On April 8, 2021, Florida Senate Bill 84 passed along party lines, with all Republicans voting for it and all Democrats voting against it.
Florida Senate Bill 84 essentially requires new state employees, with the exception of the Special Risk Class (police and firefighters), to join a defined contribution investment plan instead of the traditional defined benefit plan. Any new public employees, such as teachers, hired after July 1, 2022 would have to choose how to invest their account balance in the Florida Retirement System (FRS) investment plan, and they would be offered payments according to how well the plan performs.
So why are Republican members of Florida’s Senate moving away from a “gold-standard” pension plan that is considered to be one of the best in the nation? Senator Ray Rodrigues (R-Estero), the creator of FL SB-84, said, “It is our duty to ensure Florida’s employees have retirement plans they can count on, and that requires us to ensure we maintain long-term solvency. Also, as policymakers we must recognize that the rising costs of pension obligations crowd out funding for other priority issues such as education, transportation, security, and assistance to the most vulnerable among us. Traditional pension plans place investment risk for changes in economic conditions that impact the retirement plan’s funded status squarely on the taxpayers, and provide little benefit to employees who do not spend their entire career in government. Our goal is to provide a solution that is affordable for Florida taxpayers, reliable for government employees, and attractive to the newer workforce.”
Similarly, Florida Republicans are concerned about the state’s ability to provide for its retirees in future years, citing the $36 billion in unfunded actuarial liabilities. Florida is able to pay off these liabilities, but choosing to pay off the liabilities comes with an opportunity cost of an inability to spend tax dollars on other public projects.
However, not everyone in the state is swayed by these arguments. Democrats, union members, and public employees in professions which would no longer be eligible for the defined benefit plan expressed major concerns. Their concerns are reasonable and founded; the new plan would reduce the flow of income to the pension fund and tie the fund’s health to Wall Street. In addition, changing away from the “gold standard” model Florida currently has may turn young professionals away from working in public jobs because they value the financial security the current model provides. This could spell a disaster for Florida; there is already a national shortage of teachers and removing the attractive benefit of being a teacher in Florida could lead to future schools unable to properly function and educate their students. Naturally, this concern would apply to other public professions in Florida affected by FL SB-84, making it harder for these essential jobs to compete and be filled.
Florida is walking into perhaps what might be uncharted territory and the bill has to pass through the Florida House. Other states have made similar changes before, but the results are not consistent. Pension policy and a state’s fiduciary duty should not be wrapped up in political-ideological lines, but rather, a state should ask itself how it well can it currently guarantee a safe retirement for current and future employees and what methods would actually properly cover their constituents and ensure they have enough money in retirement.