Florida lawmakers see big savings in state-worker pension cuts

Forced to plug a budget hole of nearly $4 billion, state legislators see pensions as a source of big-bucks savings.

by Bill Cotterell

But many of the employees and retirees who count on the Florida Retirement System see it as survival. Despite some big payouts to high-earning executives, many of whom stockpile pensions for five years in a lucrative deferred-retirement plan or return to work as double dippers, the average retiree draws less than $1,500 a month.

For some of the former police officers, teachers, county and city employees and state workers receiving benefits from the FRS, it's not enough to cover their health insurance costs.

"We're not living on caviar, I can tell you that," said Nancy Stewart of Estero, who retired last year after more than 36 years as an elementary school teacher. "I think our pensions are only being brought up right now because it's a symptom of the recession."

With the state facing revenue shortfalls, and Gov. Rick Scott agreeing with the Republican legislative leadership that no new taxes will be considered, a retirement system that paid $5.32 billion to more than 300,000 retirees last fiscal year is a fat, slow-moving target.

"Reform is coming," state Sen. Jeremy Ring, D-Margate, told employee union representatives at a meeting of his Senate Governmental Oversight and Accountability Committee. "Everything is on the table."

Ring is working on a package that will require contributions by employees, who now have fully paid FRS pensions. Ring's proposal will address annual accrual rates, minimum retirement ages and qualification for higher special-risk pensions.

In addition, the Legislature could do away with defined-benefit traditional pensions for new employees and could offer them only 401(k)-style defined-contribution plans that are now more common in the private sector and without any liability for the state and other governments when workers retire.

On the chopping block, too is the Deferred Retirement Option Program that allows employees to "retire" and continue working for up to five years -- eight for teachers -- while their monthly pension checks are banked and earn 6.5 percent interest.

'GOT THEIR ATTENTION'

Fred Costello fired a shot across the bow of employee and retiree advocates. The former Ormond Beach mayor, a first-term Republican in the House, filed -- then quickly withdrew -- what legislators call "a parade of horribles." House Bill 303 would have ended the DROP program, cut annual accrual rates, raised early-retirement penalties, allowed pension reductions and hiked some retirement ages and service requirements. Ending DROP would force 33,577 public employees out of their jobs next year.



"I pulled the bill because there's no need to hit a mosquito with a baseball bat," said Costello. "I think it got their attention and everybody will negotiate in good faith now. I'm a nobody; I didn't think a freshman representative was going to change the whole retirement system himself, but this got them talking."



'UNSUSTAINABLE'

The FRS has consistently been one of the nation's strongest, funded by an investment portfolio of $126 billion that posted market gains of 14 percent last year. State employees make up about 20 percent of the plan's 655,367 members, with school boards accounting for 48 percent and the rest spread among counties, cities, special districts and colleges.



State, county and local governments will pay about $3.6 billion into the fund this year -- roughly 9 percent of payroll for regular employees and 22 percent for the special-risk fire, police and prison officers.

"It's unsustainable," said Costello. "No pension was designed for people to retire at 55 and live another 30 years, which is what's happening. The actuarial accrual rate requires more dollars because we know people are living longer, and that's a wonderful problem."



But many employees and retirees feel they're getting stuck with the tab for that problem.

"I just think they're using the retirement system as something they can gut and use the money for something else they dig for themselves," said Dorinda Bain, 62, a booking clerk at the Santa Rosa County jail. She said she joined DROP last August and hopes to retire at 66, when she will have about 17 years in the system.



"I understand change needs to be made, but if you have a contract with someone, you can't just decide to change it for people," she said.



'PANICKY'

On paper, a regular-class employee with 30 years' service and an average final salary of $40,000 would have a pre-tax pension of $19,000 annually. That works out to $1,453 a month. Health insurance premiums are $549 for single employees and $1,243 a month for family coverage. There is a state insurance subsidy that maxes out at $150 a month, but lawmakers last year tried, but failed, to reduce that.



Doug Martin, lobbyist for the American Federation of State, County and Municipal Employees, said most employees don't stay 30 years and those who opt for survivor benefits have pensions scaled back accordingly. AFSCME calculated that the average FRS benefit for regular employees at an average $34,651 salary and average service of 21 years works out to a monthly pension of $970.



"I served 30 years as a Brevard County deputy sheriff," said Scott Trotter, 51, of Titusville. "I retired one year ago and my pension is $18,000.00 dollars a year less than I was making while working. My medical insurance cost is $905 a month; that's over $10,000.00 a year right off the top."



Trotter said he went back to work as a process server. He conceded "I'm doing pretty well," having compiled $210,000 in DROP, but he rolled it into an IRA because he is still far short of Social Security or Medicare eligibility and has a wife and daughter.



"When people who don't know the facts attack the FRS pension plan they seem to only want to include the high-end workers making six-figure-plus salaries," he said. "I personally had to go back to work just to pay the bills."

Linda Edson, 62, retired after 41 years in the Leon County schools last year with a pension of about $2,500 monthly. Now she attends House and Senate committee meetings to hear ideas from legislators and lobbyists, while awaiting Scott's Feb. 7 budget proposals. She said she wasn't surprised that Costello withdrew his bill, after he touched off a barrage of phone calls and e-mails among employees and retirees.



"People were getting panicky, so I know he was getting a lot of phone calls and e-mails," she said. "I don't know if these legislators know the power of the computer."



'NOT LARD BRICKS'

One thing that irks legislators, and their taxpaying constituents, is the "non-contributory" nature of the FRS. The Senate voted last year to make employees contribute one-fourth of 1 percent of salaries into the fund, but the plan stalled in the House.



Engineer Chet Grimsley of Tallahassee, who went to work for the Department of Transportation in 1964 and retired last year, said taking on the full cost of the FRS was the employers' idea. Before the FRS was created in 1970, teachers used to pay 6.25 percent into their pension fund and state and county employees chipped in 4 percent, both amounts matched by employers.



"Now, it's being portrayed like we're taking advantage of something," said Grimsley. "But the Legislature did it."

He also said Scott and legislative Republicans find government employees an easy target.

"I'm a registered Republican, always have been, but I don't like the Republican attitude toward state employees," Grimsley said. "It's not going to help, in the future, to recruit state employees."



Attorney William Porter of Havana, an attorney for the Agency for Health Care Administration who started as a Highway Patrol officer in 1972, said pension cuts will ripple through the economy hurting realtors, insurance agents, retailers, "and a slew of Florida businesses that profit from these programs."



"This isn't about lard bricks," he said, citing a term ex-Gov. Bob Martinez once upset state employees by using. "This is about promises and long years of working steady and doing the right thing, and being slapped and squashed for the effort."

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