House Advances Scaled-Back Pension Reform Proposal, Despite Much Opposition
A House panel has agreed to advance its version of overhauling the Florida Retirement System, despite much opposition from public employees and Democrats. The newer pension reform proposal is similar to a plan that died in the Senate last year.
Originally, the House plan was similar to a proposal that already passed the Senate before the official start of Session. It eliminated the traditional pension plan for new state employees. Instead, recent hires would be shifted into a 401-K style plan called the investment plan or the new “cash balance” option, a hybrid of both the pension and investment retirement options. And, first responders, like firefighters and police officers, would have been exempt from the change.
House Speaker Will Weatherford has made pension reform one of his main priorities. He says the compromise that’s emerging from his meetings with the Senate look a lot like what the Senate proposed last year.
“So, we’re working on a middle ground and I believe we can get a pension bill done this year that will save tens of billions of dollars for Floridians,” said Weatherford, speaking recently to reporters.
And, Friday, the House State Affairs Committee under the direction of Bradenton Republican Representative Jim Boyd took up the new House proposal.
It keeps the traditional pension plan and the investment plan intact for most employees. But, it says all new employees hired on or after July 1st of next year will automatically default into the investment plan. The current default is the pension plan. New hires also have eight months to decide if they want to stay in the investment plan or switch to the pension plan. It does eliminate the pension plan for Senior Management and Elected Officials.
It also changes the amount of time an employee must stay in the pension plan in order to collect their benefits from eight to 10 years.
Lynda Russell with the Florida Education Association argued against that particular change. She says between low pay and a merit-based pay system with no funding, this serves only to give teachers two choices—both of them bad.
They can choose the defined benefit plan and we’re going to change the vesting to 10 years, so they risk becoming a donor if they don’t make it to 10 years, or they can choose the investment plan and commit themselves to a career serving our public schools with very little possibility of having a retirement with dignity. So, why do I say that? The investment plan over a 30-33-year career is probably going to provide that teacher with about 2/3 of the benefit she would get in a defined benefit plan,” said Russell.
And, former lawmaker Ron Silver agreed. He represents the Teamsters Union, which represents thousands of correctional officers. He says shifting new employees into the investment plan will weaken the actuarially-sound system and he used a biblical reference to make his point.
“I think you ought to adopt an 11th commandment, and that commandment should be no more changes to the Florida Retirement System. The Florida Retirement System today is an excellent system,” said Ron Silver.
Delray Beach Democratic Representative Kevin Rader agreed after hearing the testimony, saying it doesn’t make sense to make any more changes to system. And, to make his point, he quoted a well-known Republican.
“Florida’s pension plan is on a sound actuarial basis and one of the best managed plans in the country. –Rick Scott, Governor of the state of Florida in the 2014-2015 ‘It’s Your Money Tax Cut Budget.’ That’s what he had to say about the pension plan! So, what are we doing here year after year, hurting the state of Florida,” questioned Rader.
But, Sanford Republican Representative Jason Brodeur, who was charged with last year’s pension reform proposal, took issue with many of the speakers’ remarks.
“Let’s talk about what this bill does. Everyone person who came up here today talked about the life-long worker. You shouldn’t care if the vesting period is 25 years. You shouldn’t! Why if we’re moving it from 8 to 10 does it matter if the people that you represent are going to work their entire lives? Vesting at this point shouldn’t be an issue,” argued Brodeur.
Others voiced concerns that Republicans were focusing on how a system funded at 86-percent was bad for the Florida. But, Representative Boyd, the bill’s main sponsor, insisted this was not about the unfunded actuarial liability and more about a philosophical shift to bring the Florida Retirement System into the 21st century—which includes the investment plan part.
“Some of the comments were made that young employees were being thrown into the stock market. That’s not the case. They have options that they can be in, and they certainly can select the pension plan if that’s where they feel their investment opportunities would be better handled,” said Boyd.
The House State Affairs Committee agreed 11-6 to make the bill a proposed committee bill, and advance it onto the next stage. Meanwhile, the Senate could take its proposal up next week.
For more news updates, follow Sascha Cordner on Twitter: @SaschaCordner.