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TCPalm: Government pension reform remains unfinished business in the state of Florida

Friday, February 03, 2012

Government pension reform remains unfinished business in the state of Florida

We have started another year, and another legislative session, but Florida is still battling the same issue — unsustainable government pensions. Lawmakers must tackle the challenge of balancing the state budget and ensuring that taxpayers are not left to bear the burden of flawed systems.

Last session, we made strides in the right direction to lighten the load of the Florida State Retirement System, the fourth-largest public pension plan in the United States.

However, unless we pass further reforms, the system will continue to put the taxpayers on the hook for enormous future debts or else put state employees at risk of receiving far less in retirement than they were counting on.

While some say that the system is in good condition, this analysis is based on assumptions that the investments will appreciate at a rate that is more than double the average of the past 11 years. In fact, a 2011 report, “The Revenue Demands of Public Employee Pension Promises,” authored by scholars from the National Bureau of Economic Research, suggests that Florida should be contributing $11 billion a year to keep FRS on solid financial ground.

This estimate doubles our current contribution of $5.5 billion. According to the study, if these contributions aren’t made, taxes will need to be raised by $765 a year for each household in Florida.

Fortunately, solutions exist that can save Florida’s next generation from bearing the incredible financial burden of a broken system it didn’t create. For example, by simply switching the default option for new state government hires to a defined contribution plan instead of the current defined benefit plan, we can alleviate costs to the employee, as well as the state.

Currently, employees enrolled in FRS are allowed to switch between the plans offered once at any time in their career. By limiting switching to the first year of employment, we can ensure that the system is not unfairly exploited while also allowing FRS enrollees a chance to pick the best plan for them.

With almost 700,000 people enrolled in the FRS and with Florida facing such tough economic times, it’s more important than ever to safeguard the system that sustains thousands after retirement. By increasing the vesting period for employees in the pension plan to 10 years from eight, we can ensure that those who put in the most get the most out.

The retirement system for the state of Florida was designed to benefit employees and help them plan for their futures. In its current state, the FRS may not provide the benefits that it was created to supply and will become a financial nightmare for the next generation of Floridians.

Let’s not let our children’s future be haunted by the unfinished business of pension reform. We should encourage lawmakers to continue to create a better state retirement system for all, one that the local governments can emulate, state employees can trust, and taxpayers can sustain. Visit to learn more about the need and recommendations for further pension reform.

© 2012 TCPalm. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Robert McClure is president of The James Madison Institute, Tallahassee, and a member of Floridians for Sustainable Pensions.

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