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City Employee Pension Costs are a Silent Budget Killer

Posted on July 15, 2013

City Employee Pension Costs are a Silent Budget Killer

The City Commission has avoided raising property taxes this year and instead has relied on an increase in the gas tax and one time transfers from reserve funds to reach a balanced budget.

The recent workshops on the City’s budget have revealed that one of the major dynamics driving the $5 million general deficit this year and the projected shortfalls over the next few years revolves around Star Metro. The discussion by City Commissioners indicate that changes have to be made to Star Metro so that the general fund subsidy does not continue to increase.

However, one area that received no discussion during this budget cycle – despite a major increase over the previous year spending – is employee pensions. Budget documents show that the City contributions to employee pension funds in 2014 increased a whopping 28%, or $2.2 million, over the 2013 budget.

Tallahassee Reports contacted City budget staff about the increase and was told that a new state law required that the City increase the funding for their pension plans. This requirement resulted in an increase in the employer contribution from 10.0% to 13.4%. The employee contribution remained at 3.75%. This makes the City’s contribution over 3.5 times greater than the employee’s contribution. How does this compare to the private sector and to other local governments?

In the private sector, for most businesses, the employee’s pension program is Social Security. In that program, the employer and employee contribution is split 50%/50%. Tallahassee Reports was able to verify that the City of Jacksonville requires their employees to contribute 7% and the City of Gainesville requires their employees to contribute 5%.

More than one City source has indicated that the City has punted on the employee pension issue, but that it will have to be addressed soon to break the projected cycle of general fund budget deficits. “Just keep an eye on the current negotiations with police union, this could be an indicator of how the general employee pension fund will be addressed next year” said the source.

 

 

 

3 Responses to City Employee Pension Costs are a Silent Budget Killer

  1. MC Reply

    July 16, 2013 at 8:27 pm

    Tallahassee police officers contibute approximately 10% of their paycheck into the pension fund, not 3.75% as you reported on the radio this morning. You didn’t explain that the
    3.75% is only for the general city employees, not TPD. TFD pays even more than than that. You made it sound like TPD and TFD don’t pay enough, when in fact, they pay more than the other cities you mentioned.

    • guest Reply

      July 22, 2013 at 7:57 am

      True that. Police and Fire have separate contracts and pay much more into their own accounts, which keeps going up, not the same as general city employees.

  2. Jon Reply

    August 19, 2013 at 11:03 am

    When you say pension do you mean an actual pension where contributions pay for current retirees and they get a guaranteed benefit? Or is the contribution made to an IRA?

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