Floridas taxpayer-funded public pension plans seem to be a pretty good deal as long as youre not the one footing the bill.
The U.S. Census Bureau reports there are 303 so-called defined-benefit plans offered to Floridas state and local government employees.
The plans dish out lifetime payments after vested public workers retire. The payments are guaranteed, based on salary and years of service, and are floated by taxpayers' public employees kicking in 3 percent from their salaries.
In the event a plan goes underfunded, taxpayers are on the hook.
Due to a drop in the stock market the last few years and pension holidays taken by the state of Florida, the state Legislature paid hundreds of millions of dollars this year over and beyond what was accrued by this years public employees, said Robert Weissert, chief research officer at Florida TaxWatch, a Tallahassee-based economic research institute.
And that just applies to the state plan, the Florida Retirement System, which is estimated at 87 percent funded. Or, depending on how one views it, $18 billion short of fully funded. The FRS includes state workers, all but one of Floridas 67 counties, and the states school districts. Duval County and municipalities around the state operate their own pension plans.
The U.S. Government Accountability Office says government pension plans at 80 percent funded or better are on sound footing, even if theyre expensive to maintain.
Floridas municipal pensions, which make up the vast majority of the states defined-benefit plans, are in much worse shape.
The Leroy Collins Institute, a state-policy organization located at Florida State University, reports that only 26 percent of the states 254 municipal pensions are funded above the 80 percent threshold. More than 60 plans are less than 60 percent funded.
The Collins Institute attributes the underfunding primarily to higher pension costs and insufficient contributions.
In its report "Doing It Right," the organization recommends five ways to reverse the 10-year trend of Floridas defined-benefit municipal pensions coming up short:
- Funding annual pension contributions at 100 percent, or more.
- Requiring that employees share in the cost of their pension plans.
- Limiting the size of cost-of-living adjustments.
- Limiting the ability of employees to engage in pension spiking, or artificially inflating their pay right before they retire.
- Setting realistic assumptions as to what a pension will earn.
But thats assuming guaranteed public pensions are still worth having around.
Florida TaxWatch recommends shifting the FRS pension system, the states largest, to a 401(k)-style defined-contribution plan versus the defined-benefit system, which is based on a complicated formula of the number of years worked and other factors.
TaxWatch says a defined-contribution plan shifts a significant burden off the taxpayer, while offering benefits to workers that include compounding interest, choice of investment vehicles, the ability to transfer accrued retirement between jobs and predictable government budgeting.
House Speaker Will Weatherford championed a failed effort to reform the FRS system earlier this year, but momentum may be building for the coming legislative session as taxpayers consider their own retirement options.
There are very few private-sector employees that have access to defined-benefit plans, Weissert said. Taxpayers are funding public employees for a type of retirement plan thats not even offered to them.
Contact William Patrick at firstname.lastname@example.org or follow Florida Watchdog on Twitter at @watchdogfla.