Monday, March 4, 2013

Florida Retirement System: an outsider's view

The following note was received in response to my last post pertaining to the Florida Retirement System which was also published in the Tallahassee Democrat.  While a number of responses were received, this seemed to express a general sentiment from an unbiased viewpoint:
Your letter in the Tallahassee Democrat the other day was the first common sense I've seen in print since FRS issues began bubbling a few years ago. This isn't my dogfight but I've followed it with real interest both because pensions, especially defined-benefit plans, matter to me and because the uproar has been an educational look at the weirdness of Florida politics. For example, I was flabbergasted that any legislature would buy into a plan under which employees made no direct, identifiable contribution to their own retirements. Equally astonishing have been the enthusiasm of some legislators to transform the system without all the numbers in hand and the failure of FRS or unions and their members to see that sound numbers were available before the 2013 session. Like pregnancy and childbirth, all of this has been pretty predictable (inevitable?) since the last session. Preoccupation with the 3% withholding to the exclusion of all else has meant that the kid has come home with no diapers in the house. Perhaps more was going on but this is what it looks like from outside.
Legislative moves toward defined-contribution plans aren't confined to Florida but nobody in Tallahassee has mentioned that some other states have explored the alternatives and are moving ahead with repairs to existing defined-benefit plans along the lines you suggest in your letter. Although the deal isn't done, recent news coverage from Montana implies likely passage of a rational, long term fix for existing problems. It's true that Montana, with about one inhabitant for every 19 Floridians and many other significant differences, is different, but the process would work here. Montana still has a biennial legislative session which allowed more time but the essential aspect was collaboration between interim legislative committees, the governor's office, the retirement system(s)*, unions and system beneficiaries, and willingness to meet the costs. The switch to a 401 k plan was judged too costly. (*Montana has a Public Employees' Retirement System and a Teachers' Retirement System which includes university faculty. The piggy banks are different but the problems and solutions were the same.)  Montana salaries and wages in all sectors are lower than in Florida but employees have contributed 7.15% all along and the contribution will increase to 8.15% under the proposed plan. Other changes in vesting, eligibility etc. are the sorts of things you suggested. Montana is fiscally cautious--it was one of only four states in the black a few years ago-- and it does have a stash not available everywhere. Part of the Coal Severance Tax, and some of the interest on the untouchable endowment portion of that fund, are being diverted from existing programs to bolster the retirement systems. However, that never would have happened if employees weren't willing to ante up as well........
    I imagine you're getting responses to your good letter.
    Andy Sheldon

Andy Sheldon is retired and living in Crawfordville, Florida.  He is formerly of Mossoula, Montana where he was a professor at the University of Montana.


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