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Pension board gave John Keane big-picture goals and leeway on individual parts of pension reform

Posted: May 28, 2014 - 10:15pm

As Police and Fire Pension Fund Executive Director John Keane sat down for negotiations with Mayor Alvin Brown for wide-ranging talks on pension reform this month, he did so with a directive by his board to achieve some overarching goals, but with leeway on how to reach that endgame.

The board wanted the agreement to contain sacrifices by both current and future police and firefighters, but the particular pieces of that package were up to Keane as part of the give-and-take in negotiations, said board members Walt Bussells and Adam Herbert.

“The thing we tried not to do was go into extreme detail on every point about what you need to do or not do,” Herbert said. “This is a big-picture issue. There are multiple components of it.”

Ultimately, those talks left unchanged the 3 percent cost-of-living adjustments that current police and firefighters will receive on their pensions in retirement.

That figures to be a major topic for City Council members when the pension package reaches them for a vote. Several have questioned why the proposal doesn’t lower that COLA for current employees, which a pension reform task force recommended dropping to 1.5 percent.

Bussells and Herbert said in regard to the COLA, the board gave Keane flexibility in whether that would be part of the final deal.

Bussells said there are “dozens of individual elements” involved in comprehensive pension reform.

“It’s the total result, the bottom-line total impact on the budget and our members’ pensions that matters,” Bussells said.

Bussells said he’s convinced the total package delivers on the pension fund’s side of the shared sacrifice equation.

For current employees who entered the Deferred Retirement Option Program next year, the tentative agreement would eliminate the guaranteed 8.4 percent interest earnings on Deferred Retirement Option Program accounts. The interest instead would be based on actual market returns, with a range of 5 to 10 percent for the minimum and maximum interest.

Current employees would see their 7 percent paycheck deductions rise to 8 percent this year and eventually to 10 percent after recent pay cuts are restored.

In addition, Bussells said the pension fund will commit $107 million to help the city strengthen the pension plan faster.

“It’s really a question of the totality of the package,” Herbert said. “We did give Mr. Keane some flexibility while articulating our interest and commitment to being responsive to the goal of some sacrifice on the part of employees.”

Although Brown pushed repeatedly for a lower COLA for current police and firefighters, he has said the overall pension reform package contains other money-saving measures and would be good for taxpayers.

The mayor’s office is still crunching the numbers that would show a year-by-year comparisons of the city’s costs under the tentative agreement compared to the current situation. His office said as of Thursday the process of running the calculations is complex and it takes time to make sure they are accurate. The biggest savings would come from sharp reductions in pension benefits for police and firefighters hired after Oct.1.

The five-member pension fund board still must vote on the tentative agreement, which Keane and Brown worked out during seven days of public negotiating sessions in a three-week period.

Before those talks began, the Police and Fire Pension Fund board discussed pension issues during a “shade meeting” that examined a pending federal lawsuit that involves a current agreement between the city and the pension fund. A court reporter was present during that meeting and the transcript will become public record after the lawsuit is resolved.

After the negotiations started, the board discussed the status of those talks during its regular monthly board meeting on May 16. Board members did not give any specific directions to Keane but generally supported his approach.

Keane also gave verbal updates to board members during the course of the negotiations in one-on-one conversations with them.

Barbara Peterson, president of the First Amendment Foundation, a nonprofit that promotes compliance with open government laws, said it would be best for such updates to be done by email so there is a public record of the communication.

She said board members can give their input to their staff, but the staff member cannot relay those comments to other board members to see what they think of what other board members are saying.

“The board members are free to respond to the director,” Peterson said, adding its permissible for a board member to tell the executive director, “This is what I think you should do.”

She said it’s not okay to ask what other board members are saying. “That would be a violation,” she said.

Keane said he never relayed information to other board members about what he heard during his updates to individual trustees.

Pension fund board members had varying degrees of contact with Keane during the course of the negotiations, according to interviews with them over the past two weeks.

Board member Bobby Deal said he has daily meetings with Keane. He said he gave his opinions on the proposals being offered by Brown and also gave advice to Keane on counter-proposals.

“The fact is you have the board and John reports to the board,” Deal said. “In that context, it’s a two-way conversation. ... I’m sure he’s received input from other trustees, but to what extent, I’m not privy to that.”

Bussells also got regular updates from Keane after each of the negotiating sessions.

“I try to be a sounding board for him and talk it out, but I’m not trying to micromanage it or get in the weeds,” Bussells said of his approach. “I keep him focused on the policy objectives.”

Board member Richard Tuten said he talked with Keane two or three times about the progress of the talks.

“It’s a general overview of how are things going, how are things moving along,” Tuten said. “He’s got a job to do. I trust him to do his job 100 percent.”

Nat Glover declined to say how often he communicated with Keane. Glover said he is satisfied he had the opportunity to give his thoughts on the pension reform issues. He said he is waiting for the pension fund’s staff and the mayor’s office to finalize the wording of the tentative agreement before he makes any comments on it.

Herbert said he and Keane spoke a couple of times about the progress of the negotiations.

“I didn’t get into the details with regard to saying, ‘I think you should do this or that,’ ” Herbert said. “You provide over-arching guidance and then expect him to follow through on our [board] determination that there was going to be shared sacrifice.”

Herbert said he has “no doubt” the pension fund board will be able to back the tentative agreement. Then the proposal will go to the City Council, which last year rejected a previous proposal reached by Brown and the pension fund.

Herbert said determining whether the latest proposal goes far enough to achieve shared sacrifice “ultimately is a political question, and the mayor and the City Council are going to have to resolve that.

“What we dealt with is we wanted to enter into those conversations in good faith,” Herbert said. “We did indicate to the executive director that we wanted to be as responsive as we could be, and the outcome is what it is. The agreement has been reached.”

David Bauerlein: (904) 359-4581

 
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