Could Another Change To Florida's Pension System Result In Another Court Battle?

Jan 25, 2013

A legal battle between the state and employee unions has come to an end, after a Florida Supreme Court decision validated changes to Florida’s Retirement System. Now, as state lawmakers look to change the system again, many unions are coming out against a proposal to do away with the state’s pension plan and instead force future employees into a 401K type plan, which leaves some wondering is history bound to repeat itself?

“Anytime, you make major changes in someone’s pensions, you’re going to have lawsuits,” said University of South Florida Political Scientist Susan MacManus.

It took about two years for employee unions and the state to finish a fight over a law requiring public workers to contribute three-percent of their pay toward their retirement. But now, state lawmakers are looking to eliminate Florida’s pension plan, the most popular retirement option, University of South Florida Political Scientist Susan MacManus says the Legislature could have another fight on their hands.

“Well, I certainly expect there will be lawsuits about it. But, the question is the fiscal side of it: Do states have the legal constitutional right to protect the future finances of the state?  And, that’s going to be one of the key arguments I believe in this battle.”

In addition to getting rid of the pension plan, the proposal calls for new employees hired after January 1, 2014 to go into the state’s other retirement option, the investment 401K style plan.

And, some question the Legislature’s motivation.

“Everything we’ve heard indicates that the Florida Retirement System is one of the best retirement systems in the country," remarked Democratic Representative Irv Slosberg. "What exactly are we trying to fix here? What’s the problem?”

Republican Representative Jason Brodeur, who introduced the proposal, agrees that the state’s current retirement system is actuarially sound. But, he says that may not always be the case, adding that he’s looking at what adding more workers into the system could cost taxpayers in the future.

“This is an opportunity for us, while we’re still in decent shape—Remember, the actuaries said that in the next 10 to 15 years, it could get rough—We would rather make a small change to the aircraft now, than turn a speedboat 90 degrees in 10 years," said Brodeur.

House Speaker Will Weatherford has commissioned a study to look at its financial impact, and the House Government Operations Subcommittee is not expected to move forward on actual legislation before the results are in.

Meanwhile, Rich Templin of the AFL-CIO points to the last study commissioned by lawmakers when they last considered doing the same thing.

“In the first year, it’s going to cost $150 million, in the second year, $300 million, in the third year, $450 million and that trends continues until 2018. We are looking at potential billions of dollars in taxpayer revenue simply to fix a system where we’re still not sure what the problem with that system is.”

So far, only about 25-percent of about 600,000 employees have opted into the investment plan, which many unions say shows just how popular the current pension system already is.

Rowan Taylor, president of the Metro-Dade International Association of Firefighters says if lawmakers do away with the secure pension plan, it would expose many to the uncertainties of the marketplace contained in the state’s investment option. He says that could change the mindset of future employees:

“When we’re going forward into a fire to fight a fire, to put our lives on the line, you shouldn’t have to worry that ‘you know what? The market is doing really bad right now. My retirement account is not going to be able to help my family if something happens to me on this particular fire.’ That is the worst thing you would want your firefighters to be thinking about as they’re about to carry out their job duties,” exclaimed Taylor.

Others, like Matt Puckett with the Florida Police Benevolent Association say the change could affect current employees, like making them contribute more toward their retirement. He says it could also affect current retirees:

“Let’s not make them five, six, ten years from now get a letter from the state, saying ‘we can’t pay your retirement benefit anymore, buddy. You’re going to have to find a job because we can’t cover this stuff anymore.’ And, if we close the plan, and the plan begins to hemorrhage and we have a huge UAL—unfunded actuarial liability—that’s what’s going to happen," remarked Puckett. "They’re going to be told your dream is over.”

Despite employee unions’ reservations, all expressed a willingness to work with the committee to come to an agreement on the proposal. But, USF Political Scientist Susan MacManus says should they not come to a resolution, a lawsuit could be certain, but she’s not so sure how successful it could be.

“The question mark is since so many governments are already moving in this direction, is this so unusual that a lawsuit will prevail? And, of course, we won’t know that, until we see the particulars if lawsuits are filed,” said MacManus.

The draft proposal is modeled after something similar in Alaska and Michigan.

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