Most City leaders continue to demand that the taxpayers of St. Petersburg transfer an extra $10 million from their pockets into government pockets. Now that the Fire fee is dead, they want to raise property taxes to raise the money – or else! They threaten to close down libraries and stop maintaining parks. They warn of increased fires and crime from cut backs in public safety activity. They state the city will “Devolve” and there will be no more “quality of life”. What they seem to forget is that quality of life is not good because of the government, it is good in SPITE of the government. The truth is that these politicians want more money from you because they do not have the courage to cut spending in the main place it is growing: benefits for Unions and other government workers. That is a shame because they are doing a disservice to both the taxpayers and city workers. Without major reform in the pension and health benefit plans, the city is heading for bankruptcy and then there will really be a problem with city services and jobs for city workers. The time has come to address this problem and the politicians have it in their hands to do so right now. But you must show up and tell them: No tax hikes! (continued below)
The city has every opportunity to save the $10 million it seeks and more by modifying employee benefits starting now. The key is for the politicians to advocate on behalf of taxpayers in the current contract negotiations with the unions. The city is STILL in a contract negotiation with the firefighters that began in 2011. Why? Why have they not advised them that they must make some changes? Remember, the pension plan costs are rising every year and they are only 80-85% funded with falling funding every year. Further, the pension plans rely on a fantasy assumption of 7.75% and 8% returns from the stock market to pay them off. These unrealistic pension plans are why the city has had to dip into general tax revenues every year to pay out the pensions. In 2011, $52 million was paid out, in 2006, the number was $36 million.
Here are the changes that could be made right now to employee benefits in this contract negotiation, thus avoiding a $10 million tax hike:
- Convert all new hires of Firefighters to Defined Contribution plans as opposed to the defined benefit plans. This is more in line with the 401K retirement plans that private citizens have. The defined benefit plans are at the root cause of economic collapses all over the country from cities to large corporations like GM that required a taxpayer bailout.
- Offer a buyout of current union members with Defined Benefit plans to a defined contribution plan. A lump sum buy-out or an increase in monthly pay for firefighters would likely be well received in exchange for long-term sustainability of the pension plan.
- Change the health insurance benefit to a high-deductible/health savings account model as the preferred method of health insurance. Provide enough funding ONLY to cover these costs, and any other cost for a Cadillac insurance plan would come from the employees.
- Stop paying 75% of the health benefits for the FAMILY members of government workers. The private taxpayers generally pay their own family member health insurance.
With these sensible changes, the city could put itself on a sustainable financial pathway and spare more crippling tax hikes to the citizens of St. Petersburg that also endanger the economy. All other contract negotiations (four) are coming up in 2012 and 2013. The city therefore should use the $35 million in reserves, cut back on spending and avoid a tax hike this year and tell the Unions – it is time to come to the table with some serious plans for reform.