Educators win major pension victory -- in Florida

Hooray for Florida's educators and public employees. Thanks to a lawsuit filed last year by the Florida Education Association, changes made by the legislature to the public employee pension system have been blocked.

TALLAHASSEE – Circuit Court Judge Jackie Fulford ruled today in favor of the Florida Education Association in its lawsuit on public employees’ mandatory pension “contribution.”

Last year, the Florida Education Association filed a lawsuit seeking to stop the 3 percent tax on teachers, school employees and other workers imposed by the Florida Legislature and signed by Gov. Rick Scott.

Did you catch that? Legislators imposed a "tax" on public employees in the form of an increased contribution to their pension system. A public employment "tax."

I guess conservative lawmakers in Florida found a tax they could love.

FEA President Andy Ford hailed the decision as a significant victory for public employees, but as importantly, for the rule of law in our society.

“The judge’s ruling confirms that the Florida Constitution requires the state to live up to its promises, including those made to the public workers by the state itself,” Ford said.

Florida law has provided for nearly four decades that pension rights are contractual rights that may not be ignored or abridged. If the Legislature determines that changes to the pension system are desirable, it must do so prospectively for employees who come to work after a change in the law. Employees should not dedicate their livelihoods to public service with a contractual expectation of retirement benefits only to have that expectation wrongly taken from them.

Isn't this exactly what South Carolina's lawmakers are trying to do now, to change the retirement system and raise the rates charged to public employees?

I reckon we shouldn't get excited, though: South Carolina lawmakers abide by their own view of the law (which is, we make the law, we can unmake the law, now get back to work).

Ron Meyer, the lead attorney in bringing the challenge, argued to the court that there were three separate constitutional provisions that prohibit the state from taking away employees’ right to a non-contributory retirement system containing a cost-of-living provision. The court found that stripping workers of the contractually provided benefits constitutes an unlawful impairment of the obligations of contract, an action which is prohibited by the Constitution.

“We are pleased by today’s decision. It once again will stop the Florida Legislature from overstepping its authority by ignoring the state’s constitution,” Ford said. “We urge the governor and leaders in the Legislature to embrace this decision and abide by the judge’s ruling. If they decide to prolong this case with an appeal, FEA is prepared to continue fighting for the rights of middle-class families who make our state a better place.”

Yet one more reason why educators in South Carolina would benefit from.... well, maybe now's not the time. A lot of them would have to ask their husbands, and that's usually the end of that.

Still, it doesn't hurt to watch "Norma Rae" again.

Educators opposed Haley Public Employment Tax

After writing last night about the Haley Public Employment Tax -- the 4.5 percent tax levied by the Budget and Control Board last week against all public employees in the form of an unnecessary health insurance premium increase -- I learned this morning that representatives of one educator organization -- but only one -- was present and "opposed the increase in the strongest terms."

The South Carolina Education Association, in its "Member Matters" newsletter last week, wrote to its members,

It was a stunning slap across the face of every SC public school and state employee. After years of furloughing, firing, and finding fault with its own school and public employees, yesterday South Carolina, through its Budget and Control Board (BCB), summarily penalized state and public school employees and retirees with a whopping 4.5% increase in their health care insurance costs, effective January 1, 2012. They slapped taxpayers with an additional 4.5% premium increase for their public employees. The Board is composed of Governor Nikki Haley, Treasurer Curtis Loftis, Finance Chairman Hugh Leatherman, House Ways and Means Chairman Brian White, and Comptroller General Richard Eckstrom.

The SCEA lobbying team was present and opposed the increase in the strongest terms, but regretfully, it was the only education association to do so.

Why wouldn't every organization representing educators have taken a stand against this tax on public employees? Why was The SCEA the only one to speak up?

According to The SCEA, the Budget and Control Board, chaired by Her Excellency Nikki Haley, isn't through attacking public employees. Next stop: Pensions.

The SCEA believes that even this abuse is not sufficient to mollify Governor Haley and her allies’ determination to punish public employees. They are now looking for ways to attack the state’s employee pension plan and reduce members’ pensions. All school employees should be on the alert for further information from The SCEA. Members should encourage their colleagues to join the association today.

The organization seems to be building relationships with some leaders who don't see eye-to-eye with Haley -- including Eckstrom and Loftis.

In the last election, The SCEA supported and recommended that its members support Comptroller General Richard Eckstrom. Our perception of him as a friend of public education was confirmed yesterday when he, as a member of the BCB, proposed a lower increase--3.5%--and pointed out that even that amount was more than the law requires. Only Treasurer Loftis supported his proposal. The positive impact of member participation in campaigns and elections cannot be overstated. We ask all members to carefully review The SCEA’s candidate recommendations next November and work to support true friends of education.

Guess this means Loftis still isn't on Haley's Christmas card list, and isn't trying hard to get there.

'Haley Public Employment Tax' levied on public employees

From the beginning of her political career -- seems like only months ago -- Governor Nikki Haley has made it clear that she thinks taxes are too high and should be cut.

Which made it stunning news last week to hear that she had initiated, supported and led passage of a brand-new tax on public employees. Apparently, some taxes are good and fine, depending on who is subject to pay them.

This is a tax that only affects public employees, so it is appropriate to call it a Public Employment Tax.

And, as Haley was its inventor, it's entirely appropriate to call it the Haley Public Employment Tax.

It will be interesting to hear Haley deny that it's a tax of her invention; I understand that the proposal came to the Budget and Control Board as an agenda item from her board staff, she gives final approval to the agenda, she chose the director of the board, and she chairs the board. Therefore, it's her proposal, and she led it through to passage by the board.

So the Haley Public Employment Tax is hers to own.

I've read and re-read the coverage by The State to understand this tax:

Families covered by the state’s health insurance plan will pay $143 a year more for health insurance under a new plan approved Tuesday by the State Budget and Control Board.

The 9 percent increase will be spread equally between employees and employers, with each paying 4.5 percent more.

But why was nine percent necessary? According to the board's consultants, only 4.5 percent was necessary, and that was fully funded in the budget this year. Why was it necessary to tax public employees another 4.5 percent out of their pockets?

“We have never increased rates unnecessarily. This is the first time. It is unprecedented in state government,” said Sam Griswold, president emeritus of the State Retirees Association. “To me, you are building a profit into the system.”

Haley denied the system was turning a profit, saying any money left over automatically goes to pay down state pension debt.

Pension debt? Has anyone ever heard of this? If the system is fully funded and healthy, there shouldn't be any such thing as pension debt, should there? Which means that the additional 4.5 percent tax on public employees' salaries is, in fact, a profit to the system.

The insurance plan insures 408,605 people, close to 10 percent of the state’s population. That includes employees, retirees and their families. In addition to state employees, the plan also covers teachers and some employees for local governments and school districts.

Employees covered by the plan were hit with huge increases in the mid 2000s, including a 39.6 percent increase in 2003, according to the Budget and Control Board. Historically, employers – the state, city, county or school system – have borne the brunt of premium increases, with nine increases since 1999. Employees’ costs only have been increased five times since 1999, the last one coming in 2005.

Only five times since 1999? That's five times in 12 years, or, an average of slightly less than every other year during that period.

Henry Price, a retired USC journalism professor, attended Tuesday’s meeting to hear for himself the future of his health insurance premiums. He said he pays about $250 a month for his and his wife’s health insurance, and the increases will add an extra $120 a year to his bill.

“I think 3 1/2 (percent) covers the problem. Four-and-a-half is adding extra money into the system,” Price said. “You can say, ‘Well, it’s just pennies.’ But pennies mount up.”

Quite right. And the net result is going to be that next legislative session, when budget writers see that the health plan is now receiving a profit thanks to the Haley Public Employment Tax, they're going to feel compelled to take back some of the state's employer contribution. Mark my words.

Well, that was The State's coverage, but I trust what Sam Griswold says about public employment and employee benefits. He's the president emeritus of the Retired State Employees Association, and beyond that, he's neck-deep in experience working with the Budget and Control Board and the state treasury.

"The premise of our concern with the increase in health insurance premiums of 4.5% is that they were not needed to fund the program and were thus unnecessary," Sam wrote in a message to retired state employees and others last week.

Sam is so well-versed in this business that he prepared data to present to the Budget and Control Board last week -- but his data never made it into the agenda materials given to the board members, and were not posted on the board's website.

Want to see his data document for yourself?

Enjoy:
Griswold PageAnd here's his explanation of it:

I will explain this page to you and show you why this increase was not needed.

Focus on the two columns labeled Scenario 1 and Scenario 2 (s1 and s2). S1 assumes the imposition of the 4.5% employee rate increase. S2 assumes NO rate increase. The program is required by law to maintain a reserve fund to pay claims for up to 45 days in case an epidemic occurs or some other projection of claims costs is in error. The first line is the amount of that reserve fund being carried over from 2011. The second line is the amount available to pay claims. The difference between the two columns is $19 million and represents the increase of 4.5% from employees in s1.

The third line is interesting. This line transfers $158.9 million out of plan income to the Other Post Employment Benefits Trust Fund. This Fund was set up a couple of years ago to conform to new government accounting standards requiring that the projected cost of providing health insurance to retirees be included in the State's liabilities on its balance sheet. This fund was set up to reflect that the State acknowledged this liability. The law states that each year any funds not needed to run the insurance program will be transferred into the OPEB fund. Last year the transfer was $16 million. So this year, 2012, in this particular line, is $158.9 million not needed to run the insurance program.

Go to the last line in the top box. This is the amount we have available in 2012 to pay claims. S1 is $19 million larger than s2. Your increase.

The second line in the second box shows how much we expect to pay in claims. Subtracting the claims from the revenue ends up with Projected Ending Claims Reserve at 12/31/2012. That amount is $233 million in s1 and $214 million in s2 (your $19 million showing up again and it has NOT been spent). This is the amount of the operating reserve that is supposed to be able to fund an additional 45 days of claims payments if needed.

Now the fun part: go to the bottom line of the third box. This line tells you how many days of reserve we have and the excess days that are funded. Under s1, we see 51.8 days which is 6.8 days more than the 45 day reserve required by law. Under s2 (remember this is the figure with NO rate increase) we see 47.6 days which is 2.6 days more than the 45 day reserve needed.

THE CONCLUSION: Had no increase been imposed on employees/retirees, the program would have had enough funds to pay every claim, maintain an operating reserve that complies with state law--even exceeds it, and still transfer a record amount of $158.9 million into the OPEB Trust Fund. The 4.5% increase on employees/retirees was not needed.

Sam Griswold is no joke.

The same cannot be said for those occupying our seats of power.

So, I wondered if my interpretation of the Haley Public Employment Tax was accurate. And Sam said, "It was an increase not needed by the program to operate at full funding. It is the imposition of a tax."

So there is a tax that Haley has found she can love and can raise. It happens to be levied against all the men and women who do the state's work for meager compensation, and pray daily not to get sick and require health care provided by the state's ever-more-costly, ever-weakening health plan.