Cities and counties throughout Florida have promised more than they can afford in retirement benefits to their employees — a "ticking time bomb" for local governments, a study released Wednesday concludes.
Pension obligations made up about 8 percent of total spending by counties and cities in 2009, according to the report by the nonprofit, nonpartisan LeRoy Collins Institute at Florida State University.
"This is money that is being obligated, promises that are being made to local employees,'' Carol Weissert, director of the institute, said in an interview. "Many of the cities and some of the counties just aren't paying for them, so they are obligations that are just getting bigger and bigger.''
State pensions have been in the headlines recently, with Gov. Rick Scott announcing that he wants public employees covered under the Florida Retirement System to contribute 5 percent of their salaries.
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Municipal pensions account for more than half of the total payroll of some cities, including Miami, Pembroke Pines and Hollywood, according to the Florida League of Cities.
"It's catastrophic,'' said state Sen. Jeremy Ring, D-Parkland, chairman of the Florida Senate's Governmental Oversight and Accountability committee. "We could have a crisis soon very much like the 2008 [real estate bust].''
The Collins report examined the retirement costs of large cities and found that all were underfunded. Orlando and Fort Lauderdale's pension shortfalls each totaled 30 percent.
Another area of concern: health care benefits promised to retirees. Hollywood and Titusville are among the six cities with the highest percentage of unfunded benefits.
"When those obligations come due, they'll pull money out of the general fund,'' said David Matkin, lead researcher on the report.
That will mean less money for services that cities provide, such as garbage collection, police and fire protection and access to public parks.
The Collins report makes seven recommendations, including increasing the minimum retirement age to 60 and eliminating overtime and bonus pay when calculating pension benefits. The Florida Legislature should also consider repealing a law that requires local governments to make health care benefits available to retirees at the same rates established for working employees, the report said.
"The need to make decisions is now because the problem only gets worse as we wait,'' Matkin said. "We can still stop the bomb.''