantage, Delaney explained it really doesn’t change the bargaining position of the City–which in the end still has to find the right balance of pay/benefits the market commands to keep employees.
Delaney said if he were mayor today he would sit down with the Pension Fund to negotiate benefits and sees Keane as a “deal maker” who can be worked with. Regarding the negotiations while he was mayor, Delaney explained “I wasn’t going to go back and forth for separate conversations about all of that. When we left the pension was fully funded and they were pretty happy with the package. But we’d cut taxes and the size of the city payroll by one third without a single layoff, through attrition and efficiencies. So we more than paid for all that with savings.”
Millage Rate. ”I don’t think the millage rate is necessarily too low,” said Delaney. ”If people want to raise taxes for social services they need to go out there and make that case.” But Delaney did express concern that there is a point where any city can become a hollowed out shell and that without adequate funds for things that make a place “livable,” like swingsets and parks and libraries they start to suffer.
Mismanagement of the fund. As Delaney sees it, John Keane has done a good job managing the pension and notes that PFPF is under certain restrictions in terms of the kinds of investments it can make by law. He notes, however, that Keane has inaccurately promoted the notion of a “pension holiday” in public, but ultimately thinks of Keane as a deal maker who can be worked with. Delaney wouldn’t shy away from talking to the Pension Fund for resolution of the benefits dispute, but notes that reform of current benefits structure is going to be a necessary part of successfully resolving Jacksonville’s pension crisis. As he said on WJCT, Delaney believes the crisis is really the result of the market crash. It’s counter-productive now to point fingers and we really should get to work.
Hallett’s Take. Get Smart: Jacksonville Cannot Exclusively Prosecute or Police its Way Out of Poverty. President Delaney is extraordinarily well-qualified to address the complexities of Jacksonville’s pension crisis in a comprehensive way, something that he believes has not been fully achieved in most journalistic accounts of the issue nor in several policy papers exploring the topic. Having served two terms as Jacksonville’s mayor (from 1996 – 2003), a stint as the City’s top lawyer and Chief General Counsel, not to mention Chief of Staff to his predecessor Mayor Ed Austin (under whose tenure most of the supposed pension holiday took place)–Delaney’s perspective is literally incomparable.
But I disagree about the millage rate. Jacksonville’s millage rate is too low and has long been too low, not only in comparison to peer cities in the state–but in regard to the numerous risk factors facing the City in terms of concentrated poverty, crimes of violence and homicide, the proliferation of firearms, education failure and family breakdown. Jacksonville’s main problem has not been a lack of fiscal austerity, but a lack of generosity. Long term, intervention programs ARE CHEAPER AND MORE EFFECTIVE than harsh punishment and incarceration. And because children are incredibly resilient, programs far cheaper than incarceration really can turn children around.
In sum, Jacksonville chronically fails to meet the needs of its own citizens, a pathology I ultimately ascribe to lingering institutional racism. Jacksonville’s most blighted, challenged neighborhoods are disproportionately black, containing literally tens of thousands of children living in poverty and relative political and social isolation. In response, Jacksonville currently leads the state in prosecuting children as adults and in rates of adult homicide–unlike, Miami, for example, which in response to similar problems established the Miami Children’s Trust to address similar issues. Instead, Jacksonville currently incarcerates five times more children than Miami-Dade county. For deeper exploration of that pernicious cycle, see the earlier Jacksonville Justice Project post. And I’m not advocating some large tax increase, but suggesting that matching citizens’ needs to a millage rate more on a par with cities facing far fewer challenges is long overdue. It’s also about fundamental fairness to men and women of JSO –who do not get social security–and who serve Jacksonville citizens in crisis on a daily basis. Reform is necessary, all agree. Let’s make it happen.