Miami ponders fallout of high court ruling on police pay cuts

Miami’s police union says taxpayers owe more than $100 million in back-pay and pension costs after the state’s high court ruled against the city in a lawsuit over steep cuts imposed seven years ago during a financial crisis.

Speaking Wednesday during a meeting of the board that governs Miami’s police and firefighters’ retirement trust, Fraternal Order of Police president Lt. Javier Ortiz said the union’s initial estimates show the city is on the hook for $101 million in wages owed to officers whose salaries were unilaterally slashed in 2010. The impact to pensions will cost the city another $40 million in money owed the retirement trust, he said.

“We’re ready for the fight,” said Ortiz, who prefers to negotiate a compromise with Miami’s commissioners. “We’re hoping that our elected officials will make the right move, make the right decision, and stop listening to the seven years of poor legal advice they’ve been receiving.”

The ruling, which becomes final next Friday unless the city files for rehearing, is also expected to be applied to a parallel lawsuit by the city’s firefighters contesting their own pay and pension reductions.

For now, though, there’s no consensus on the financial consequences, or even on whether there will be any.

Miami’s budget director, who attended the meeting, said “it’s too soon to tell” what if anything last week’s ruling by the Florida Supreme Court will cost the city. City attorney Victoria Méndez plans to meet Thursday with city commissioners to discuss the high court’s decision, which determined that an administrative law judge used faulty reasoning when upholding the austerity measures imposed on Miami’s police under the state’s “financial urgency” law.

Méndez did not respond to an interview request. She previously said she remained confident that the city would prevail when the case returned to the lower courts to be reconsidered under the Supreme Court’s guidance.

But the pension fund’s board is clearly concerned that the union’s victory will increase the cost of keeping the retirement trust afloat, a price already estimated to increase to $51.6 million this year regardless of last week’s court ruling. Board members directed an actuary Wednesday to determine how much more the city will have to kick in if the steep pay cuts and pension reforms from 2010, including a $100,000 pension cap and increased member contributions, are reversed.

“It’s going to cost them something. Somewhere between zero and a lot,” said pension fund attorney Robert Klausner. “And I think it’s going to be closer to a lot than to zero.”

In defined benefit pension systems like Miami’s, annual benefits are calculated based off a formula that factors in years of service and employees’ highest-paid years. Actuaries, meanwhile, project costs out over several years and use estimates on salary increases and market performance to help determine how much money taxpayers must kick in to keep the fund sound.

For that reason, wide discrepancies — like a sudden reversal in pay cuts and employee pension contributions — can throw a pension system out of whack. During the late 2000s, back-loaded contracts given to Miami’s police and firefighters in 2007 were assigned some of the blame for the spiraling pension costs that threatened to pull the city under during the recession in the late 2000s.

This time around, though, the unions are in the driver’s seat and the city on the defense, although Klausner told board members Wednesday that there’s nothing from the courts dictating how the city of Miami should implement the ruling.

There’s also a question of how bargaining agreements negotiated between city officials and their unions in the years after the controversial cuts in 2010 impact the consequences of last week’s ruling, and whether they cap the city’s liability — something the pension board asked its actuary to consider Wednesday.

Commissioner Francis Suarez, who attended Wednesday’s board meeting, described reactions to the ruling as being “very raw.”

For now, union leaders say they’re somewhat optimistic that they’ll be able to work things out.

Firefighter president Freddy Delgado, who has paused labor negotiations until there’s more clarity on the consequences of the ruling, said “we have to figure a way out of this that won’t cripple the city, and will make the police and firefighters whole.

“We’ve done this before.”

This story was originally published March 8, 2017 at 6:42 PM with the headline "Miami ponders fallout of high court ruling on police pay cuts."