Proposed overhaul of Florida’s public retirement plans would limit benefits, end popular DROP program

By William Gjebre, BrowardBulldog.org

With the state facing a mounting financial crisis, a new bill has been proposed that would slash retirement benefits for state and local government employees.

The proposal would eliminate overtime and other earnings beyond base pay as a basis for pension calculations, and allow optional plans that would require government workers to make contributions to their retirement plans.

The bill would also eradicate the state’s Deferred Retirement Option Plan (DROP) that allows employees to accumulate savings accounts, some of them lucrative, during their final years of employment.

At present, the approximately 760,000 active employees in the Florida Retirement System do not make pension contributions, only the employing agency.

The bill targeting these and other changes was filed last week as HB 303 in the state House by Representatives by Republican Rep. Fredrick W. Costello, whose district covers parts of Flagler and Volusia counties.

The bill is awaiting assignment to a committee by the Speaker of the House. There is no companion Senate bill. The state legislature goes into full session in March.

Costello, elected to the House last year after serving as mayor of Ormond Beach, said he has been working on pension reform for the past five years. It is needed, he said, because municipalities are struggling under the weight of fund pension costs.

“Any local government should be pleased because this provides reform,” Costello said. He added he is “committed” to development of a “fair and sustainable” plan that doesn’t burden government agencies and taxpayers.

He said his bill is “comprehensive” and the recommendations come from various groups studying reform. “I’m putting my best foot forward,” he added.

But opponents to the measure want Costello to step back and go away on the issue.

“Pensions for public employees in the state are already weak, and anything that further erodes them is an insult,” said John Ristow, a spokesman for the Broward Teachers Union. “BTU opposes the changes and proposals.”

“The bill is very poorly drafted” and would violate many commitments made to teachers and other public employees under current pension provisions, said Artie Leichner, vice president of the United Teacher of Dade, representing Miami-Dade school teachers.

Local police unions aren’t happy about Costello’s efforts either.

“The proposed bill dictates” new and lesser pension provisions for municipalities that already have separate and different provisions in municipal agreements, said Jack Lokeinsky, President of Fraternal Order of Police Lodge 31, representing City of Fort Lauderdale police officers.

For instance, he said, Fort Lauderdale’s plan uses a different method of calculating benefits than what’s offered in the proposed bill. The city only factors in up to 40 hours of overtime annually for pension purposes while the state has allowed unlimited overtime. He added his group will do all it can to oppose the measure. 

While all state and local employees would feel the proposed changes many particularly affect police officers and firefighters who generally have more in pension benefits.

League of cities supports change to the pension system

Rebecca O’Hara, communications director for the Florida League of Cities in Tallahassee, said the bill contains many of the recommendations her group supports for police and fire reforms because pensions have been too costly for some local government agencies.

“We are setting out to correct the imbalance,” O’Hara said. “Florida taxpayers have had to pay for the imbalance and the only way to correct it is to change the law.” She added the League supports a “fair and equitable plan.”

Miami, which uses approximately 20 percent of its budget for pension costs, reduced salaries and pensions last year. Hollywood, faced with pension fund shortfall, has raised its required contributions by employees to 9 percent, from 7 percent.  

The League’s position was no surprise to Matt Puckett, Deputy Director of the Florida Police Benevolent Association, based in Tallahassee. The proposed bill, Puckett said, attempts to force municipalities to join the Florida Retirement System because their pension costs will be lower.

“The bill is heavy-handed,” Puckett added. “We will try to slow it down or defeat it.” His organization has 22,000 employees in various state and local government agencies.

Fort Lauderdale City Commissioner Bruce Roberts, the city’s former police chief, likened the changes proposed in the bill to using “a nuclear weapon on an ant hill.” He said there needs to be pension reform but he believes his city is moving in the right direction. He pointed out that unlike the state, Fort Lauderdale requires employees to contribute part of their salary for pensions, new officers pay 8.5 percent of salary.

One of the key provisions of the bill is limiting the yearly pension multiplier for future years of service for most employees to 1.6 percent for each year of service beginning June 30, 2011. Pension calculations are generally based on years of service, times the multiplier. An employee with 30 years of service, multiplied by 1.6 percent would receive a pension of 48 percent  of the average salary of the highest five income years.

Current state law allows a multiplier up to 1.68 percent for each year for regular employees; 2 percent for upper management employees, such as school superintendents; 3 percent  for elected officials; 3.3 percent  for judges; and from 2-3 percent  for various special risk employees that include police officers, fire fighters and correctional officers.

The 1.6 percent appears to be aimed at all employees in the state retirement system and those now working for municipalities, according to an analysis by pension consultants working for the FOP Lodge 31.

Another key provision is eliminating the DROP program. Costello’s bill would end the program December 31, 2012, with all those in the program receiving their accumulated funds by that date. DROP has been highly popular among state employees, providing some with saving accounts in the hundreds of thousands of dollars at retirement.

Some of the other provisions in the bill are as follows:

• Removes overtime, unused leave, or any other compensation beyond base hourly or annual salary for the purposes of retirement calculations; this is applicable to all employees, including and police officers and firefighters.
• Stipulates that the normal retirement for employees will be 55, unless higher under a local plan.
• Provides that a public employer may also offer a pension plan that requires employees to make contributions equal to that made by the employer. The bill stipulates that the public employer is not and may not be required to make a contribution to a public retirement system or plan that exceeds 15 percent of the collective payroll for the participants of the system or plan. 
• Permits municipalities or special fire districts to unilaterally establish one or more new plans for police officers and firefighters with different benefits than the existing plans, or to join the FRS.