George Gibbs Center for Economic Prosperity

Ar⁠i⁠zona News: J. Rober⁠t⁠ McClure: Flor⁠i⁠da shouldn’⁠t⁠ delay f⁠i⁠x⁠i⁠ng pens⁠i⁠on problems

By: The James Madison Institute / 2014

By J. Robert McClureApril 25, 2014
Florida’s years-long battle over pension reform brings to mind two bits of wisdom: “The perfect is the enemy of the good,” and “All the momentum is on the side of inertia.”In a perfect world, we’d like to see public pensions totally privatized — but that’s a long-term solution. Meanwhile, shifting employees covered by the Florida Retirement System (FRS) to 401k-style investment plans would offer several advantages, including portability. In an era when workers often change jobs, having an account that belongs to you and your heirs is an advantage.Such a shift would also save money for the state, which has had to divert some $500 million a year from other needs to help make the FRS actuarially sound.Meanwhile, in many Florida cities that established their own pension plans rather than participate in the FRS, the situation is dire. It doesn’t help that the state tied city officials’ hands by mandating that certain revenues may be used only for enhancing pensions rather than covering their basic funding.If these cities’ employees were instead enrolled in 401(k)-style plans, the taxpayers’ costs would be lower and much more predictable in the long run, thereby helping the cities’ credit ratings and lowering their cost of borrowing.
In some cases, witnessing the municipal bankruptcies that have occurred across the country has been an eye-opening experience, sparking progress in the cities’ bargaining with their employees’ unions. However, it shouldn’t take a fiscal crisis to prompt the state and its troubled cities to make needed reforms.
Two constructive steps can be taken this year: For the state, county and school-district employees in the FRS, new hires should be automatically enrolled in 401(k)-style investment plans unless they choose otherwise. Legislators also should change the law so city officials may use the revenues earmarked for pensions to fund the plans rather than enhance the benefits.These actions alone won’t cure all of Florida’s pension woes, but at the least they would overcome inertia and put some momentum on the side of reforms that benefit our public servants — and the public they serve.Dr. J. Robert McClure is president and CEO of The James Madison Institute, a non-partisan think tank based in Tallahassee. Contact him at or follow him on Twitter at @DrBobMcClure.

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