George Gibbs Center for Economic Prosperity

Tampa Tr⁠i⁠bune: Flor⁠i⁠da lawmakers cons⁠i⁠der duel⁠i⁠ng pens⁠i⁠on proposals

By: The James Madison Institute / 2013

TALLAHASSEE –House Speaker Will Weatherford did not mince words in explaining why he has made overhauling the Florida Retirement System his top priority of the 2013 legislative session.”You can’t be a free and prosperous state if you have a pension fund that’s bankrupting your state,” the Wesley Chapel Republican said at a banquet hosted by the conservative James Madison Institute.He spoke on the eve of a House committee vote for his plan to make newly hired government employees sign up for a 401(k)-style investment plan, rather than traditional monthly benefit pensions. The bill cleared its last committee hurdle in a straight party-line vote and is ready for House floor action this week.But it is on a collision course with the Senate, where Sen. Wilton Simpson, R-New Port Richey, has an alternative version that would let public employees continue taking the “defined benefit” option – but would give them financial incentives for opting into the riskier “defined contribution” plan.Senate President Don Gaetz, R-Niceville, supports Simpson’s plan, which means the issue will probably percolate for a month or so and be resolved in House-Senate negotiations as budget work is finished in the final days of the session, set to end May 3.Rep. Jason Brodeur, R-Sanford, sponsored the Weatherford plan, which is what actuaries call a “soft freeze” on the Florida Retirement System. Instead of shifting everyone to the investment plan, it would close the FRS to state, county, school board and municipal employees hired after next Jan. 1, requiring them to take the investment plan. The state has offered the optional plan for several years, but very few employees have opted into it.Serving about 632,000 active employees and 135,000 retirees, the $126 billion FRS has a ratio of funding to liabilities of 87 percent. Financial analysts consider anything more than 80 percent healthy, but Weatherford points out that the state is spending about $500 million a year to maintain the FRS – money the Republicans who run the Legislature would rather use for schools, roads, social services and other expenses.And there’s the rub, says Sen. Jeremy Ring, D-Margate, who heads the Senate Governmental Oversight and Accountability Committee. That panel unanimously approved Simpson’s bill last week, at the same time the House panel was clearing Brodeur’s bill for floor debate.”We have this stable retirement system, not built on stilts. It’s built on concrete,” said Ring. “It costs a lot of money for the state every year. Although we have a very stable pension fund that’s not going away tomorrow, it does become somewhat of a general revenue issue – upward of $500 million, which is money for education, money for roads, money for the rest of the budget.”Simpson’s bill would require all elected officials and senior management officials hired after Jan. 1, 2014, to join the investment plan. It would also reduce the FRS contribution rate from 3 percent of salary to 2 percent for employees in the investment plan. Simpson’s bill would also increase the “vesting” period – the minimum time of service for any pension– from eight years to 10 in the “defined benefit” play, while investment-plan members would get vested after one year.Currently, new employees who don’t make a pension choice are placed in the traditional FRS plan. Under Simpson’s bill, they would “default” to the investment option.Rather than money, Simpson would rather talk about options – especially for young employees who aren’t usually thinking about their golden years yet, but might like the portability of the investment fund.”They might change jobs eight or 10 times in during their careers. This gives them an opportunity and an asset to take with them, much more quickly. I think it’s about choice,” Simpson said after the Senate committee approved his bill.Public employee unions vigorously oppose the Weatherford approach and reluctantly support the Simpson bill. When the speaker of the House wants something, it usually gets done – at least partly – so Democrats and their labor allies see the futility of trying to kill both bills.Simpson said he has had no indication whether Gov. Rick Scott will support his version of pension changes. Scott persuaded the Legislature in 2011 to impose the 3 percent pension fee on public employees, which was upheld last year by the Florida Supreme Court.