After fierce debate Friday between ruling Republicans and union-allied Democrats, the House approved an overhaul of the Florida Retirement System, the pension fund used by more than 620,000 teachers, law enforcement and other public employees.
The House voted 73-43 along party lines for the measure (CS/HB 7011), which would close the traditional pension plan to new employees. Beginning Jan. 1, new hires seeking a retirement account could instead only join a defined contribution investment plan similar to a 401(k) plan available to many private sector workers.
The legislation is a top priority of House Speaker Will Weatherford, R-Wesley Chapel, who says the Florida Retirement System is underfunded. Weatherford also maintains the system will command increasing millions of dollars from Florida taxpayers to keep it afloat, although his stance is disputed by many experts.
“It’s fair. It’s fiscally responsible. And it’s time to act,” Rep. Ritch Workman, R-Melbourne, said in support of the bill.
Democrats, though, accused House Republicans of employing scare tactics to push through a proposal that is being dismissed by Senate Republicans.
During committee hearings, Democrats were supported by police and fire union representatives who packed Capitol meeting rooms to testify against the legislation.
“You’re using bogeyman tactics of how the taxpayers will save money. … It’s absolutely false,” Rep. Dwayne Taylor, D-Daytona Beach, told the House Friday.
Democrats said the legislation is not only unnecessary but potentially dangerous to the $136 billion pension fund, used by more than 623,000 state and local government workers and 335,000 retirees.
The Florida Retirement System is considered 87 percent funded. Most analysts acknowledge that 80 percent is the benchmark for a fund considered to be on solid financial footing.
Republican leaders, however, say the unfunded actuarial liability totals $19.2 billion — a level they say is alarming.
Still, those defending the fund also point out that the shortfall would exist only if every pensioner demanded their full payments at once, which analysts say would never happen.
Republicans, however, said the proposed change will ease the burden on taxpayers — with lawmakers poised to spend more than $500 million this year to reduce the unfunded pension balance.
Supporters also said that the changes proposed by the House would not affect any of those in the traditional pension, or drawing benefits as retirees.
“We’re being proactive,” said Rep. Ben Albritton, R-Wauchula. “This way, we don’t have some huge crisis in the future.”
Under a traditional, defined benefit pension, workers are promised a specific monthly payment based on earnings and years of employment. The State Board of Administration directs the fund’s investments.
In a 401(k)-style account, workers play a bigger role in directing how their individual retirement funds are invested. Their benefits can ebb and flow, based on the economy.
In the free-swinging debate, Democrats pointed out Friday that lawmakers have failed to adequately finance the pension the past three years, deepening the gap supporters of the bill are citing to support their call for change.
Republicans who spoke Friday on the House floor said that reducing the payments demanded to maintain the pension plan would free more state money for schools and other programs.
The debate, though, quickly turned heated.
Rep. Mark Pafford, D-West Palm Beach, told House members, “how dare we” take action that endangers the pensions of low-wage public employees.
Rep. Irv Slosberg, D-Boca Raton, told Republicans, “Go pick someone else’s pocket. Leave our public servants alone.”
Within the retirement system, workers can choose between the traditional pension or, for the past decade, an optional 401(k)-like plan. The pension remains the favorite, though, with more than 500,000 employees enrolled, compared with only about 100,000 in the investment plan.
The Senate proposal (CS/SB 1392) by Sen. Wilton Simpson, R-Trilby, is significantly different from the House plan. It would give public employees an incentive by cutting their payroll contributions to 2 percent if they join the state’s 401(k) style investment plan.
If workers choose the traditional, defined benefit pension plan, they’d pay 3 percent. The only new workers required to join the investment plan would be senior managers, under Simpson’s bill.