Is Florida Paying Former Employees Too Much?

Bennett has announced that he will be introducing a bill this fall that will cut and eliminate benefits to FRS members.

In a recent new article titled “Is Florida Paying Former Employees Too Much”, Senator Mike Bennett was quoted as saying the current Florida Retirement System Pension System is “out of control”.  Bennett has announced that he will be introducing a bill this fall that will cut and eliminate benefits to FRS members.  We decided to check into the data he used to support his opinion and we could not find credible data to support his conclusion.

The article statesthe state paid out $5.6 billion to retired workers; that’s almost 10 percent of the state budget”.  According to the Annual Report (page 53) The Florida Retirement System Trust paid out $4.8 billion in total pension benefits (we could not validate the $5.5 billion number from the annual report).  The article stipulates this is almost 10% of the state’s total annual budget.  Again the math is fuzzy; as the budget was closer to $66 billion, of which 5.5 is only 8.3%, but I guess rounding up makes the story more sensational.

Page 19 of the Annual Report, reflects $4.8 billion payout to retirees (who worked hard for the benefits the state promised them), employer contributions accounted for $3.73 billion, and of that only $679 million are labeled state contributions.  The real number – only 1% of the real dollars came from the State budget.

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Be Prepared !

… it would be implausible to believe significant changes aren’t in store for FRS people and their benefits in the 2011 session.

The Florida Senate “Interim Work Plan 2011 Session” has been published on the Florida Senate Website, and there doesn’t seem to be any entry or schedule for the “Summer Study” that was promised (please see FRSOptions post “All FRS Legislation put on hold”).  During the 2010 Legislative Session, Senator Mike Bennett announced that all changes to FRS would be put on hold pending a summer study on how the legislators should best proceed in making potential changes.  The pending study provided a respite for Florida Retirement System participants, as none of the thirty-plus bills that had been introduced in the 2010 session came to fruition.

In the absence of the study it is unclear what course the legislators will take.  Hopefully it will not be a repeat of the maelstrom of bills introduce this past session.  It appears the press has been enlisted to a large degree, as there is seldom a day goes by that an article doesn’t appear condemning the Florida state pension plan and the Deferred Retirement Option Plan (DROP) as being overly generous, and an unfair liability to the taxpayers of the state of Florida.  (We attempt to post a sampling on a regular basis on our sister site on Facebook.com/FRSOptions).

In light of the previously proposed bills, the vetoed changes, and the changes suggested by the “Florida Tax Watch”, which is a lobbying group that boasts of several prominent Legislators including the following:

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Ask Why?

the FRS Pension Plan has enough assets to pay ALL of its retirement obligations for roughly the next 30 years! If that is the case, why should any benefits be cut? Why do the legislators feel it is so important to bolster a financially strong plan?

Ask Why?

Governor Charlie Crist vetoed the impending cut in the DROP interest rate last Friday (See HB 5607) and stated his veto was because “the legislators unfairly popped the changes into the budget” (see tallahassee.com/article) .  We discussed that fact in our April 28th post Drop Rate Dropped.  It would seem the Governor has clamped down on the unfair process used by the legislators to cut benefits and increase funding for the Florida Retirement System.  Perhaps the important question for participants (and taxpayers) to have answered is Why is the legislature seeking random solutions before clearly defining the problem.  What is the motive for the legislature’s attempts to cut FRS benefits, and to increase employer and employee contributions to the plan?

The press has labeled Crist’s veto as a political move so he can identify himself as an independent.  If that is the case, so be it, it was still the right decision.  Your Florida Retirement System benefits should not be a pawn in some gambit in Tallahassee.

Starting early in the Legislative session, your benefits have been at risk.  Some of the proposed bills were pretty severe in their proposed cuts (A Call for action, HB 1319 and 1543).  All of the proposed bills were put on hold pending a “summer study” by the legislature.  From input and conversations with all of you, the question is What is the purpose of the study?  Is the legislature exploring whether changes should be made in FRS, or has the legislators already determined cuts should be made, and the study is simply to determine what changes?  I think it bears some exploration.

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Crist Vetoes cut in DROP interest?

Governor Crist exercised his line item veto power to veto HB 5607 which would have cut the interest rate paid on DROP form 6.5% t0 3%

We have just heard that Governor Crist exercised his line item veto power to veto HB 5607 which would have cut the interest rate paid on DROP from 6.5% t0 3% for those entering the DROP after July 1 of this year.  According to our sources, Crist vetoed the cut because he didn’t like the way it was rushed into the legislation at the end of the term, without going through the normal process!  We will keep you informed.

A battle won, but the War is still on to preserve your benefits.

SB 2022 was introduced by Senator J.D. Alexander …. has already passed through the Senate Committee in very rapid manner. It will mandate all employees make a payroll contribution to their retirement benefits.

Please do not think the war is over to protect your benefits. While Representative Grady’s office has indicated HB 1319, which is particularly radical in its changes, is dead, it still appears on the legislative slate.  HB 1543, another really nasty bill, shows up as having been withdrawn on the legislature’s slate.  Senate Bill 2022 is a relative newcomer, and is very much in play.  SB 2022 was introduced by Senator J.D. Alexander, a very powerful figure in Tallahassee and the Chairman of the Ways and Means Committee, and has already passed through the Senate Committee in very rapid manner.   It will mandate all employees make a payroll contribution to their retirement benefits.

It is an interesting coincidence that the two most radical bills were withdrawn concurrent with the introduction and rapid push through committee of SB 2022.  In comparison to HB 1319 and HB 1543, SB 2022 looks like a dream.  I am hoping that wasn’t the plan.  Scare everyone with radical changes, then a seemingly innocuous bill comes up, and it might be more easily pushed through.  I am hoping this isn’t the legislative version of “good cop, bad cop”.  If FRS participants are mandated to pay a portion of their pay, where does it end?  Next year will it be more and more?  The national average for employee contributions to pensions is around 5%.  That is a significant cost to you!

Below is a list of about 30 different bills that have been introduced and are still on the table that could negatively affect your benefits in one way or another.  I would urge you all to keep on your toes, and continue to call your Representatives and Senators and let them know you do not want them to vote in favor on ANY bill or amendment which will take away your benefits. Simply click on the blue link and it will take you to the Florida Legislature site where you may review the status and original version of the bills.

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