Okaloosa County BOCC — August 28, 2013 — TALKING PAPER ON 2013 FRS RATE INCREASES — reading text

TALKING PAPER ON 2013 FRS RATE INCREASES FOR EMPLOYER CONTRIBUTIONS 1. Effective July 1, 2013 new rates for the Employer Contributions to the Florida Retirement System (FRS) program went into effect as passed by the State Legislature and published in F.S. 121.71, Uniform rates; process; calculations; levy. The key paragraphs in this Statute are (4) and (5). 2. Para. (4) gives the “Required employer retirement contribution rates for each membership class and subclass of the FRS for both retirement plans (Investment Plan and Defined Contribution Plan)”. These Employer Contribution rates did not change for any class from those effective July 1, 2012 compared to those effective July 1, 2013. Another way of stating this rate structure is that these are the retirement contributions coupled with the 3% employee contributions that are used in determining the employee retirement benefit rates. Thus, the rates in this section did not place any additional FRS funding burdens on the employer (County). [See attached F.S. 121.71 (4)] 2. Para. (5) lists the Employer Contribution rates for July 1, 2012 and July 1, 2013 “to address unfunded actuarial liabilities of the system”. [See attached F.S. 121.71 (5)] These massive rate increases are what has caused the County’s approx. $1,825,000 increase in our liability to FRS for the current year. Examples of these rate increases that impact Okaloosa County are: Membership Class Rate July 1, 2012 Rate July 1, 2013 Percentage Increase Regular 0.49% 2.02% 312% Special Risk 2.75% 7.03% 156% Admin. Support, Spec. Risk 0.83% 27.04% 3,158% County Elected Officers 0.32% 23.01% 3,052% Senior Management Service 0.32% 11.25% 3,416% DROP 0.00% 6.21% 62,100% 3. The increases in Employer Contributions as shown in para. 2 above do not add any additional retirement benefits (dollars) to County employees; they are used to “beef up” the “health” of FRS from the 87%-funded level of recent history to some percentage beyond that. Although many State Legislators claim that they did not increase any taxes in this past legislative session, they did pass on an unfunded mandate to Florida’s 67 counties to pay these exorbitant increases. This financial burden then falls on our local taxpayers as counties must find the required revenue to “pay the bill to the State”. Had the Legislature opted to beef up the FRS funding levels in smaller bites, e.g., limiting the increases in any single class to even 50%, the required funding increases perhaps could have been absorbed in our FY2014 budget. It should be noted that as the State Legislature taxed the County Governments to fund these FRS increases, this same Legislature added over $1 Billion to the State Reserves and had the State pick up the tab to fund these same FRS increases to the County School Districts. 4. I had Gary Stanford do an analysis of the FRS increases due to the F.S. 121.71 (5): A. County Enterprise Funds: $ 428,303 B. County General Fund: BCC Depts.: $ 671,209 Sheriff: $ 600,000 Clerk of Courts (Finance): $ 37,487 Property Appraiser: $ 74,172 Supervisor of Elections: $ 40,381 Total General Fund: $1,423,249 C. Total Budget Increases due to FRS Increases: $1,851,552 [This equates to an ad valorem millage increase of 0.1409 (4.3% increase to current millage of 3.2899) if that is the method to cover this unfunded mandate from the State Legislature.] 5. The above is only one of the unfunded mandates the County has received from the Legislature for 2013. In addition, we are required to pay $1.54 Million to the State Medicaid fund, and almost $200,000 to DJJ for juvenile detention, another State-run program. 6. It should be noted that in the FY2014 Budget, the Board has returned to the taxpayers $1.82 Million from the DJJ Reserves due to winning our lawsuit against DJJ, and net $900,000 from the Natural Disaster Fund Reserves. These amounts (total of $2.72 Million) have been applied against FY2014 Expenditures. Also, the employee COLA of $1,400 per employee is being funded via the health insurance Pro-Share refund of approx. $2.8M in addition to a 10% reduction in health insurance premiums for FY2014. These Pro-Share funds and the insurance premium reductions are a result of the relatively low claims history of our employees. During the time period since County employees last received a COLA (Oct 1, 2009), the cumulative Federal COLAs for Social Security, military retirements, and other Federal retirees have been a cumulative 11.5% (does not include any COLA for Jan. 2014). Dave Parisot Okaloosa County Commissioner, Dist. 2