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Union research shows pension overhaul will cost workers, taxpayers

by John Kennedy | March 26th, 2013

Public employee unions fighting the House pension overhaul rolled out research Tuesday that says the move will cost taxpayers more — challenging the view of House Speaker Will Weatherford and other proponents that closing the traditional plan to new workers will reduce state costs.

A report by Keystone Research Council, a Pennsylvania think tank whose directors include a number of union leaders, underscores many of the points raised by Florida opponents.

A key provision is that with a shrinking pool of public employees in the defined benefit plan, investment strategies will change, becoming less risky and less likely to earn sizable returns.

The change will force those in the plan to contribute more to offset more modest returns. Public employers, including school boards, cities and the state, will also have to pay more to cover the cost of the rising number of retirees still in the traditional pension, the report concluded.

“The bottom line,” said Sarabeth Snuggs, co-author of Keystone’s report and a former Florida Retirement System administrator, “is that the House proposal means higher costs for taxpayers and lower-quality pensions for employees, hurting businesses that depend on the buying power of retirees.”

The House voted 73-43 along party lines Friday for the measure (CS/HB 7011), which would close the traditional pension plan to new employees. Beginning Jan. 1, new hires seeking a retirement account could instead only join a defined contribution investment plan similar to a 401(k) plan available to many private sector workers.

The Post reported that the  legislation may be rooted in the American Legislative Exchance Council, the advocacy group that helps corporations and conservative interest groups write bills for legislatures across the country.

Dozens of Florida Republican lawmakers gathered at an ALEC conference in New Orleans in 2011, where a pitch for pension reform was a central part of the three-day gathering. Among those attending were Weatherford, R-Wesley Chapel, and Rep. Jason Brodeur, R-Sanford, the bill’s sponsor.

ALEC has advocated changes in environmental and labor laws, voter ID measures and pro-gun laws such as the “stand your ground” legislation, which came into focus following Trayvon Martin’s shooting death last year in Central Florida.

In Florida, where free-market conservative Republicans control every phase of state government, ALEC’s model bills have proved a touchstone for many policies.

But as the legislative session nears its midpoint in Florida, the Republican-led Senate isn’t looking to go as far as its House counterparts.

Instead, Sen. Wilton Simpson, R-Trilby, is advancing a measure (CS/SB 1392) aimed chiefly at encouraging workers to join the investment plan. But the Senate would keep the traditional, defined benefit pension open to them.

“We don’t want to make a mistake. It’s a lot of money, and people’s livelihoods are at stake,” Simpson told the Post.

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6 Responses to “Union research shows pension overhaul will cost workers, taxpayers”

  1. rebar Says:

    Weatherford, Wesley Chapel, Jason Brodeur are all stooges for crooked corporate interests. If they are sponsoring a bill, you can bet your bottom dollar that it’ll screw the common man.

  2. spence Says:

    Death to corporate vampires.

  3. Additional Research Needed Says:

    Another aspect that needs to be researched and presented is the funding mechanisms and requirements of the FRS compared to funds that are in trouble.

    Such a comparison would show that states like Illinois which is having serious pension issues, is a polar opposite to the FRS in terms of funding requirements… Florida, if the requirements are followed, will not end up where Illinois is now…

    That said, even Florida has not following what is considered good practice. When the fund was over 100% funded, legislators allowed participating employers to contribute LESS than actuarially required contributions – in essence, spending away the surplus on other state needs. Furthermore, now that the fund is below 100% funded, the legislature has failed to make the actuarially required contributions to make up the shortfall. Initially, this is a small amount, but when ignored for three years, it too has contirbuted to the current under-funded status.

    Legislators cannot have it both ways… if there is no intent to step up to the table when the fund is under-funded, then don’t ‘raid’ it when it is over-funded.

    This is a manufactured issue that even at this point does not rate as a crisis.

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