Tax & Accounting Blog

New Florida Law Allows Counties to Impose Sales Tax to Fund Public Pensions

Blog, Indirect Tax, ONESOURCE, Sales and Use Tax April 7, 2016

On March 25, 2016, Florida Governor Rick Scott approved HB 1297, a bill allowing counties to impose a discretionary sales surtax to fund underfunded public pension plans. The bill was the result of intense lobbying by the City of Jacksonville, which is consolidated with Duval County. According to the Florida Times-Union, Jacksonville pushed for approval of the new law in an attempt to address its $2.87 billion public pension debt. Although the city was successful in getting the state to allow counties to impose such a tax, it still has to convince Duval County voters, who will have the final say later this year on whether to actually impose the new tax.

Florida allows counties to levy sales taxes to raise revenue only for certain things, including schools, fire departments, public transportation and, now, public pension plans. However, before a county may levy a tax to fund public pension plans, several conditions must be met, one of which is that the pension plan is below 80% of actuarial funding. With such conditions, the law aims to ensure that only truly underfunded public pension plans will be eligible to be bailed out with a discretionary sales surtax. However, Rep. John Tobia, R-Melbourne Beach, voiced concerns that the bill could nonetheless create a slippery slope:

Tobia also warned that Jacksonville might be a template for other local governments.

“What this bill does is it opens it up to other cities across the state. … This will happen to Orlando. This will happen to Miami. This will happen to Tampa,” Tobia said.

If Duval County voters approve the new sales tax, they will join the company of Cook County, Illinois and Springfield, Missouri, where voters have already approved sales taxes to help fund public pension plans.