Battle lines drawn for state pension plan overhaul as bill aims to shut out new hires
"The one goal we have is to ensure we have a fiscally solvent pension plan," Sen. Ray Rodrigues says.
Police, firefighters and teachers on Thursday failed to get a Senate panel to defeat a proposal that would make the biggest change to the state retirement system for public sector employees in nearly 50 years.
The proposal would close the traditional pension plan to new hires and move them into a 401(k)-style investment plan, managed by the individual worker and not by the state.
And while the bill cleared the Senate Governmental Oversight and Accountability Committee on a 4-2 vote, one supporter — state Sen. Joe Gruters, R-Sarasota — said he will not vote again for the measure (SB 84) in its current form.
Previously:Florida lawmakers try again to cut new state workers off from pension plan
That's no problem for the sponsor, Estero Republican Ray Rodrigues: "This bill is how we will start. It is not necessarily how we will finish.”
The bill is fast tracked, having been assigned only two committees before it can be heard on the Senate floor, suggesting it is a priority of leadership.
Rodrigues, a first-term state senator, anticipated a grueling battle when he decided to rebuild the foundation of the over 1 million member pension fund, the fifth largest in the nation.
He commissioned an actuarial study of the Florida Retirement System (FRS) for lawmakers and stakeholders to review. The Milliman firm will report back in March.
"We will know more once we get the study back. We are going to follow the data. The data will guide the amendments to the bill," Rodrigues said.
His focus is the pension plan’s unfunded liability, the difference between the amount of money on hand and what is needed to pay promised benefits to current workers in the system were they all to retire today.
He sees the $36 billion shortfall, up 230% since 2009, as a threat to the state’s financial wellbeing.
His opponents, however, note that even with the shortfall the plan is funded at 82%; financial experts generally consider any pension fund at least 80% funded to be in good shape.
Still, the shortfall has had the attention of some lawmakers since 2012. They've made repeated attempts to reduce the unfunded liability with a reduction in the number of members in the pension program for state workers, school system employees and county workers.
Their plan now is for new hires to sign up for a 401(k)-type investment plan for their retirement. Retirees, labor unions, and Democrats, along with maverick Senate Republicans have blocked the efforts each time out of fear that fewer contributors to the pension would eventually bankrupt it.
They compared the unfunded liability to a home mortgage: One can’t pay it off all at once, but monthly payments are doable. And state economists calculate that at current funding levels the unfunded liability, largely a result of the Great Recession, will likely disappear in 30 years.
But Rodrigues fears that projection is based on overly optimistic predictions on returns on stock investments. With a current assumption of a 7% rate of return on investments, Rodrigues calculates the system has a one-in-three chance of hitting that mark.
"Unless we start getting better returns ... we will have not paid down that unfunded liability," Rodrigues said.
Rich Templin of the Florida AFL-CIO warned the panel that FRS recipients are a "major pillar" of the state economy, fearing it could weaken the fund.
He cited a study that pegs the state’s return on every dollar spent on FRS at more than $6, and the pensioners producing a statewide economic impact of $18.2 billion and an additional $2.7 billion in tax revenue.
“The biggest jeopardy to the long-term solvency of this fund is what the Legislature does,” Templin said.
Rodrigues replied: "The one goal we have is to ensure we have a fiscally solvent pension plan that will honor the obligations we’ve made to all the people who have enrolled in it."
The bill moves to the Appropriations Committee next month, with the formal start of the 2021 legislative session on March 2.
James Call is a member of the USA TODAY NETWORK-Florida Capital Bureau. He can be reached at jcall@tallahassee.com. Follow on him Twitter: @CallTallahassee
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