PENSION REFORM: Lies, myths, deceit and fairytales
An Editorial Response
James W. Preston, President
Florida State Lodge
Fraternal Order of Police
To hear House Speaker Will Weatherford tell it, the whole problem with Florida’s budget is public employee pensions. He wants to help save the Florida Retirement System. “We want to protect that pension for you”, he says. His plan is to place all new hires in a “defined contribution” (401k) investment plan thus starving the current system of defined benefits, sentencing it to a slow death. By eliminating the incoming revenue stream, the current system becomes unstable and eventually collapses. So how will that “save” anything for the current employees? Speaker Weatherford has a solution in search of a problem.
The 900,000 current employees and retirees in the Florida Retirement System deserve better representation. State workers, teachers, law enforcement, firefighters and local government workers, middle class hard working Floridians are very concerned at the drastic plans of Speaker Will Weatherford.
His pet project to gut the pension system failed in the last legislative session for good reason. Yet now he plans to hold legislators hostage and twist arms of those who opposed his draconian bills. “We’re going to work with those senators who voted no, and see what it would take to get them to vote yes,” Weatherford said. Public employees are going to work with Representatives and Senators who voted yes and see what it would take to get them to vote no.
Instead of raising the bar for private sector employees to get them guaranteed pensions for their hard work, Speaker Weatherford would lower the benefits for FRS employees onto the 401k roller coaster ride as investments on their retirement income rise or fall with the stock market. Our workers deserve better. Let us be very clear, the defined contribution (investment) plan is not a pension! It is an investment, period. It does not have a death benefit for those officers in the Special Risk category who may die in the line of duty. Please review;
Florida State Statute 121.591 Section 3. To receive benefits, the member must be deceased.
• (b) In the event of a member’s death, all vested accumulations as described in s. 121.4501(6), less withholding taxes remitted to the Internal Revenue Service, shall be distributed, as provided in paragraph (c) or as described in s. 121.4501(20), as if the member retired on the date of death.
No other death benefits are available for survivors of members, except for benefits, or coverage for benefits, as are otherwise provided by law or separately provided by the employer, at the employer’s discretion.
They get whatever has accumulated in their 401k.
In the investment plan, let’s guess an average annual return of 6% on their funds. A bit ambitious in today’s economy but with decent investments an officer or deputy putting in between $1,500 and $2,500 per year would accrue about $60,000 at the end of their career. Hardly enough to retire on, so they buy a 20 year annuity to protect their money and are then provided a meager $353.00 a month to live on in 25 or 30 years from now. Really? To buy groceries and gas and pay their utilities. But wait you say, what about Social Security? Well, many agencies opted out of Social Security many years ago. Those that did pay into the system will have their Social Security reduced by 2/3rds due to the Government Pension Offset and the Windfall Elimination Provision. Of course, that is if Social Security isn’t broke by then.
Most of us are happy to keep the meager benefits earned through our hard labor and risks they take over the life of their career, sacrificing compensation today so that they may have something to depend on tomorrow. We are not in favor of some “Wall Street crap shoot”. Why are we risking our future and the future of our families on an uncertain investment plan when the defined benefit plan is working so well?
For years the state and many local governments have taken a pension holiday and neglected to make their annual contributions deliberately underfunding pensions. Skipping their payments has created a shortfall not the police officer or secretary or teacher. Try telling your mortgage company that “you know, I just don’t feel like paying this year”.
Florida’s pension system is funded at 87% with $133.7 billion according to estimates with an 11% return on investment according to the State Board of Administration. The “unfunded liability” of approximately $11 billion is like your home mortgage. Part of the principle is paid each year over 30 years. How would you like your home to be 87% paid for? Fully funded would mean enough money on hand to pay the full pension of every member should they all decide to retire on the same day. An event that logic and reality tells us will never happen. So, the Speaker would scare the public and talk about tax increases and money taken away from education, health care and infrastructure. The truth is the Florida Retirement System is one of the best in the nation. It is so good that even 65 Florida Legislators are in the system. There is a reason that 85% of those in FRS have elected the Defined Benefit plan over the investment plan. Weatherford’s plan; let’s burn down our house now because a hurricane may come 30 years from now. This whole idea is a train wreck waiting to happen.
He even looks into his crystal ball and predicts the future 30 years from now with a savings of $9.8 billion. Does anyone seriously believe he can foretell the future? Our pension experts found a $38 billion dollar flaw in his savings since he didn’t figure falling returns on investments as the amount of new money in the defined benefit plan shrinks because new hires are in the
401k plan. Senator Greg Evers, Senator Jack Latvala and Senator Charlie Dean get it. They know the system is sound. Financial experts all report the FRS is well funded. Speaker Weatherford’s own experts agree the Florida Pension plan is a well-funded plan. Their own experts warn that moving away from a “defined benefit” program will cause the loss of an important recruitment tool to hire and retain good workers. If the 3% that FRS workers were mandated to contribute in 2011 was necessary to “fix” the pension plan, why did that money go towards the state budget instead? So, let’s look at the lies, myths, deceit and fairytales being told about pensions and all those greedy public employees that caused such a problem. The media spin likes to talk about the evil unions, greedy teachers, sanitation workers, firefighters and law enforcement officers. We are constantly told about public employees with their pockets lined with gold and that the tax payers need to cut their wages and benefits, slash their pensions, and put them in their place.
If there is a pension crisis it is not because of benefits for public employees. It is a direct result of decreased revenues from the tax rolls as the housing market fell, from corporate tax breaks and from the state taking a pension “holiday” and not making their contributions.
Pension benefits in the public sector were won through negotiations. Now as I see it, negotiations take two sides to agree to the benefit. The private sector has seen dramatic losses in benefits for workers as union representation declined. The continuous assault on the working middle class by those in power in Tallahassee is unacceptable.
First Pinocchio Award goes to “Public Workers are better paid than private workers”.
Simply not true, the Center for Economic and Policy Research reports that public sector workers earn 4% less in their total compensation package. When you compare education levels the gap is even wider.
Second: “Public Sector workers do not contribute to their pensions”. In 1974 the Florida Legislature in an effort to save money ($3 million per year) decided that FRS workers should not contribute to the plan, that way those who left before being vested would not be due a refund of their contributions. Fast forward to 2011 and the Florida Legislators decide that workers should contribute 3% to fix the pension system but used the money instead to shore up the state budget. The 2011 legislators also insured that no new employee would ever again earn a cost of living adjustment and increased the number of years employees would have to work to earn their pension. Understand that all compensation is earned compensation. Not just the cash in your paycheck but all compensation due from the employer, pension, sick time, vacation time, etc. is earned. It is not a gift. Asking public employees to contribute more is asking them to take a pay cut.
Third: “Public pensions are the cause of budget shortfalls”. The reality is pension contributions are less than 3% of the overall total state budget. Why is this issue the scare tactic Speaker Weatherford would use to deny funding to education or suggest a raise in taxes. Overall, Robert Reich reports that taxpayers are directly responsible for only about 14% of public retirement benefits. Employee contributions and return on investments of the pension fund account for the lion’s share of the plan. Attacking public workers to create that envy with false and misleading information is an excuse, part of the blame game. We are now outside of the 2008 downturn and crash and new estimates of the health of our FRS system is expected to show our plan continues to be one of the best.
Fourth: “Public pension are too generous”. This one is easily debunked. Some would point to the exceptions on the high end as if all retirees were living in luxury while many are barely able to keep up with inflation. Pensions earned by our retirees help keep them off of public assistance in their retirement years. The average pension in the FRS system is around $19,000 per year.
Fifth: “The state is broke; there is no choice but to fix the pension problem”. $500 million per year figure estimated by Speaker Weatherford is a drop in the bucket when compared to the massive billions in the state budget. This session, the legislators cut the funding to the Criminal Justice Standards and Training Commission responsible for training of law enforcement officers across the state. The Commission now must work with $40.00 per officer per year down from $100 per officer per year for post academy training our men and women in law enforcement (Amended Budget Item 2C, dated 05/13/2013), a more than $2,000,000 reduction in training at a time when officer safety and public safety is needed the most. Our officers and the public becomes less safe with decisions like this.
Sixth: “Public workers need to sacrifice”. The market is bad, the economy is bad, jobs are hard to find, we all need to sacrifice, taxes are too high, public employees need to give back. We are taxpayers too! We live in Florida, in your communities. Our children attend school with everyone else. We shop and go to church. We are your neighbors and friends. Public workers provide the necessary services required to live in our beautiful state. We have sacrificed just as everyone else with pay cuts, lost benefits and wages.
It is time to stand up and say enough is enough. Florida is a great place to live and raise a family because of our public workers.
Speaker Weatherford will try to convince otherwise but he is simply misguided and wrong.
That’s my opinion. Part-time elected officials trying to devastate career employees in a system that is not broken. What do you think?
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