A Florida House Budget panel has moved a bill forward that would eliminate the state’s pension plan for all new employees hired at the beginning of next year, despite several objections from opponents, like unions and Democratic lawmakers. They say the Republican-led Legislature is rushing a proposal that is not fully finished and doesn’t have all the necessary information about its impact.
It’s a priority of Florida House Speaker Will Weatherford, which he stressed in his opening remarks on the first day of the Florida Legislative Session.
“We will spend 500 million dollars of general revenue just to shore up our pension fund. That’s above and beyond what we contribute to state employees’ retirement. And it’s just the down payment. We’re going to have to keep writing that half billion-dollar check for another 28 years –to keep our so called ‘great pension system’ afloat. It’s not sustainable. It’s not rational. And it’s not keeping with the times we are living in,” said Weatherford.
So, now the House is moving forward on a bill that was put on hold about a month ago, until a study was finished to identify the financial impacts it would have on the state.
The bill essentially forces all new employees hired on or after the first of next year into one retirement option, the state’s investment plan, a 401K type plan—thus eliminating Florida’s most popular retirement option, the state’s pension plan.
The House Government Operations Subcommittee sponsored the bill, and its chair is Representative Jason Brodeur.
“Are we reducing the state’s risk immediately? Yes! This bill reduces the state’s risk, saves the taxpayers a great deal of money, keeps every promise made to every current state worker, and offers robust benefits for our future state workers,” said Brodeur.
It’s estimated that there will be no cost to the state in its first year, and a little over 2-million dollars a year later. But, then, the state is expected to start saving billions of dollars—close to 10 billion by the year 2043.
But, Friday, during the House Appropriations Committee, a representative from Milliman, the firm that provided the analysis, was questioned on its credibility, after recently admitting mistakes were made in the first analysis they had provided.
“I apologize for that study. It was not up to our standards,” said Milliman's lead actuary Robert Dezube.
Using a football analogy, Dezube, says that should in no way reflect their work moving forward.
“If you play football, and you’re a running back, you’re going to occasionally fumble the ball. But, what’s important is what you do after the fumble,” Dezube added.
But, several Democratic lawmakers fired back with an analogy of their own, saying that the study could not be trusted. House Democratic Leader Perry Thurston says lawmakers are pushing a bill based on faulty information that may have a negative impact on all state employees and taxpayers.
“Well, if you continue to fumble that football, you’ll lose that game. And, if you fumble more, the coach will lose his job. So, there’s a lot more consequences to fumbling. But, the sad part is we’re not talking about a game. We’re talking about some of our residents who will be at the most critical stage of their lives when they feel the impact of some of the decision. With the information that we have, I cannot in good conscience vote for this bill,” said Thurston.
Rich Templin of the AFL-CIO, another opponent of the bill, pointed to studies done in other states by multiple firms, including Milliman, that analyzed retirement models similar to Florida's. He says they show the exact opposite of the current Milliman study.
“In Arizona, California—that was a Milliman study actually—Colorado, Kansas, Kentucky, Minnesota, Nevada, New Hampshire, New Mexico, New York, and Wisconsin," listed Templin.
"In each one of those states, the exact question posed before you today was raised, was researched, and analyzed by various different actuarial and research firms. In every single one of those cases, the conclusion was closing a functioning defined benefit plan and shifting new employees into a defined contribution plan provided less retirement security at greater expense to the taxpayers than leaving the defined plan open.”
Another argument many opponents use when discussing the pension system is that it’s one of the top funded pension systems not just in the nation, but around the world. It’s also an argument that backers of the bill acknowledge. But, Republican Representative Steve Precourt pointed to other states who he says are now struggling to keep their pensions in place.
“They thought their pensions were healthy at one time too. They thought just like we did that okay, we’re good enough, let’s trust it, let’s have a little faith, but something happened in those states as well and now they’re making painful cuts they’re raising taxes, they’re throwing good money after bad, to pay for their own broken Ponzi schemes. I don’t think we should do that. I think we should be proactive. We should address this issue now,” said Precourt.
The bill passed along party lines 12 to 9 with Democrats opposed in the House Appropriations Committee. It now heads to its last committee stop before the House floor, the House State Affairs Committee.
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