One of the priorities for Florida House Speaker Will Weatherford and Senate President Don Gaetz this spring? Pension reform.
That once-sacred promise to workers is on the chopping block. The two Republican leaders want to enroll all state workers hired after Jan. 1, 2014, in 401(k)-style investment plans.
It’s a move bound to anger government employees, especially on the heels of last month’s Florida Supreme Court ruling requiring that state workers start contributing to their own retirement.
It’s also the only responsible path to follow. As Florida continues to dig out of the worst economic period since the Depression, lawmakers have to look for any way they can to cut costs. And that includes pensions.
No doubt this will be quite a battle, reaching far beyond the halls of government in Tallahassee. The Florida Retirement System covered about 623,000 people in 2012, but only about a quarter of them worked at state agencies or state-run universities or colleges. Almost half come from school districts, about 23 percent work for counties and the rest work for municipalities or special taxing districts. Miami-Dade and Broward counties are part of the FRS.
Mr. Weatherford has called the $127-billion pension system a “ticking time bomb” that won’t be able to afford its obligations. Mr. Gaetz said it would be “morally wrong” to hold off on action and pass the problem to future legislators. Both say the time to make the change — and it is a major one — is now, before there’s a crisis and taxpayers have to pick up the tab to pay for the retirement of thousands of workers.
Pension proponents argue that Florida’s plan is solid, almost 87 percent funded as of 2012. True, but that’s dependent on maintaining similar levels of returns, which is unlikely. And other states such as Illinois have struggled to keep their pension plans afloat.
The Legislature began to tackle the problem in 2011. Pushed by Gov. Rick Scott, lawmakers approved a plan to require that state workers start contributing 3 percent of their pay toward their pensions, a requirement upheld by the Florida Supreme Court last month. Prior to this, state workers paid nothing toward their own retirement, in sharp contrast to the private sector, where pensions are rare and 401(k) plans — with substantial contributions by employees — have long been the rule.
Union leaders were upset about the 3 percent, saying it amounted to a pay cut and will make it harder to recruit and keep qualified professionals. Not likely. The decision puts Florida on par with 47 other states that require government workers to pay into their pensions. And it saves the state an estimated $861 million a year. That’s positive news for taxpayers.
Now lawmakers are trying to take a bigger step by ending the pension plan as an option for new employees. Those currently enrolled in the pension would remain in the plan, and that’s only fair.
A House panel, which unveiled the proposal Jan. 25, raised questions about the impact on taxpayers and incentives for workers to remain employed by the state. Those are good questions. Two studies on the impacts of the changes also must be completed before any decisions are made.
The thrust of the idea is undeniably in the right direction. Taxpayers can no longer afford such unsustainable benefits. And most workers coming from the private sector wouldn’t expect them. Many municipalities and counties are embarking on similar reforms.
Pension reform should be fair to workers — and taxpayers.