Gov. Rick Scott urged the Legislature Monday to scrap its plans for reforming Florida's pension system for state workers in favor of his solution.
"I don't believe they go far enough," Scott said of plans in the House and Senate that require state workers to contribute to their pensions.
The House calls for a 3 percent flat contribution rate from state employees, and the Senate includes a tiered approach, with a 2 percent rate for salaries under $25,000, a 4 percent rate up to $50,000, and a 6 percent rate over $50,000. Both plans fall short of Scott's call for a 5 percent flat contribution rate for all members of the Florida Retirement System.
Scott lobbied for his approach Monday, touting the formation of a new group -- Floridians for Sustainable Pensions -- made up of business interests and fiscal conservative activist groups to advocate for more strident pension reforms.
I am hopeful we will continue to look for ways to improve the system next legislative session. I am confident that FSP will make a difference in those discussions by their ability to ensure Floridians have an organized and research-backed voice to urge action, Scott said.
One of the keys to his pension plan, Scott said, was closing the defined benefit plan to new employees, something that is not included in the House and Senate plans. Instead, new employees would join a defined contribution plan, similar to a 401(k) plan.
"The right thing to do is exactly what the private sector is doing, which is moving all the new employees to a defined contribution plan so you know exactly how much you're paying out," Scott said.
There are 655,000 members in the FRS, nearly half of which are school district employees. Andy Ford, president of the Florida Education Association, the state's largest teachers' union, said the pension reforms, combined with the merit pay bill that Scott signed into law last month which ties teacher pay to the performance of their students, will push teachers away from the state.
"I don't know why anyone would come to Florida to teach after these reforms," Ford said.
Florida's $3.8 billion budget deficit helped to spur the call for pension reforms, but Scott said that the current system is unsustainable. The FRS is currently funded at 87 percent of its liabilities.
Some legislators, like Sen. Jim Norman, R-Tampa, favored ending the contribution requirements from state workers after the FRS becomes fully funded, but others, like Sen. Jeremy Ring, D-Margate, cited the need to balance the budget as the main need for reform during the Senate's pension reform talks last month.
The state pension system, however, is not the only underfunded plan plaguing the state. Several large municipalities throughout the state have pension plans that are woefully underfunded.
In 2006, 11 of the states 25 largest pension plans were funded at 80 percent or less of their liabilities. By 2009, after the drastic effects of the recession and a plummeting stock market cut down pension investments throughout the country, that number had climbed to 19 out of the top 30 pension plans, according to the LeRoy Collins Institute.
FSP understands that our government employees, particularly our first responders, perform a great service for Floridians. However, if we continue down the path of underfunded pensions, these government employees may be confronted with job cuts, wind up with unstable retirements or no pension at all, said Dr. Robert McClure, president and CEO of the James Madison Institute, a Tallahassee-based conservative think tank and FSP member.
Budget talks are slated for later this week between the House and Senate, which passed their competing budgets last week. In a joint TV interview Monday, House Speaker Dean Cannon, R-Winter Park, and Senate President Mike Haridopolos, R-Merritt Island, said they will work out the differences between their budgets and have a good working relationship with Scott.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
