Tallahassee, FL - Gov. Rick Scott proposed wide-ranging changes to the state’s pension plan Tuesday, demanding 5 percent contributions from 655,000 public employees and requiring all new hires to enroll in investment plans.
Scott, who said his plan would save Florida taxpayers $2.8 billion over the next two years, also would close the state’s Deferred Retirement Option Program (DROP) to new participants in July, a move that would likely push more senior government workers into the plan before the deadline, signaling their eventual retirement.
Scott has said he wants to reduce the state’s workforce by 5 percent this year.
“I want to make sure that the pension plan is something that anyone who’s relying on it knows that the money is going to be there,” Scott said. “Step two, I want to make sure that taxpayers are treated fairly. And I want to treat employees fairly.
“In the private sector, if you have a plan you generally participate,” he added.
State analysts have said the 5 percent contribution rate proposed by Scott would save $1.3 billion the first year – an amount which closely corresponds with a $1.4 billion reduction in property taxes – a campaign pledge Scott has said he will meet, despite drawing early oppositiong from fellow Republicans in the Legislature.
When asked Tuesday, however, if the two issues are linked, Scott had a one-word reply:
“No,” the governor said.
School board employees form the largest share of Florida Retirement System participants, records show.
But the wider pool of government workers affected by Scott’s contribution plan could help the governor, politically. In applying the hit to a broad group of employees, it could blunt criticism that the move unfairly targets state workers, who haven’t drawn an across-the-board pay raise since October 2006.
Teachers, though, haven’t fared much better, said Mark Pudlow, spokesman for the Florida Education Association, which endorsed Scott opponent, Democrat Alex Sink, in last fall’s governor’s race.
“Pay has been stagnant,” Pudlow said of teachers. “But if we’re going to talk about equity – making employees contribute like those in most other states – what about equity in salaries and pension benefits? Florida has been below most states in each.”
Doug Martin, spokesman for the American Federation of State, County and Municipal Employees (AFSCME), said the most jarring element of Scott’s plan is his proposal to close the traditional Florida Retirement System pension plan to new employees on July 1 – forcing new hires to join defined contribution plans similar to private sector 401 (k)s.
“You will wind up with a dwindling number of active employees who pay for an increasing number of retirees,” Martin said. “Employees will have to continue to contribute more or you will destabilize the system.”
Sen. Jeremy Ring, D-Margate, chairman of the Government Oversight and Accountability Committee, said lawmakers are also considering an FRS contribution plan. But the level will not be set until budget talks are further along, he said.
“Directionally, a few of the areas where he’s going, are also where we’ve been,” Ring said. “But we haven’t talked about getting rid of DROP. He may be a little more aggressive than what we’re looking at.”
Scott outlined his plan during a Tuesday visit to Arthrex, Inc., an orthopedic equipment engineering company in his Naples hometown. The location was intended to draw parallels between government employees and private industry.
Among other changes he proposed was ending an annual 3 percent cost of living adjustment on retirement benefits on service after July 1, leaving current retirees unaffected.
In another recommended change, Scott also takes on the annual accrual rate. When combined with an employee’s years of service – the accrual rate is a multiplier for calculating benefits. Scott would hold that rate at 1.6 percent for most employees, although senior management, judges and elected officials would be reduced from current levels ranging from 2 percent to 3.3 percent.
Scott also proposed cutting special risk class members – mostly police and firefighters – to 2 percent, from their current 3 percent level. The state’s largest law enforcement union, the Florida Police Benevolent Association, also backed Sink in last fall’s governor’s race.
“I think the police and fire unions will have a real hard time swallowing that,” Ring said of the reduction.
Sen. Don Gaetz, R-Niceville, part of the Senate’s leadership team, said Scott’s proposal largely expands on pitches he made during his campaign for governor.
“He ran on cutting spending and increasing jobs,” Gaetz said. “Pay and benefits are a big area of state spending.”
But Rep. Alan Williams, D-Tallahassee, said Scott’s proposal amounts to a 5 percent “tax” on state workers.
“I fail to see how the governor’s proposal concerning the Florida Retirement System can improve the economy,” Williams said.