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Pension work nears finish line

by John Kennedy | April 29th, 2011

Plans to dramatically revamp Florida pensions at the state and city levels appeared headed Friday toward the finish line — far short of where Gov. Rick Scott and lawmakers had initially proposed.

House and Senate negotiators have settled on extracting 3 percent paycheck contributions from 655,000 teachers, police, firefighters and other government employees enrolled in the Florida Retirement System, part of an effort to pull $1.1 billion into the state’s recession-strapped budget.

But a plan to scrap the state’s Deferred Retirement Option Program (DROP) has been abandoned,  House and Senate negotiators agreed. The House had wanted to bar the lucrative early retirement program to new enrollees in July; the Senate in 2016.

But what emerged Friday night from House lead negotiator Ritch Workman, R-Melbourne, was a proposal to reduce the 6.5 percent interest rate paid on DROP benefits to 1.3 percent. The move will save $81 million, if agreed to by Sen. Lizbeth Benacquisto, R-Wellington, the Senate’s lead negotiator on the Florida Retirement System.

Among other changes nearing agreement are a plan to increase the retirement age for new enrollees in the FRS from age 62 to 65.  An existing 3 percent cost-of-living adjustment would be eliminated for service earned after July 1, with Workman saying the goal being that it would be reinstated in 2016.

That change save $404.8 million, analysts said.

Meanwhile, plans to revamp municipal pensions also have been scaled-back.

Cities had wanted lawmakers to rework a 1999 law that fattened the pensions of police and firefighters, spearheaded by former Gov. Jeb Bush, who had been endorsed by the Florida Police Benevolent Association and Florida Association of Professional Firefighters in the governor’s race.

Cities this year wanted authority to use the growth in dollars flowing to them from state taxes on property insurance premiums to go into existing benefits or easing municipal pension liabilities. The 1999 law requires the growth in these premiums go only to additional benefits.

Cities have responded with such pension sweeteners as cost-of-living adjustments, lower retirement age, or an increased “multiplier” used in determining pensions based on years-of-service, all of which have forced them to spend an additional $400 million on pension costs since 1999.

Instead, the only major city overhaul looking likely to surface this session is a provision that would limit overtime pay to 300 hours per year for benefit calculations, Ring said.  The cap would block employees from what critics say is a common pension-boosting practice.

“The cities, counties and unions just couldn’t find much agreement on anything else,” Ring said. “There was no unified voice.”

In West Palm Beach, fire pension costs – if tucked into the city’s overall payroll – would absorb 31 percent of the dollars. Police pensions would take 29 percent, according to a Florida League of Cities analysis.

But some cities, particularly in Broward and Miami-Dade counties, are facing double those costs.

Although Gov. Rick Scott didn’t weigh into the municipal pension fight, he did have some strong opinions about the Florida Retirement System, calling for wholesale changes.

How he accepts what looks like modest change is an unknown. But earlier this month, Scott ridiculed House and Senate public pension proposals for not going far enough.

Flanked by business organizations supporting his push for almost $2 billion in tax breaks — while schools, health and social programs endure deep cuts — Scott said lawmakers needed to rework their plans for overhauling government retirement plans.

“The right thing to do is exactly what the private sector has done,” Scott said at the time.

Scott wanted public employees hired after July 1 to be forced into 401(k)-styled investment plans and barred from the standard pension providing guaranteed benefits through the Florida Retirement System.

But lawmakers appear to have backed off earlier threats to close the pension plan to new hires.

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6 Responses to “Pension work nears finish line”

  1. Can't Wait To Vote Again Says:

    Don’t think for a second that this will be forgotten in the next election.

  2. Ms Vicky Says:

    Just in case anyone imagines that these Tallahassee clowns backed off from taking more draconian measures against FRS members from the goodness of the hearts, let me inform you otherwise: They are aware that they are treading on very dangerous legal territory and will certainly be challenged in Court.Even at best they are demanding a 3% tax, or a 3% deduction in pay, from 655,000 FRS members who have a legal, binding contract with the FRS, a/k/a the State of Florida. For many, the contract represents that these employees will accept lower salaries for deferred payment in the way of a pension plan; and every year they get a statement from their employers explaining that their “true” salaries are what they earn, PLUS what their employers pay into the pension system. (Most of these people have not received a 3% raise in years, so a deduction puts them back to their salary as of about 2007.) These legislators could legally enact such a plan for people who are not already in the system, but changing the rules for those already in is ILLEGAL and a violating of a legal contract without consideration. I hope the Unions take their sorry, greedy
    as–s to court, put them to shame, and dismantle their attack on the middle class workers of Florida. If these jokers worked half as hard as most FRS workers, they might “get” why they are making a mistake. Less money for the workers, less for the state of Florida!They are their own WORST enemies. Good riddance to bad rubbish in 2012!

  3. t Says:

    The amount of money currently in my DROP account is my accrued deferred retirement. It is my money. The State contracted with me to leave it in their account for a fixed interest rate of 6.5%. They get paid 12.5% from my employer as long as I keep working. I also agreed that none of my earnings during this 5 year period will add to my retirement. If the legislature drops my interest rate to 1.3% then they should allow me to move my accrued retirement fund into other investments and should let my government agency off the hook of contributing to the retirement fund on my salary. I receive no retirement benefit from continuing to work, but the FRS does.

  4. Tim Says:

    The republicans, who talked about overhaul, are conceding and will not get my vote in 2012, and that opens the door to a democrat takeback.

    All talk and two-bit change is not enough, we wanted serious change. The republicans got scared and that will be remembered.

    The unions won’t vote republican in 2012, they have been burned and it is incised in their brains. They won’t take chances. The repub and Indepedent voters see wishy washy republicans-they were all talk(and now, no action) and won’t vote for them in 2012.

    Weak Republicans screwed up an opportunity. They think running the usual repub against Scott in 2012 will be the answer. It won’t.

  5. Marge Says:

    It’s future retirees, not present retirees.

    And take a lump sum, don’t have the State divvy out your retirement. YOU take ALL the money and be responsible for it. This is especially true if you have a spouse and family members who you want to get your retirement after your death. They will be better IF you handle your money well.

  6. American Citizen Says:

    The way I am reading this change is people already retired will keep the 3% COLA. People currenly in Drop will keep the 6.5% interest but lose the 3% COLA until July 1, 2016 and people entering the drop on July 1, 2011 or after will lose the 3% COLA and only get 1.3 % interest on their DROP. I am currently in the DROP and contracted with FRS for the 3% COLA. FRS gave me a statement showing what I would be making if I went into the DROP and my decision was made on this information. I hope I am wrong about the change but if not, they should allow me to go back into the investment program at which time I will take me money and leave. Marge- If you have any additional information on this please let me know. Thanks

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