Home Personal Finance FRS double-dip retirement expansion will make it harder for private sector to compete with state

FRS double-dip retirement expansion will make it harder for private sector to compete with state

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  • Some Florida legislators want to extend the period during which state workers can “double-dip” by collecting retirement benefits even while in state jobs.
  • Elected officials in Florida, including legislators, are also eligible to participate in a double-dipping program known as the Deferred Retirement Option Program (DROP).
  • The bill makes it difficult for the private sector to attract and retain talent because state benefits are so lucrative.
  • The Florida Retirement System (FRS) already faces $36 billion in debt and is only 82% funded.
  • The bill will cost taxpayers $3.1 billion in the next fiscal year and will do little to address the FRS’s outstanding debt.

Last Tuesday, the Florida House Appropriations Committee announced a plan aimed at attracting and retaining state employees, especially police officers, firefighters and other first responders, as well as teachers and nearly 90,000 state employees. , passed a bill aimed at significantly expanding state retirement benefits. Bureaucrats – as the vacancy rate for these jobs is currently over 16%.

Current plans to address worker shortages include expanding the controversial deferred retirement option program known as DROP. This allows state bureaucrats who have reached retirement age to “double” by collecting retirement benefits, even if they are not actually retired. Retirement money is deposited into a special bank account where you can earn interest as well. Under current regulations, the state allows the employee to remain in her DROP program for five years.but HB239 This will allow DROP participants to continue working and receive retirement benefits for up to eight years, doubling the interest they currently earn on these retirement benefits while employed.

In defending the bill, Republicans are sticking to first responder-centric arguments, but when it comes to DROP’s benefits, that excuse doesn’t make much sense.

“These restricted windows have caused many public servants, including law enforcement officers and first responders, to retire before they are ready. Demi Busatta Cabrera“These changes will help state and local governments and departments retain experienced staff for longer.”

That’s right. Still, the bill goes to great lengths to allow members of the retirement plan’s “special risk class,” including police and firefighters, to “retire” five years earlier than regular members, such as elected officials and teachers. I am doing my best. In testimony Tuesday, one fire association thanked lawmakers for granting early retirement so they wouldn’t be exposed to dangerous chemicals, PTSD, or other trauma for another five years. For many, the DROP program tempts them to stay and work longer and is the very logic used to persuade lawmakers to reduce the number of years of service required by police and firefighters before they retire. It seems to be against the norm. .

If you have one civil servant class milesbottom DROP program, become a worthy recipient of its teachers. In that case, DROP could help address the ongoing labor shortage. For virtually every other class, DROP is just one way for her to manipulate the system and get more cash out of her FRS.

So while granting access to the controversial DROP program is bad enough, HB 239 expands the benefits of DROP across the board so that all state employees who reach retirement age are No matter how important (or unimportant) it is, let’s double it.system up to Eight Year. This is not the only change. The bill would increase the interest rate on doubled dollars from 1.4% to 4%.

The original purpose of the DROP program was to enable the retention of rare skill sets and experience in mission-critical jobs essential to the state. This argument makes sense in certain circumstances. It also probably makes sense, for example, in highly specialized jobs where new, younger workers are unable to fill those positions. But Florida’s financially unsound state retirement program has left many of the easier bureaucratic government jobs that young, inexpensive workers can easily fill, especially the potential for layoffs. It doesn’t make sense that the government would extend severance pay for some positions that are rare, wage cuts, or other potential shortcomings of competitive private sector jobs.

It would be one thing if civil servants were to leave en masse for more lucrative private sector jobs. As a matter of fact, the private sector itself is experiencing similar labor shortages across a range of industries, and private sector firms are already competing for workers within their own industries and cannot compete. Florida State Government for the same talent.

Where are the Republican budget hawks?

Of course, every Democrat on the House Appropriations Committee voted in favor of expanding and expanding government benefits paid to state bureaucrats. After all, Democrats never say no to the chance to expand government.

The real surprise came from the fact that there is not a single Republican budget hawk on the House Appropriations Committee. No Republican committee member expressed any concern about changes that, if HB 239 were passed, would increase the cost of the FRS by billions of dollars over the next few years. The Florida Retirement System (FRS) currently has a staggering $36 billion in debt, and only 82% of its assets are needed to fund its long-term benefits. But after hearing law enforcement and first responder union representatives testify in favor of expanding their retirement benefits (unsurprisingly), not a single Appropriations Board member Didn’t ask about the bill. Committee members voted in favor of him 27 to 0.

Perhaps now is the time to note that elected state representatives are also part of the Florida Retirement System. This will count towards the calculations used to determine how much he will be doubled in the DROP program when he finally qualifies. Many lawmakers currently serving will be able to hold other elected or appointed government jobs in the next few years and qualify for the double DROP benefits they helped expand.

FRS is not healthy

Lawmakers who vote to hatch their own nests are worrisome. But even more alarming is the fact that the proposed changes do little to address the shortcomings of the current pension system. The current pension system is already woefully underfunded, structurally unsound, and relies on state contributions and risky investments to sustain itself. Expanding eligibility, increasing retirement benefits, and at the same time increasing the interest paid on the doubled dollars would cost the FRS enormously. At the same time, the bill only slightly increases the state’s burden on her FRS itself. In other words, the FRS’s unfunded liability (the amount owed to retirees that it cannot actually pay) will only grow over time.

This proposed expansion of the state pension plan will cost taxpayers $3.1 billion in the next fiscal year alone. Some of those dollars include adjustments to the long overdue Cost of Living Allowance (COLA) for state workers amid a rapidly expanding economy. . But can we get it next year? Are lawmakers confident that state, national, and global economies will continue to generate budget surpluses that can be lavished on state workers at the expense of the private sector?

2011, then-Governor Rick Scott Inheriting a state budget that was billions short due to the unforeseen economic crisis of 2008, he and his legislators faced a tough choice: cut the COLA and overhaul the FRS. These changes led to a balanced budget, but failed to make the pension system structurally sound. In fact, his FRS now is worse than his 2011.

Now that you have a budget surplus, a better use of your cash is to allow the FRS to be resolved in the long run. Instead, legislators are rolling back changes to the system to provide civil servants with benefits that the private sector cannot afford and enjoy. If the economy falters in the next few years, Florida will pay retirees because the funds are contractually mandated. This means that the cash distributed to retired state employees (and bogus employees) will either come from other programs such as education budgets, health care programs, or Florida will have to increase private sector taxation. To do. None of these options are attractive.

As Leonard Gilroy As the director of the Reason Foundation’s Pension Integrity Project points out: health care. “

Florida’s pension system needs a drastic overhaul, and if HB 239 is passed, it will require even more drastic reform. But that requires Republicans to take a long-term view of the problem and have a commitment to do something about it.

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