Government

House Backs State Employees' Pension Reform on Party Lines Vote

GOP insists reform was needed but Dems call it an income tax
By: Kevin Derby | Posted: April 8, 2011 3:55 AM

The Florida House passed a reform measure to newly hired state employees' pensions Thursday, backing the measure on a 78-to-39 party lines vote.

The initial measure called for a 5 percent contribution, but the new version requires a 3 percent contribution. The bill that passed the House, which has the support of Gov. Rick Scott, would also terminate the state Deferred Retirement Option Program (DROP) for new workers and would raise the retirement age from 62 to 65.

Rep. Ritch Workman, R-Melbourne, the chairman of the Community and Military Affairs Subcommittee and the sponsor of the legislation, spent a large part of Wednesday afternoon on the  House floor taking questions on his proposal, which mandates that state employees place 3 percent of their salaries into the Florida Retirement System (FRS).

The representatives engaged in structured and limited debate, per an earlier agreement, with both sides getting 25 minutes to spar over the measure. Rep. Denise Grimsley, R-Sebring, served as the floor manager for the Republicans while Rep. Jim Waldman, D-Coconut Creek, managed the Democrats on the floor.

Workman opened the debate by focusing on the bill. “It requires all state employees to contribute 3 percent to their pension plans,” said Workman. “Since 1975, the state has paid 100 percent of the costs of their workers’ pensions.”

Workman maintained that as the state continues to struggle economically, the measure was needed.

“We find ourselves in the unfortunate position of not being able to shoulder 100 percent of the burden,” said Workman.

Democrats attacked the measure, just as they had in the committee process, labeling it a “tax.”

“Now is not the time to be implementing more fees,” replied Rep. Evan Jenne, D-Fort Lauderdale.

“This is an income tax on the public employees at a time when they cannot afford it,” agreed Rep. Luis Garcia, D-Miami.

Republicans stressed the reforms were needed to sustain the FRS -- and state spending -- in the long run.

“This is an increasing burden that will become unsustainable,” said Rep. Debbie Mayfield, R-Vero Beach, who insisted the measure would only impact new employees. “It is not unreasonable for employees to make a 3 percent contribution.”

Rep. Elaine Schwartz, D-Hollywood, fired back that the changes in DROP would impact current employees.

“I don’t want to hurt people,” said Rep. Tom Goodson, R-Titusville, as he spoke in support of the bill. “This bill will modernize the FRS and put it in better posture for the future.”

As he had throughout the committee process, Rep. Ed Hooper, R-Clearwater, who had been in the FRS during his decades as a firefighter, said that while he had problems with the bill, he would support it. Hooper said that he was “bowing to reality” and that the bill was needed to help the state in the long haul.

“This 3 percent that employees will contribute, they will get back,” said Rep. Matt Gaetz, R-Shalimar, who took aim at the Democratic characterization of the measure as a “tax.”

“This is a 3 percent cut in the take-home pay of state employees,” said Rep. Michele Rehwinkel Vasilinda, D-Tallahassee, who said this would be less money flowing into Florida shops and businesses. “This bill will cause job loss, not job increases.”

Rep. Seth McKeel. R-Lakeland, praised Workman’s proposal for not ending cost of living adjustments and not terminating future health subsidies for retirees -- as Scott’s initial proposal called for. McKeel praised the measure as “thoughtful” and “member driven.” Noting that state employees had not received a raise since 2006, McKeel pointed out that the state has been paying more health insurance costs for those employees. “We’re not balancing the budget on the backs of anyone. We’re balancing the budget -- and that’s our job.”

“This bill is a solution in search of a problem,” said freshman Rep. Jeff Clemens, D-Lake Worth, who argued the FRS was not in trouble. “The $700 million we’re going to save, that’s not going to shore up the FRS … we’re going to fill up our budget hole.”

On behalf of the Democratic Party, Clemens said he was thanking Republicans who voted for the measure -- and therefore were backing a tax. As he had throughout the process, House Democratic Leader Ron Saunders of Key West maintained the bill was a state income tax.

“For the first time in public history, this bill will impose a state income tax,” said Saunders, who then raised a point of order, arguing that the “mandatory contribution” mentioned in the bill was unconstitutional. House Speaker Pro Tempore John Legg, R-Port Richey, moved the point of order to Rules Committee chairman Rep. Gary Aubuchon, R-Cape Coral, who rejected the point.

“No aspect of government should be immune from cuts,” said Workman in closing. “We cannot afford to have any sacred cows.”

Legg then moved to temporarily postpone the measure. The House then took up the various budget proposals before taking up the issue as they passed conforming bills readying to conference with the Senate over the budget.

 

Reach Kevin Derby at kderby@sunshinestatenews.com or at (850) 727-0859.


Comments (3)

Common Sense
4:35AM APR 8TH 2011
I urge everyone to start the calls and support the Senate version of Pension Reform and here is why.

1. The tiered system is better for the workers. 2% for the first $25K; 4% for the next $25K; 6% for anything over $50K. Here is how it works. If you make less than $25K per year you pay 2%, if you make over up to $50K you pay 2% on the first $25K and 4% on the second $25K up to $50K. If you make over $50K you pay 2% on the first $25K, 4% on the second $25K and 6% on anything over the $50K. This is a better system for all workers.

2.Now imagine that you have been hired and told what you will receive as part of your compensation package. Like a responsible individual you plan for your future. Then with one month left you find out that your plans are worthless. That is what will happen in the house plan. Let's say you have 24 years and eleven months in employment. You are set to do your DROP and now you have nothing. Or you have 29 years and eleven months same deal. This is a bad bill. People actually do plan for their future and you have shot it down with a pen stroke. The Senate Bill give a grace period until 2016 to enter DROP. This is a better approach than the House Bill.

Something else that people do not know, or have not been told. Years ago someone could enter DROP, get a lump sum payment, go back to work, get paid for the job and draw a retirement check. This was wrong. Now they enter DROP there is no up front lump sum payment. Your retirement is calculated and a monthly check is placed in a trust fund. You go back to work for a maximum of five years. You do not collect two checks. When you retire for good you receive the amount in the trust fund. You then receive monthly retirement checks. You cannot go back to work for at least six months.

What neither House or Senate are telling you. First, judges have an actuary of 3.3 which is higher than any other classification; second, legislatures have an actuary of 3.0 which is equal to High Risk employees; and third, they pay no more into the system than anyone else.

Solutions:
1. All legislatures pay 7% into the FRS.
2. Reduce actuary to 3.0 for judges and 2.0 - 2.5 for legislatures.
3. No DROP for any elected official, anywhere.
4. Anyone who has worked ten years or less there would be no DROP, over ten years DROP would still apply.

My favorite option would be that individual retirement contribution would be optional. During these tough times every penny counts. So when times get better and I believe they will, individuals would not have to contribute. The state would still contribute the 4% and when times were better people could opt into the system. Once they entered they could not get out until retirement.

The Senate version is better than the House but could be made better with a few Common Sense solutions. Call Tallahassee and ask them to use some Common Sense.
FloridaIndy
9:43AM APR 11TH 2011
Very good commnets and suggestions......you should post this on the Facebook "Awake the State" page.
Scott
11:36AM APR 8TH 2011
Thanks for the well written explanation.

While my original thinking was something like 2.5 percent this year, 5.0 percent next year (with a cost offset next year, maybe 3 percent first 25k, 2 percent next 25k, 1 percent thereafter), you make a good case.

The "DROP" is difficult to understand, and it is complicated. It would seem something along the lines of an enhanced 401(k) participation would also be fair, and good value all around.

Thanks for the very helpful explanations.

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