JMI Makes the Case for Public Pension Reform

On Tuesday, the James Madison Institute (JMI) released a study entitled Florida Retirement System Reform: Why Now?which argues that the current pension reforms in the Legislature are needed.

The time to look at reform is not after the system is broken, but before it runs into problems. Weve heard that many times, but thats because its just good common sense, said Dr. Bob McClure, the president and CEO of JMI. We trust that the Florida Legislature will heavily consider problems that have plagued other pension plans and be proactive to design a system today that will not run into those same problems in the future.

The study argues moving the Florida Retirement System in line with best practices from the private sector, including relying on defined contributions, will ensure the systems stability.

Many private companies offer federally-insured defined contribution pension plans. There is no reason for the FRS to manage those accounts, said Dr. Randall Holcombe, a senior fellow at JMI and economics professor at Florida State University and the author of the study. Workers could choose the firm that would manage their pensions, and typically, such plans offer workers a variety of investment alternatives for their pension plans. This would put both Florida and the states public employees in a better position without the current risk of compounding unfunded liabilities that take funding away from important public services.

The study can be read here.