Tavares, FL - June 28, 2011 - A recent Teacher's union lawsuit might increase local Lake County and School District budget shortfalls by an estimated $6-9 million dollars.
The Florida Teacher's Union just sued Florida State to halt the planned 3% pension contribution by all employees, which is required by a new law initiated by Florida Governor Rick Scott. Previously, that expense was paid by the employer, such as local County governments and School Districts. As a consequence, they planned to save the estimated $6-9-million because employees would be paying the contribution, and have already factored the savings into budget plans.
Now those savings might vaporize.
HERE is the latest news on the lawsuit - court date set for October.
I estimate that the lawsuit, if successful, could increase budget shortfalls for the Lake County school district by $3-4 million and Lake County government (including Constitutional officers) by an estimated $3-5-million (they have fewer employees). I use estimates because I don't have the actual dollar effects, but the lawsuit causes a number of "dominos" to fall in local (as well as State) government budget plans and could significantly raise current budget shortfall predictions. The School District made it extremely hard to understand the details of recent wage increases and offsetting pension savings, but their public information officer said they will save about $4-million.
The Florida Education Association filed a lawsuit HERE on June 20 in Circuit Court in Tallahassee seeking to stop the 3 percent pay cut on teachers imposed by the Florida Legislature and signed by Gov. Rick Scott. Other employee groups may be joining in the lawsuit.
According to the FEA news release, they want the collected money to be set aside in a separate account until the lawsuit is settled, but that idea was killed by the judge as described in the first article link above.
This could completely screw up the budgeting for Lake County and other agencies who were relying on the 3% savings to help balance budget shortfalls, and could result in more shortfalls. For instance, the Lake County Sheriff recently said he could reduce his budget by $2-million, but that was mostly due to predicted savings from not having to pay the pension plan the 3% of wages that employees were recently required to do.
A recent presentation at the Lake County School Board meeting showed they had a $22-million shortfall. At the Lake County board, their shortfall was predicted to be around $16-million. The School district gave away most of the pension savings by increasing employee wages, which were magically signed just before the FEA announced their lawsuit. The County was planning on using the pension savings to reduce their shortfall, including the Sherriff's $2-million.
Why will this lawsuite cause shortfalls to increase? Here is our speculation on how the lawsuit will damage local Lake County agencies like the School District and County Government?
1. If the 3% contributions from employees are started today, July 1 (which did happen), I figure the agencies MAY STILL have to pony up the 3% just like they did in the past if the unions win the lawsuit. However, one local official said that any losses would have to be borne by the State, not the local agencies, because the STATE reduced state FTE funds to school districts to balance the STATE budget by taking into account the 3% contributions. Another official says "what can we do...we will have to wait, and if the unions win, take it out of reserves."
2. Florida government agencies other than school districts (like the Lake County government) should do legal research to see if the FEA lawsuit results would be applied to their employees, and if so, they will have to take actions like below. It would mean, for instance, that the total Lake County government might LOSE a planned $3-5-million (my estimate) of predicted savings to offset budget shortfalls and will have to plan for it.
3. If the union LOSES, then the funds taken from employees for contributions to the pension fund will stay there, and employees will continue contributing 3% of their wages to the State run pension fund. The current budget projections using pension savings will continue as planned.
BUT,
4. If the union wins, the teachers (and we assume many or all other government employees) will get their 3% withholding back, plus interest (or some type of credit). Then who will be responsible to replace the 3% withholding? The State or the local government employers? That means one of them will have to fund the 3% shortage, retroactive to TODAY, July 1, or at the time the decision is announced. That means the State or agencies will have to setaside the 3% in reserves until the court decision, or as mentioned above, take it out of reserves. That means that predicted SAVINGS from having employees pay the 3% instead of the employer will vaporize. That means that the Lake County School District REALLY needs to reconsider the recent wage increase that they gave the teachers, SEIU workers and administrators because the pension savings will go away. I figure that will be $3-4-million in added budget shortfalls if not addressed. (I can't get any real numbers from the School District on details of the wage negotiations, so I have to guess). I couldn't help notice the Lake County School District unions negotiated wage increases that were approved JUST before the lawsuit was announced.
Conclusion:
Elected officials and managers of local Lake County government agencies, including Lake County and the Lake County School District better make sure they have the legal research and plans to cover their possible INCREASED budget shortfalls (and their credibility) if the Union lawsuit wins. They better have reserves setaside to cover a possible loss, AND they should seriously consider halting ANY wage or benefit increases granted until the matter is settled. If the agencies pay wage increases which we think were partially done to offset the 3% pension contribution cost, they won't be able to get them back, and your fiscal situation will be much worse than it is now.
Caveat: My purpose is to bring out possibilities and ensure the local government officials plan for the possible losses if the FEA lawsuit is successful. I understand that the Lake County School District CFO plans to present alternative strategies to the Board at an upcoming meeting. I don't know about the County Board.
Vance Jochim
http://feaweb.org/fea-3-percent-lawsuit
