January 25, 2011. “When you get past the anecdotal eye-openers, the numbers don’t show a big, rich public trough for public retirees.”
Tallahassee Democrat
(Jan 24, 2011)
Bill Cotterell
Notebook
There’s an old joke in newsrooms — at least, I hope it’s said jokingly — about not letting the facts get in the way of a good story.
Elected leaders do that, too, but they’re not joking. Ronald Reagan once said “facts are stupid things.” Maybe he meant “stubborn things,” but he was right either way — truth just is what it is, unyielding and unresponsive to what we’d like.
The 2011 legislative session is going to make major changes in the Florida Retirement System. A lot of the new rules will be based on cold, hard fact — namely, money — but much impetus for these changes will come from feel-good political motives.
There’s a perception that public pensions are far too generous and that the FRS is in great financial peril. But the fund is sound, despite some investment losses in the great market collapse of 2008-09. And if you look closely at the greed stories about some 48-year-old cop retiring with a six-figure pension, or retiree health-care costs gobbling up city and county tax revenues, you’ll notice that they occur in other states.
Most frequent examples come from California, New Jersey, New York and Pennsylvania. And in Florida, when you hear about cities staggering under the weight of massive pension burdens, those cities are not members of the FRS.
When you get past the anecdotal eye-openers, the numbers don’t show a big, rich public trough for public retirees. While it’s true that some retire with generous benefits — especially in the “special risk” class of firefighters, police and prison officers — they earn it.
It’s also true that a lot of the local governments now unable to afford their obligations got in trouble by bargaining away future health and pension benefits. It may have been done by previous administrations but, many times, the cities avoided giving big pay raises today by promising big benefits in retirement — and their successors now see the bill coming due.
The Florida Education Association rebutted some popular pension myths at a meeting of the Senate Government Oversight and Accountability Committee on Jan. 12. The American Federation of State, County and Municipal Employees is scheduled to do it again this week.
The average state-employee salary in the FRS regular class is $36,423, according to the FEA figures. That’s the lowest of the six groups in the FRS, which includes school boards, universities, counties, cities and community colleges.
For the school boards, the average teacher’s retirement check is $1,868 a month. For secretaries, it’s $1,271 — and that’s based on 30 years of service.
Drawing figures from the state’s Annual Workforce Report, AFSCME calculated that the typical Career Service employee in the regular class has an average FRS benefit of $970 a month. That’s based on 21 years of service, the average, since not many state workers go the full 30.
State retirees also get a health-insurance subsidy of $5 a month for each year of service, capped at $150. But since the average career is 21 years, it works out to $105 a month. AFSCME calculates that monthly health premiums are $549 for single retirees and $1,243 for family coverage — so, on average, a $970 pension and $105 health subsidy leaves $526 a month for single people and $168 for a couple.
AFSCME also notes that, under new federal rules, the average FRS retiree in the regular class is eligible for Medicaid, because the average pension of $11,642 is well below the $14,404 income threshold for the federal program.
All of which is to say, the FRS is not just bursting with lifetime free rides. Legislators will change things, because money is tight and about 12 percent of their constituents seeking jobs can’t find any at all.
First, the FRS is entirely employer-paid. Forget that one. Gov. Rick Scott said during his campaign that Florida is the only state in which employees don’t chip in to their pension pot, and the Senate last year tried to require a quarter-percent contribution. It looks like a sure thing this year — at a lot more than a quarter-percent.
Sooner or later — probably sooner — all new employees will be offered 401(k)-style “defined contribution” pension plans, rather than the traditional defined benefit system. Why? Because the DC plan is more like private-sector pensions, employees manage their own investments, and it’s portable so workers can take their holdings with them when they go to another job.
Ex-Gov. Charlie Crist vetoed a reduction in the 6-percent interest rate paid on pent-up pensions in the Deferred Retirement Option Plan. Scott won’t veto such a cut, which is probably the second most-likely change to pass the Legislature.
Another idea is to lower the special risk retirement credit, now 3 percent a year, or to restrict it to officers who face dangers on the job every day — like police, firefighters and prison officers. There’s a wide range of others in the criminal justice system with special-risk status now.
Instead of calculating pensions on an employee’s “high five” earning years, they could start averaging the best 10 years — or even the employee’s salary over a whole career. The practice of “spiking” pensions by counting overtime will probably come to an end, too.
Sen. Jeremy Ring, D-Margate, chairman of the Senate committee, says “everything is on the table.” But he’s taking a cautious approach, waiting for thorough actuarial studies of every idea.
That’s harder than just buying into the popular presumption of greedy employees gorging on lavish pension plans — which makes a good story, until the facts get in the way.