Saturday, June 3, 2017

Inflation and Legislative Budgeting

The 2017 Florida legislative session ended in May. It was an eventful 60 days this year, with significant discussion of workers' compensation litigation, filing and attorney fees. I summarized to the best of my ability in The 2017 Session is EndingTurn out the Lights the Session is Over, and The Return of Discretion, One Way or the Other. Shortly after the session ended, the Florida First District reversed the trial decision in Fee v. NCCI and OIR. And so the debate of workers' compensation may be over until 2018.

But there has been discussion about a special session. It is said that a session in June is possible. The Orlando Sentinel reports recently that medical marijuana is a topic being discussed. But, also in the limelight is the state budget, which was presented to the Governor last week. The Sentinel reports that the Governor was "under intense pressure" to veto all or some of the education budget. There have been news reports of other interest groups and their qualms about the 2017-18 budget. On June 2, 2017, the Naples Daily News announced a special session has been called for next Wednesday through Friday, to address budget compromises between the Legislature and Governor.

In May, the Palm Beach Post reported that the 2017-18 budget includes a pay raise for many state employees. It would take effect in October and 
for most workers, would provide a $1,400 raise for workers earning less than $40,000 a year and a $1,000 raise for state employees earning more than $40,000.
Not to look a gift horse in the mouth, I am thankful for this recognition of the job that is done by so many in this agency. Pay raises have been rare in recent years, but inflation has not. It is also worth mentioning that back in 2013 state employees began contributing to the pension system. That change reduced take-home pay by 3%. 

The budget does not treat all employees the same. It has a 5% increase for "Rank-and-file law enforcement officers," which is effective in July instead of October, and a 6% increase for assistant public defenders, also effective in October. These groups are certainly deserving of increased compensation, they are difficult occupations to be sure. 

But for all of the elected State Attorneys and Public Defenders, Supreme Court Justices, Appellate Judges, Circuit Judges, and County Judges there is a 10% pay increase included. In effect. every judge in the state would be paid significantly more under this budget except those judges in the Executive Branch. Judges of Compensation Claims and Administrative Law Judges in the Division of Administrative Hearings would instead receive the same $1,000 raise discussed above. For clarity, I repeat that every judge in the state except the Division of Administrative Hearings judges will receive a 10% pay increase. 

In the early 1990s there was a provision in Chapter 440, F.S. that set the salary for Judges of Compensation Claims. It did so by stating that effective in 1989 JCCs would be paid "$4,000 less than" the salary of "a circuit judge." Section 440.45(4), F.S. (1991). That requirement, called a "tie-in," was removed in 1994. In the 1989-90 fiscal year, Florida trial judge salaries were: Circuit Judges $84,359; County Judges $75,345, and JCCs $79,359 (I know that looks a lot more like a $5,000 difference than a $4,000 difference).

What has happened in the decades since that time has diminished the salary of a Florida JCC markedly. If that 1989-90 JCC salary had kept pace with inflation, the JCC salary in 2016-17 would be $151,267. But, the actual salary is $123,564 (to increase to $124,564 next year under the budget as passed). That is a difference of $27,703. JCC's effective salaries have decreased 18% in the last 23 years. 

Judges in the constitutional court system have better kept pace with inflation. The 1989 Circuit Judge salary of $84,359, adjusted for inflation would have been $160,797. That is considerably more than the Circuit Judges were paid in January 2017 ($146,080), but it is very close to what they will be paid after their October 2017 pay raise ($160,688). The 1989 County Judge salary of $75,345, adjusted for inflation would have been $143,616 in 2017. That is less than the County Judges actually earned in 2017, which was $138,020. It is fair to say that Circuit Judges have come close to remaining steady with inflation and County Judges have done better. 

This figure illustrates the effect from elimination of the "tie in" for JCC salaries. JCC earnings have stagnated, and inflation has taken its toll. In 1989-90, a JCC earned $5,000 less than a Circuit Judge, and in 2017-18 the JCC will earn $36,124 less. In 1989-90, a JCC earned $4,000 more than a County Judge, and in 2017-18 will earn $27,258 less. JCC salaries have been flat, or very close to it, for ten years. 

And, these figures only address the compensation for Judges of Compensation Claims. The current methodology for calculating pension benefits is somewhat complex, based upon years of service and pay figures. There is a multiplier figure that is also included in that calculation, and JCCs pensions are based on 2% of their earnings, while other judge's are based on 3%. It is another example of inequity in the compensation of Executive Branch judges. 

In 2016, The Florida Bar produced a detailed study of the practice of law in Florida. According to its findings, a "partner, shareholder, or member" of a law firm had a mean (sum of all respondents, divided by volume of respondents) between $130,773 and $202,397. depending on region of the state (the average of these two averages is $166,585). The JCCs in Florida are not earning what the "average" or "mean" practicing law partner earns ($166,585). In fact, they are earning $43,021 less. According to an American Bar Association study, they are not earning the median starting pay for associate attorneys in the United States, $135,000.00, though that figure includes many very expensive markets. 

The JCCs and ALJs are exceptional people. I have been privileged to serve with many over the years. I know their work ethic, intelligence, dedication, and spirit. I have no doubt that they could earn those averages and more. I also know that they do not serve for financial gain. They are public servants who dedicate themselves to a better Florida. Though they are driven by motivations beyond money, it it would make sense to recognize their efforts. 

A 10% pay raise for the JCCs would increase pay from $123,564 to $135,920. That would be nowhere near the $151,267 that the 1989-90 salary would be if it had kept pace with inflation. That would be nowhere near the $156,688 that JCCs would earn if the "tie in" had been left in place. In fact, that would barely bring the JCCs above the lowest average of "partner, shareholder, or member" the Bar found in 2016 ($130,773). 

But, it would certainly say a great deal about the value seen in the dedicated and devoted public servants that are Judges of Compensation Claims and Administrative Law Judges. Even better would be a restoration of a "tie in," so that such a disparity does not creep back in over future decades. But, at a minimum, the State of Florida should not treat the JCCs and ALJs differently than all the other judges in Florida. 

And, the legislature would not need tax revenue to make the change. The Florida Office of Judges of Compensation Claims does not use tax money, any tax money. All of the funding for this Office comes from the Workers' Compensation Administrative Trust Fund, which in turn is funded by assessments on the workers' compensation industry whose disputes the JCCs adjudicate. Providing the JCCs with a 10% raise commensurate with other Florida Judges would cost less than $500,000. Restoring the JCCs to the "tie in" range of the past (Circuit less $4,000) would require about $1 million; none of it tax dollars, all of it long overdue. And either figure would have minimal impact on either the Trust Fund balance or the assessments needed to maintain it. 

This year or next, special session or regular, the subject of compensation for these public servants should be a priority. There will be those who argue that others in the executive branch (attorneys, mediators, clerks and more) should likewise not be ignored. There are likewise good arguments for those employees, and that discussion is worthy as well.