TALLAHASSEE, Fla. – Local governments with underfunded pension plans would not be able to look to the state for a bail out, under a bill filed Wednesday that is expected to become a template for legislation in the months ahead.
Meanwhile, House Speaker Will Weatherford and Senate President Don Gaetz reiterated that it's time for the state to shore up its own retirement system by shifting from a traditional pension plan to one more comparable to those the private sector.
While state lawmakers have been wanting to shore up the Florida Retirement System for a couple years, many local governments may face more immediate consequences from pensions that, according to one study, are underfunded to the tune of $10 billion and growing.
A Department of Management Services report indicates that 61 percent of local pensions are funded at below the 80 percent level, an historic threshold for an adequately funded pension.
While many counties, cities and special taxing districts have put enough away to pay future benefits, some face looming pension deficits that will divert money away from other local priorities. State lawmakers have contributed to the problem by expanding benefits for targeted classes of employees.
In response, Sen., Jeff Brandes, R-St. Petersburg, on Wednesday introduced SB 534, which would require local governments to more fully explain to taxpayers the performance of 492 local pension plans and whether they are adequately funded.
Further, the bill would prevent local governments unable to meet pension obligations from seeking relief from state taxpayers.
"We have to be able to know with one set of rules what is solvent, what is insolvent and what is in danger," Gaetz said Wednesday of local pension plans.
For state employees, a House committee is working on a proposal that would require FRS employees hired after Jan.1, 2014 to be placed into defined contribution retirement plans, which set aside contributions and rely on investment returns to determine what the ultimate payout will be.
The FRS, which is now funded at about 90 percent of its obligations, is in a good position to transition to such a defined contribution plan because it is not too far in the red. Weatherford estimated that it would take about $500 million to pay off the unfunded liability now in the FRS system.
"We have figured out that we can afford it, it's the right thing to do and it guarantees long term that we will not be going to our citizens asking for a tax increase to bail out a broken pension system," Weatherford said.
A spokeswoman for Gaetz said the Senate president is also on board with transitioning to a defined contribution system but wants more information on how much the transition would cost. That information is expected within the next few weeks, said spokeswoman Katie Betta.