George Gibbs Center for Economic Prosperity

Grow⁠i⁠ng Pens⁠i⁠on L⁠i⁠ab⁠i⁠l⁠i⁠⁠t⁠⁠i⁠es Threa⁠t⁠en Mun⁠i⁠c⁠i⁠pal Budge⁠t⁠s

By: The James Madison Institute / January 10, 2011

The James Madison Institute

George Gibbs Center for Economic Prosperity

January 10, 2011

TALLAHASSEE-– An escalating problem nationwide, underfunded public pension liabilities are placing significant burdens on government budgets and limiting their ability to provide services. While this has not yet reached a crisis in most Florida municipalities, now is the time to address the potential problems before they get out of hand.“Pensions are a part of total employee compensation, and when governments negotiate compensation packages with their employees, there is always temptation on the part of government officials to promise increased compensation in the form of unfunded pension benefits, because by doing so they can push the present cost of government into the future.”  –Dr. Randall G. Holcombe, JMI Senior Fellow and DeVoe Moore Professor of Economics at Florida State UniversityIn JMI’s newly released Backgrounder, “Protecting Florida’s Cities through Pension Reform,” Dr. Holcombe analyzes the underlying causes of this developing crisis and makes recommendations for addressing the problem including two key components: Encourage local governments to place all new employees in 401K-style “defined contribution” pension plans rather than “defined benefit” plans and encourage current employees to convert.  Encourage municipalities that want to offer defined benefit plans to do so through the state government’s Florida Retirement System.“Underfunded public pension liabilities are economic sinkholes waiting to collapse. Florida has an opportunity to halt further fiscal erosion and potentially reverse some of the damage, but we must act now, before municipal budgets begin to significantly disintegrate.”  –Dr. J. Robert McClure III, JMI President and CEO