The Florida Retirement System is considered a national model as one of the best funded pensions with an almost 90 percent funding rate and $125 billion in assets. Market downturns of 2003 and 2008 affected pensions, but the bigger problem was created by employers who neglected to pay their required contribution when the market provided returns better than 15 to 18 percent. At the time the only revenues invested were employee payroll deductions. Government entities enjoyed contribution holidays. The spin now is pensions are unsustainable and public workers created the problem.
The Center for American Progress Action Fund in 2012 issued the whitepaper, In defense of Defined-Benefit Pensions. The research states, “Eliminating defined-benefit pension plans and switching to 401(k)-style funded contributions plan will not save money because dollar for dollar defined benefit plans are much more efficient.”
Terminating pensions for 401(k)s is very common in the private sector. The reason: They all had large aging workforces with tens of thousands of employees with 20-plus years on the job, similar to the state and municipalities. And just like the state, private companies had more than enough money in their pensions, but didn’t want to use pension assets for their employees. Similar to the state’s proposal, they closed pensions for 401(k)s.
Floridians have all heard that government should be run like a business, and this is one case where it shouldn’t be. Not only is it unfair to rob the FRS, but unlike business, government cannot increase sales or produce more widgets. Government’s main revenue source is taxes and when you limit revenue, you create a ceiling on income. If a CEO were to cap revenue, shareholders would remove him immediately.
Politicians cap revenue by providing tax cuts. This isn’t a call for increasing taxes because that would affect everyone statewide, but enough is enough. Continuously reducing government’s sole revenue source by providing more tax cuts during a recession makes no sense. Floridians should ask Tallahassee to concentrate on real issues: Citizens Property Insurance rates, correcting the November 2012 election fiasco and creating sustainable, true wage-earning jobs.
We should be echoing the cry, “Let’s get to work!” in Tallahassee so real issues are addressed.
David Perez, president, South Florida Council of Fire Fighters, Miami