Already facing a tight budget year, the City of Gainesville will have to pay an extra $2 million into its employee retirement plans in the 2011 fiscal year because the recession has hurt earnings on retirement investments that the
plans own.

The city’s contribution for the retirement plans will go from $2.6 million per year to $4.5 million, a 75 percent jump.
Investments in Gainesville’s General Employees Plan lost 16.4 percent in the 2008 fiscal year and 1.8 percent in 2009. The Consolidated Police Officers’ and Firefighters’ Plan lost 16.2 percent in the 2008 fiscal year and 3.8 percent in 2009.
In the past, Gainesville’s $400 million in retirement investments earned more than 10 percent annually, but declining earnings in the stock market prompted the city to lower its projected long-term return to 8.5 percent.

Things are much worse elsewhere in Florida, city officials point out. Even with the increase, Gainesville will be contributing 9 cents on the payroll dollar into the retirement plans for police and firefighters and 11 cents for all other employees. Some South Florida communities are now paying between 30 cents and 73 cents for each dollar in employee pay to support their retirement plans.
Such South Florida communities as Coral Springs, Hollywood, Miami Beach and West Palm Beach are spending heavily now to cover employee retirement plans because they raised benefits generously during the flush years when quickly appreciating property values made increases easy to swallow.
Gainesville made relatively moderate improvements in its plans, say officials, including a 2 percent annual cost-of-living increase in 1999 and a state-mandated increase in funding for police and fire pensions in 2006. Employees covered much of the 2006 adjustments.
“Our costs are going up, but not as much as some other communities,” says Gainesville Budget and Finance Director Mark Benton.

Better and Worse Than State System
Gainesville’s retirement system treats employees better than the Florida Retirement System in some ways and not as well in others.
The big benefit of being a city employee is that you can retire after working for the city for 20 years rather than waiting for the 30 years required under the Florida State Retirement System.

While Gainesville’s plan sounds generous, it comes at a price. In exchange for the 20-and-out program, regular city employees contribute 5 percent of their salary into the retirement system, and police and firefighters contribute 7.5 percent. Employees covered in the state system don’t contribute a dime.
Most units of government in Alachua County are members of the state retirement system, including the University of Florida, Alachua County School District and the small municipalities.
Even these units will be setting aside more money to cover retirement costs in the coming year. The state retirement system is requiring universities and state and local governments to raise their contribution per regular worker from 8.7 percent of salaries to 9.6 percent. For police and firefighters, the amount is increasing from 19.8 percent to 22.1 percent.
When Gainesville’s general workers retire they receive a pension equal to 2 percent per year of service, multiplied by the average of their last three year’s salaries. Multiplying the 2 percent by 20 years of service translates to a 40 percent payout. The multiplier for police and fire retirees is 2.625 percent per year of service, or a 52.5 percent payout for 20 years of service.
The average benefit for employees in the state retirement system is $16,843. The average for Gainesville is $20,930 for general employees, $28,013 for firefighters and $29,031 for police.
The city plans a thorough review of its retirement system next year. Among other issues, the review will consider if the employee contributions are high enough and if the 20-year-and-out plan is viable.