AFL-CIO Questions Pension Reform

By: Kathleen Haugney, The News Service of Florida Email
By: Kathleen Haugney, The News Service of Florida Email

Tallahassee, FL - Florida lawmakers are intent on revamping state and municipal pension systems hoping for millions of dollars in savings, but some union members say they aren’t sure it’s a system needing a fix.

The Florida AFL-CIO, at a press conference Monday, cautioned that talk that states and cities would go bankrupt funding pensions was a “myth” and that hundreds of thousands of families could be affected by alterations.

“There are whispers of radically altering a system that evidence shows is actually functioning quite well,” said AFL-CIO lobbyist Rich Templin.

The state’s $124 billion Florida Retirement System is one of seven state pensions in the country that does not require employee pension contributions and has over the years been either fully funded or nearly fully funded, even as the state and national economy tanked.

But lawmakers and Gov. Rick Scott have questioned the pension’s future viability and promised to look at a variety of reform options that could save the state and local governments money.

A January 2010 look at the pension system by the Legislature’s Office of Program Policy Analysis and Government Accountability found that if lawmakers changed the FRS to a system where employees contributed 5 percent of their salaries, the state could save more than $1.3 billion. That’s attractive to a Legislature looking for change underneath the seat cushions as it tries to close a $3.5 billion budget shortfall and cut taxes, as Scott has proposed to do.

Scott promised to lower taxes to an average of $4.29 per $1,000 in assessed property values, a plan that would pull $1.4 billion from the state coffers that now go to public school budgets.

The Senate has begun to hold committee meetings on potential legislation that would make changes to the fund.

“Reform is coming,” said Sen. Jeremy Ring, D-Margate. “Now, in terms of what reform looks like, that remains to be seen.”

Ring held his first committee meeting on pension reform last month and is slated to hold another one this week. He hopes to produce a bill by February, but is still developing a plan and waiting for reports from various stakeholders before he releases any formal draft.

“Obvious things we’ll be looking at are contributions, defined contributions, multipliers…All the obvious things, we’ll be looking at,” he said.

Ray Edmonson, the chief executive officer of the Florida Public Pension Trustees Association, speaking to reporters at the AFL-CIO press conference, acknowledged that sometimes abuse of pension systems does occur, such as in cases where someone retires from a state job and draws a pension, but then finds a new job and simultaneously draws a salary. But, he said, all of these agreements have been negotiated between employees and a governing body.

Edmonson’s main concern, he said, was that the state or local governments fund what they are promising to in the pension agreement. And they are, he added.

“They are reforming something that’s not broken,” he said, referring to the Legislature.

While Scott has said he intends for the Legislature to make changes to the pension system, he has been vague in what he’d like to see done. He has said, however, that he wants changes to affect new employees going forward, and not those already in the pension system.

Ring disagreed with Edmonson’s and the AFL-CIO’s contention that the system was not broken. Though he acknowledged that he wasn’t worried about the state retirement system going broke any time soon, he said he is concerned about municipal retirement systems.

The Florida League of Cities and the Florida Association of Counties presented information at Ring’s committee meeting in December and made clear they don’t want a situation where the state government turns to local officials for more dollars. Representatives of several unions, including fire, police and teachers unions, have been invited to speak to Ring and other lawmakers on the Senate Governmental Oversight and Accountability Committee.

Dennis MacKee, a spokesman for the State Board of Administration, which manages the state pension fund, said lawmakers have not had discussions with the SBA’s investment professionals yet, and said that the board would likely not weigh in on whether lawmakers should change the system.

“At the end of the day, we’re really just the bank,” he said. “We do the investing.”

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