Curtis Lee: Our Public Pension System is Broken
Jacksonville’s taxpayers are being harmed because the City’s public employee pension benefits are lavish, and because the plans are mismanaged.
The City provides the most lavish pension benefits to its police and firemen, who benefit from the Police and Fire Pension Fund (PFPF). Police and firemen can take full retirement at any age, after 20 years’ service. At 30 years’ service, they can obtain 80% salary replacement, for life. Plus, they get 3% annual increases, compounded, for life, after retirement, even when there is no inflation. The average police or fireman in Jacksonville retires at 49, and receives a pension of about $46,000 per year. (2008 City figures – recent data not available.)
Because of this lavishness, the average police and fireman in Jacksonville gets about twice the annual benefit that Social Security recipients get, and gets it for twice as long. All told, on average, they get at least 4 times as much as most Social Security recipients get, while making lower lifetime contributions to the PFPF. An amazing deal!
I am unaware of any private company that provides such lavish pension formulas. Only governmental entities can be this spendthrift. But the gig is up - these lavish pensions are making Jacksonville insolvent.
Thanks to the City’s folly, combined with negative pension fund returns over the last 3 years, Jacksonville’s 3 public pension plans have a combined $1.467 billion deficit. (Pension liabilities exceed pension assets by that amount.) And, for several reasons, the total unfunded employee related liabilities actually total about $1.8 billion – about $2,000 per City resident (including children). A nasty surprise for taxpayers suffering from declining property values!
The City’s pension deficit (unfunded liability) plus other City liabilities total over $5 billion. The City’s assets are about $4 billion. If Jacksonville were a corporation, it would probably be in bankruptcy.
Thus, the costs of Jacksonville’s public employee pension plans are zooming. The average City household spends, in taxes, over $300 per year just to fund the City’s pension plans. (The City, in total, contributes about $110 million per year to those plans.) All so that some 8,000 public employees, plus retirees, can get lavish benefits.
Unless benefits are slashed, City pension costs will more than double by 2020. City pension costs are 11% of the current City budget (General Fund), and are headed toward 20%. They are the fastest growing major City cost. They are the driving force behind library cutbacks, etc. But most people want libraries. Most of us don’t want to pay higher taxes so that 49 year olds can retire at $46,000 per year or more for life, with 3% annual escalators! If only we could vote on City pensions! Note – all this does not even consider public schools and teacher pensions.
Moreover, the City’s pension administration costs are excessive. More than $13 million per year is spent to manage the pension plans and invest their assets. These costs are high when compared to pension plan norms.
Scandals at the Police and Fire Pension Fund (PFPF)
Of the City’s 3 pension plans, the PFPF is the worst, and is beset by scandal.
Scandal #1 - It has assets of about $900 million, versus liabilities of about $1.8 billion (9/30/09 figures). It scarcely has sufficient assets to satisfy its liabilities to retirees; there is essentially no PFPF money to cover active employees’ expectations. Yet the same man has run the PFPF for 20 years. He is John Keane, a retired fireman.
Scandal #2 - The PFPF spends more than $6 million per year in investment and administrative costs, including $1.2 million per year on personnel costs, for 8 employees. John Keane makes $238,702 per year, plus excessive benefits like more than 6 weeks’ paid vacation, other lavish leave provisions, junkets, and a golden parachute worth almost $2 million. The PFPF is a honeypot for the favored few.
What is this “golden parachute”? Despite a PFPF deficit of about $900 million, the PFPF board of trustees – all union members or allies – gave Mr. Keane contractual rights to get a payout of almost $2 million from the PFPF should he be forced from office today. The second in command would “only” be entitled to about $1 million in that event.
Scandal #3 is more complex, and took me several weeks to unravel.
The PFPF is governed by a 5 person board of trustees, who in theory could replace Mr. Keane, but who have not, despite these scandals. One trustee, Peter D. Sleiman, has been a PFPF trustee for about 23 years. Mr. Sleiman is in the property development and management business, and is (or was) a wealthy man. I started researching his background, and was amazed at what I learned.
In 2005, Peter Sleiman and his 3 brothers, who had been in the property development and management business together, had a falling out. Litigation followed. The 3 brothers accused Peter Sleiman of looting, embezzlement and theft. A judge held that Peter Sleiman violated his fiduciary duties to his brothers. Another judge, in January 2010, signed a judgment against Peter Sleiman and in favor of his brothers. Peter Sleiman was ordered to pay his brothers more than $3.8 million.
I also learned that Peter Sleiman had violated 3 laws, all of which required him to live in Jacksonville in order to be a PFPF trustee. By violating these laws, Mr. Sleiman committed dozens of misdemeanors, and possibly felonies. Mr. Sleiman moved to, and registered to vote in, Ponte Vedra Beach, St Johns County, in February 2006. He subsequently voted, twice, in St Johns County. In 2009, he supposedly moved to Jacksonville Beach, and claimed a homestead exemption. But, in 2010, the homestead exemption was revoked by the Duval County Property Appraiser’s Office, because of returned mail. It seems he might not really live in Jacksonville Beach.
Then, after I started writing to City officials documenting Peter Sleiman’s violations of the law and dubious character, Mr. Sleiman, in mid July, officially changed his voting address to Jacksonville Beach. Convenient, but doubtful, since his homestead exemption had been revoked!
I thought that all these violations of the law, the $3.8 million judgment against Peter Sleiman, and all the other information I unearthed would cause the City Council to refuse to reappoint Peter Sleiman to another term as PFPF trustee. I was mistaken. On August 24, 2010, the City Council met. About 2 dozen policemen appeared in uniform, to support Mr. Sleiman. This, plus probable backroom politicking, plus who knows what else, caused the City Council, by a 12 to 5 vote, to reappoint Peter Sleiman to another 4 year term as PFPF trustee. What were they thinking?
If you are rich and powerful in Jacksonville, you can oversee a public pension plan having $900 million in assets, even if you violate the law, and even if your family has claimed that you are a thief, looter and embezzler, and then obtained a $3.8 million judgment against you! Amazing!
What next? Will Angela Corey – State Attorney – prosecute Peter Sleiman for violating the 3 residency laws, and for possible homestead exemption and voting related fraud? Or will she too kowtow to the public employee unions? Will the City Council wise up and put taxpayers first by exercising its right to remove Mr. Sleiman, which it can do at any time? The answer depends in large part on the public. Do they care? Will they contact the State Attorney? Will they contact the City Council?
The PFPF is a scandal, and a basket case. It needs a thorough housecleaning.
Curtis Lee is a retired attorney with pension expertise. He lives in Jacksonville FL and is a member of the Concerned Taxpayers of Duval County.