11-02-2010, 02:11 PM
Is Florida Paying Former Employees Too Much?
On August 13, 2010, in Florida Retirement System - Pension Plan, by Mark Davy
In a recent new article titled “Is Florida Paying Former Employees Too Much”, Senator Mike Bennett was quoted as saying the current Florida Retirement System Pension System is “out of control”. Bennett has announced that he will be introducing a bill this fall that will cut and eliminate benefits to FRS members. We decided to check into the data he used to support his opinion and we could not find credible data to support his conclusion.
The article states “the state paid out $5.6 billion to retired workers; that’s almost 10 percent of the state budget”. According to the Annual Report (page 53) The Florida Retirement System Trust paid out $4.8 billion in total pension benefits (we could not validate the $5.5 billion number from the annual report). The article stipulates this is almost 10% of the state’s total annual budget. Again the math is fuzzy; as the budget was closer to $66 billion, of which 5.5 is only 8.3%, but I guess rounding up makes the story more sensational.
Page 19 of the Annual Report, reflects $4.8 billion payout to retirees (who worked hard for the benefits the state promised them), employer contributions accounted for $3.73 billion, and of that only $679 million are labeled state contributions. The real number – only 1% of the real dollars came from the State budget.
Bennett states “You have a firefighter who could retire at 45 and live until 90. They only worked 25 years, but are going to collect for 45 years. That’s not what it was designed for!” Again, it makes for wonderful political rhetoric! It is possible someone retires at 45 with 25 years of service, and lives to be 90. We looked at the annual report to see what the real data suggests.
According to the states own numbers (Page 56) bottom of page “Average duration of benefit payments in years is 9.53 years” not 45 as used in the Senator’s example. The real numbers, according to the Annual Report (page 57), reflect the average age of retirement is between the ages of 60 and 64, and there are 97 employees over age 85!
WFTV found, “even now, the state’s pension program is in the red. As of last year, Florida had a total of $15 billion in unfunded pension liabilities”. The statistic chosen for use was for the year immediately after the Financial Panic of late 2008, when assets were at their lowest values.
The accurate numbers could be found by the press release posted on the MyFRS.com web page under the title “Florida Retirement System Rebounds in FY 2009-2010”
Even when the system was temporarily underfunded by less than $15 billion, it was still well within Pension Actuarial thresholds (80% funded) of being a sound and solid plan. With the latest year’s performance, the $15 billion shortfall has been mostly made up, and the FRS System is well within the parameters of an outstanding Pension Plan. For the previous 11 years the fund has been over funded and the last 18 month has been an aberration to the plan. FRS is a well funded and self sustaining pension plan, which does not reach into the general budget for shortfalls. We believe the legislators should not use its efficiency as a scapegoat for other budget shortfalls.
The articles final point of propaganda says that according to a “2009 study by the Bureau of Labor Statistics, average state and local government workers earned $26.24 per hour while private sector earnings were $19.45 an hour”. We would like to point out this study was done for ONE year, in the middle of the worst recession most of us have lived through, at a time when the civilian unemployment rate was over 13%! This is hardly a statistic legislative changes should be based on. How did government workers fare in the statistics for the prior 25 years?
There are many states facing severe funding gaps in their pension plans that may need to be addressed, Florida is probably not one of them. So that brings us back to if it isn’t broken why fix it!
We believe that while “Bennett is still crunching numbers with the state budget office before filing his bill”, he should be honest with those numbers, and not misconstrue statistics for good sound bites and political rhetoric. If the budget needs to be reduced, and the financial system needs to be reformed, we would like to encourage the legislators to knuckle down and cut wastes where waste exists, and not arbitrarily break promises and cut benefits to those who have worked for the benefits they were promised, and earned.
On August 13, 2010, in Florida Retirement System - Pension Plan, by Mark Davy
In a recent new article titled “Is Florida Paying Former Employees Too Much”, Senator Mike Bennett was quoted as saying the current Florida Retirement System Pension System is “out of control”. Bennett has announced that he will be introducing a bill this fall that will cut and eliminate benefits to FRS members. We decided to check into the data he used to support his opinion and we could not find credible data to support his conclusion.
The article states “the state paid out $5.6 billion to retired workers; that’s almost 10 percent of the state budget”. According to the Annual Report (page 53) The Florida Retirement System Trust paid out $4.8 billion in total pension benefits (we could not validate the $5.5 billion number from the annual report). The article stipulates this is almost 10% of the state’s total annual budget. Again the math is fuzzy; as the budget was closer to $66 billion, of which 5.5 is only 8.3%, but I guess rounding up makes the story more sensational.
Page 19 of the Annual Report, reflects $4.8 billion payout to retirees (who worked hard for the benefits the state promised them), employer contributions accounted for $3.73 billion, and of that only $679 million are labeled state contributions. The real number – only 1% of the real dollars came from the State budget.
Bennett states “You have a firefighter who could retire at 45 and live until 90. They only worked 25 years, but are going to collect for 45 years. That’s not what it was designed for!” Again, it makes for wonderful political rhetoric! It is possible someone retires at 45 with 25 years of service, and lives to be 90. We looked at the annual report to see what the real data suggests.
According to the states own numbers (Page 56) bottom of page “Average duration of benefit payments in years is 9.53 years” not 45 as used in the Senator’s example. The real numbers, according to the Annual Report (page 57), reflect the average age of retirement is between the ages of 60 and 64, and there are 97 employees over age 85!
WFTV found, “even now, the state’s pension program is in the red. As of last year, Florida had a total of $15 billion in unfunded pension liabilities”. The statistic chosen for use was for the year immediately after the Financial Panic of late 2008, when assets were at their lowest values.
The accurate numbers could be found by the press release posted on the MyFRS.com web page under the title “Florida Retirement System Rebounds in FY 2009-2010”
Even when the system was temporarily underfunded by less than $15 billion, it was still well within Pension Actuarial thresholds (80% funded) of being a sound and solid plan. With the latest year’s performance, the $15 billion shortfall has been mostly made up, and the FRS System is well within the parameters of an outstanding Pension Plan. For the previous 11 years the fund has been over funded and the last 18 month has been an aberration to the plan. FRS is a well funded and self sustaining pension plan, which does not reach into the general budget for shortfalls. We believe the legislators should not use its efficiency as a scapegoat for other budget shortfalls.
The articles final point of propaganda says that according to a “2009 study by the Bureau of Labor Statistics, average state and local government workers earned $26.24 per hour while private sector earnings were $19.45 an hour”. We would like to point out this study was done for ONE year, in the middle of the worst recession most of us have lived through, at a time when the civilian unemployment rate was over 13%! This is hardly a statistic legislative changes should be based on. How did government workers fare in the statistics for the prior 25 years?
There are many states facing severe funding gaps in their pension plans that may need to be addressed, Florida is probably not one of them. So that brings us back to if it isn’t broken why fix it!
We believe that while “Bennett is still crunching numbers with the state budget office before filing his bill”, he should be honest with those numbers, and not misconstrue statistics for good sound bites and political rhetoric. If the budget needs to be reduced, and the financial system needs to be reformed, we would like to encourage the legislators to knuckle down and cut wastes where waste exists, and not arbitrarily break promises and cut benefits to those who have worked for the benefits they were promised, and earned.