With a $3 billion budget shortfall looming, Florida’s pension fund and employee health benefits are shaping up as piñatas that state lawmakers will whack next spring – hoping they will yield millions of dollars in cost savings.
A Senate panel Thursday began weighing a wide range of approaches which will effectively set lawmakers at odds with police, fire and other public employees’ unions, whose members will bear the brunt of any changes.
“Ultimately, it’s a union negotiation, that’s really what this is,” said Sen. Jeremy Ring, D-Margate, chairman of the Senate’s Governmental Oversight and Accountability Committee.
The Florida Retirement System has 572,000 active employees and 319,000 retired members, with beneficiaries drawn from more than 900 state and local government employers. The $109 billion fund has had a rollercoaster run in the economy – with a projected $15 billion deficit eased by a 14 percent investment return last year, its best performance in 25 years, according to the fund’s overseers, the State Board of Administration.
But Florida’s system, with school board employees forming the largest share of participants, is among only seven state programs that don’t demand contributions from its members. That’s among the most lucrative proposals on the table – with a 5 percent employee paycheck contribution potentially pumping $1.3 billion into state coffers, analysts say.
While potentially shrinking the budget gap, that level of cash also would help Gov.-elect Rick Scott meet his campaign promise of cutting the property tax. Scott’s promise to lower the state’s required local effort by $1 – to an average $4.29 per $1,000 in assessed valuation – would pull $1.4 billion from the state treasury now going to funding schools.
The state’s pension fund played a central role in the governor’s race, with Scott running television ads blistering Democratic opponent Alex Sink, the state’s chief financial officer, for being a member of the SBA when investment losses mounted. But Ring said Thursday that campaign rhetoric ignored the pension system’s subtleties.
“This is a highly complex issue,” Ring said. “A lot of the campaign issues we heard – it’s just not that simple.”
Ring said he hoped to have legislation filed by Feb. 1 on revamping the pension plan, but said he expected to hold hearings by then which give public employers, workers, and retirees a chance to make their case. Ring said he was approaching the effort “unemotionally,” although the issue clearly can divide public employees and lawmakers.
Gov. Charlie Crist vetoed the only major pension fund measure approved by lawmakers last year – reducing by more than half the 6.5 percent interest rate earned by those in the state’s Deferred Retirement Option Program (DROP).
Overhauling health care coverage for state employees also could involve cost increases for a workforce that hasn’t received an across-the-board pay raise since Oct. 2006.
“We are doing our best to use our expertise to help legislators understand what these changes can mean to state workers,” said Doug Martin, with the American Federation of State, County and Municipal Employees, which represents state workers.
“While it may make headlines when there’s a report about someone retiring who makes $150,000-a-year, we’re talking mostly about people who retire with pensions that make $12,000-a-year,” Martin added.
City and county officials also warned that one approach they don’t want explored is turning to them for more money. They told the committee that state requirements that beefed-up police and firefighter benefits and expanded “special risk” classes have strained local government costs.
“That’s a huge chunk of change,” said Sarrah Caroll, lobbyist for the Florida Association of Counties.
Representatives of several law enforcement agencies attended Thursday’s hearing, but didn’t comment on the proposed changes. Ring said those on the employee side of the pension issue will be allowed to testify next month.
The state’s Department of Management Services reported this week that Florida’s state government payroll is 47 percent below the national average of $72-per-state resident. But the state also has an aging workforce, the report found, with 43 the average age of a worker in the Florida personnel system.
By John Kennedy
The News Service of Florida
