(The Center Square) – A proposed Senate bill requiring government employees enroll in a 401(k)-type plan rather than into the Florida Retirement System (FRS) could affect more than 430,000 retirees and retirement plans for at least 645,000 public service workers, opponents argue.
Senate Bill 84, filed by Sen. Ray Rodrigues, R-Estero, would require new public employees hired after July 1, 2022, to enroll in the investment plan and not the FRS.
The FRS is the nation’s fourth-largest public pension plan. It serves about 5.1 million Floridians, including 4.425 million retirees, who work or retired from the state, 177 cities, 151 hospitals, 74 school districts and dozens of special districts.
After more than six weeks awaiting a hearing, SB 84 was approved by the Senate Governmental Oversight & Accountability Committee Wednesday in a 12-8 partisan vote.
It is now bound for the Senate floor. Without a House companion, if SB 84 is endorsed by the full Senate, it is likely to be transmitted directly to the House for a chamber vote.
A growing coalition of workers and retirees vowed this week to intensify efforts to ensure senators understand how widely opposed the proposal is.
“The Florida Legislature and the people making these decisions, fundamentally, do not understand how pensions work,” said Florida AFL-CIO representative Rich Templin, noting SB 84 has “nothing to do with sound fiscal policy.”
“The actions they’re taking are going to prove disastrous, not only to the Florida Retirement System, but also to all of Florida’s budget and the taxpayers who fund it,” he added during a Wednesday zoom conference.
Templin cited a National Institute on Retirement Security study documenting the FRS has a $19.5 billion impact on the state economy, adds $2.7 billion dollars in tax revenue and for every dollar governments allocate to the FRS, it generates $6 in Florida spending.
Without contributions from new enrollees, the system will fail — which is the intent of SB 84, he said.
“What the Legislature is doing is breaking the Florida Retirement System,” Templin said. “They’re breaking the bank, they’re going to break the taxpayers with this change.”
According to SB 84’s legislative analysis, the 51-year-old FRS carries $36 billion in “unfunded liabilities,” the gap between assets and obligations, an exposure critics insist puts the state at risk.
“The only (pension plan) metric our employees care about is this: Can the state keep the promise it made to them when they accepted the employment and charted their financial future, counting on this pension to be there for them in the end?” Rodrigues said in February. “That’s the metric that is most important.”
In June, Florida TaxWatch (FTW) recommended the Legislature enroll all new public workers into a “Defined Contribution Investment Plan.” The move would save $2.7 million the first year and $9.8 billion over 30 years, according to FTW.
SB 84’s legislative analysis estimates the proposed change would save the state $8.3 million in the first year, increasing to $109.7 million annually after 30 years.
As of June 30, FRS held $164.3 billion in assets against $200.3 billion in liabilities, leaving $36 billion in unfunded liabilities, which means the FRS could cover 82 percent of its obligations if every member retired today.
Templin said an 80-percent threshold is the “gold standard” in pension viability and the FRS is “in very good shape.”
Which makes it attractive for manipulation, said AFSCME Florida Retiree Executive Board member Maxie Hicks.
“This well-run system that benefits so many is in jeopardy because some Wall Street gamblers want to play with our hard-earned retirement fund,” Hicks said. “It’s a travesty … a giveaway to Wall Street swindlers.”