It will be tough sledding, but the Florida Legislature needs to continue trying to rein in the unsustainable rise in public pensions and benefits.
Fortunately, the state has done a good job in recent years. Local governments, not so much.
Pew Center on the States said in a 2007 study: “Florida is a national leader in saving enough to cover its pension bill—but it hasn’t yet put any money aside for future retiree health benefit costs.”
Altogether, states are $1.26 trillion behind the curve in paying for benefits, Pew said in a 2011 update.
Democrat controlled states such as California and Illinois are drowning in debt and seeing businesses flee because of pension obligations politicians have been unwilling to address.
For a look at the growing problems nationwide with public pensions, see this: http://www.nationalreview.com/articles/297094/public-employee-unions-gone-wild-patrick-brennan
Granting overly generous public employee pay and benefits is easy for politicians. They can promise the moon, pick up a few votes for re-election, and let future generations worry about the cost.
Public employee unions know this and exploit it to the max. If they can’t get costly benefits from local governments, they are not shy about running to Tallahassee. Legislators often are happy to please them, leaving it to the local officials to figure out how to pay the cost.
The American Legislative Exchange Council says state and local employee benefits are 69 percent higher than those of employees in the private sector.
Most private pension plans are defined contribution, meaning the employee contributes as much as he likes, up to a limit, and usually the employers match a certain amount. The pension depends on what the investment earns.
Most government entities have defined benefit plans, which promise employees a certain percentage of their pay upon retirement. If the state can’t earn the money by investing, it must pony up anyway, which generally requires tax increases.
The Florida Retirement System began offering a defined contribution plan as an alternative in 2000 and about 15 percent of employees take that option.
One weak spot is that Florida is the only state where public employees pay nothing for their retirement. Gov. Rick Scott and the Legislature tried to fix that but were stymied, temporarily, by a court ruling.
There are also other gold-plated programs for state employees, such as the DROP program and health insurance subsidies for retirees. Florida TaxWatch has recommended eliminating both.
But the fiscal responsibility shown in Tallahassee hasn’t filtered down to local governments.
The LeRoy Collins Institute, a Tallahassee think tank, said, “As of year-end 2011, Florida’s 100 largest cities oversee 208 separate pension plans for their employees. Of these, only 14 percent received a grade of “A,” or were at least 90 percent funded; 62 percent received a grade of “C” or lower, and 15 percent were woefully underfunded.”
Legislators have limited ability to nudge local politicians toward fiscal responsibility. That’s mostly up to local voters. If they are happy paying higher taxes to provide better pay and benefits to public employees than they have themselves, so be it.
Lloyd Brown was in the newspaper business nearly 50 years, beginning as a copy boy and retiring as editorial page editor of the Florida Times-Union in Jacksonville.
© Florida Voices
Editor's note: This column has been updated to reflect that it was the LeRoy Collins Institute, not the James Madison Institute, that authored the report on Florida's public pension plans.