02-07-2011, 05:00 PM
Article published Feb 7, 2011
Bill Cotterell: Protests won't keep benefits off Scott's chopping block
Bill Cotterell
Notebook
Ethicists and debate coaches have a term, “the tyranny of the anecdote,” for information that’s hard to dispute because people hear it so much, it becomes conventional wisdom.
Everybody knows clock-watching government workers just put in their years, pad their salaries with overtime to jack up that final-five compensation average, stash cash in deferred-compensation accounts, run up a fat tab in the DROP plan and sometimes come back to “double-dip” after retiring. The trouble with what everyone knows is, except for a few enviable examples, it’s a canard.
Gov. Rick Scott goes to Eustis today to release his state budget plan for 2011-12. Expect shock and awe — along with warm applause from the Tea Party gathering he’s attending for the occasion.
What we’ve seen so far is in keeping with what Scott said last year during his outsider campaign for governor. The whole idea behind his $80 million hobby was to create private-sector jobs, which means running Florida government as much like a business as possible.
Regardless whether you like him or his policies, Scott is clearly on to something and has conservatives on his side when he speaks of state employment. Scott said last year he’d cut state payrolls. Attorney General Bill McCollum and Chief Financial Officer Alex Sink said it’s not that simple.
Look who won.
The trend in the private sector, Scott correctly points out, is away from “defined benefit” pension plans and toward “defined contribution” systems, like the 401(k) investment packages. The state already has its “public employee optional retirement plan,” but few employees have opted for it, so Scott wants to steer new hires into defined-contribution.
And, of course, his budget plans call for saving some $2.8 billion over two years by making members of the Florida Retirement System pay 5 percent of their salaries into the fund. The FRS is wholly employer-paid now — the only state plan with no employee contributions, Scott says — and most of the taxpayers don’t have employer-paid pensions in their jobs.
Legislators will hear protests from police unions, particularly about Scott’s proposal to reduce special-risk retirement credit from 3 percent to 2 per year, as well as from schoolteachers, state office workers and the already-retired. But legislators won’t get many calls and mail from regular, private-sector voters who think public employees shouldn’t put some money into the pension pot.
State Rep. Alan Williams, D-Tallahassee, called Scott’s plan a 5-percent pay cut for government workers — in effect, an income tax on members of the Florida Retirement System. And state employees haven’t had a general pay raise in five years, which is probably going to become six years pretty soon.
But Williams and other state employee advocates are not quite right about pension payments being an income tax. If you get vested with the state, you get it back — probably a lot more than you put in, if you live long enough — and if you’re a new hire in the 401(k)-style plan, you can take it with you when leave a state job.
You can't do that with an income tax.
Employers in the private sector don’t have DROP plans, either, so Scott wants to close it for new members next year — another certain crowd-pleaser with the voters.
The Deferred Retirement Option Plan is a good deal for employees — but it’s also a great benefit for employers. This is where anecdotes can get tyrannical.
DROP lets employees retire on Friday and come back to work on Monday, in the same jobs, for up to five years (eight for teachers). Their pensions are put in retirement accounts with cost-of-living increases and interest accruals, so they can build up six-figure payouts when their DROP clocks finally expire and they really have to leave their jobs.
The Legislature last year tried to reduce the guaranteed interest rate from 6.5 percent to 3 percent, but Gov. Charlie Crist vetoed the cut.
One trouble with DROP is, it never got defined. A few years ago, the Legislature’s Office of Program Policy Analysis and Governmental Accountability issued a report saying lawmakers should decide whether DROP was intended to help people retire or help them stay on the job.
The late Sen. Pat Thomas, D-Quincy, sponsored creation of the program about 20 years ago. For him, the idea was to keep good workers when their kids are grown and their houses are paid for — when they could afford to live on their pensions, Social Security and savings. The idea was to give them their pensions, in escrow, and keep their services for five years.
But DROP also has the effect of putting senior employees on a glide path toward a comfortable exit from their jobs. In that way, it helps the state shed, in five years, people who might stay for 10 or 12.
Put aside anecdotal envy of people who retire with $175,000 or $200,000 piled up in their DROP accounts, and the system is a win-win. Unless the state abolishes your job, it’s going to be paying the pension and the salary to someone. It will probably be a lower salary, at least for a while, if your replacement is far younger and less experienced — but the employer will also be getting less service from the new employee.
Those younger employees also tend to have more dependents in the state insurance system, which probably costs more than any salary difference. Net saving is temporary, almost a wash.
Abolishing DROP next year will probably have another consequence, intended or not — shedding many employees. Last year, when the Legislature cut the interest rate, there was a rush to join DROP and lock in the higher interest rate — before Crist vetoed the cut.
You can bet Scott won’t be vetoing anything that encourages employees to quit.
Contact Senior Political Writer Bill Cotterell at (850) 671-6545 or at bcotterell@tallahassee.com.
Bill Cotterell: Protests won't keep benefits off Scott's chopping block
Bill Cotterell
Notebook
Ethicists and debate coaches have a term, “the tyranny of the anecdote,” for information that’s hard to dispute because people hear it so much, it becomes conventional wisdom.
Everybody knows clock-watching government workers just put in their years, pad their salaries with overtime to jack up that final-five compensation average, stash cash in deferred-compensation accounts, run up a fat tab in the DROP plan and sometimes come back to “double-dip” after retiring. The trouble with what everyone knows is, except for a few enviable examples, it’s a canard.
Gov. Rick Scott goes to Eustis today to release his state budget plan for 2011-12. Expect shock and awe — along with warm applause from the Tea Party gathering he’s attending for the occasion.
What we’ve seen so far is in keeping with what Scott said last year during his outsider campaign for governor. The whole idea behind his $80 million hobby was to create private-sector jobs, which means running Florida government as much like a business as possible.
Regardless whether you like him or his policies, Scott is clearly on to something and has conservatives on his side when he speaks of state employment. Scott said last year he’d cut state payrolls. Attorney General Bill McCollum and Chief Financial Officer Alex Sink said it’s not that simple.
Look who won.
The trend in the private sector, Scott correctly points out, is away from “defined benefit” pension plans and toward “defined contribution” systems, like the 401(k) investment packages. The state already has its “public employee optional retirement plan,” but few employees have opted for it, so Scott wants to steer new hires into defined-contribution.
And, of course, his budget plans call for saving some $2.8 billion over two years by making members of the Florida Retirement System pay 5 percent of their salaries into the fund. The FRS is wholly employer-paid now — the only state plan with no employee contributions, Scott says — and most of the taxpayers don’t have employer-paid pensions in their jobs.
Legislators will hear protests from police unions, particularly about Scott’s proposal to reduce special-risk retirement credit from 3 percent to 2 per year, as well as from schoolteachers, state office workers and the already-retired. But legislators won’t get many calls and mail from regular, private-sector voters who think public employees shouldn’t put some money into the pension pot.
State Rep. Alan Williams, D-Tallahassee, called Scott’s plan a 5-percent pay cut for government workers — in effect, an income tax on members of the Florida Retirement System. And state employees haven’t had a general pay raise in five years, which is probably going to become six years pretty soon.
But Williams and other state employee advocates are not quite right about pension payments being an income tax. If you get vested with the state, you get it back — probably a lot more than you put in, if you live long enough — and if you’re a new hire in the 401(k)-style plan, you can take it with you when leave a state job.
You can't do that with an income tax.
Employers in the private sector don’t have DROP plans, either, so Scott wants to close it for new members next year — another certain crowd-pleaser with the voters.
The Deferred Retirement Option Plan is a good deal for employees — but it’s also a great benefit for employers. This is where anecdotes can get tyrannical.
DROP lets employees retire on Friday and come back to work on Monday, in the same jobs, for up to five years (eight for teachers). Their pensions are put in retirement accounts with cost-of-living increases and interest accruals, so they can build up six-figure payouts when their DROP clocks finally expire and they really have to leave their jobs.
The Legislature last year tried to reduce the guaranteed interest rate from 6.5 percent to 3 percent, but Gov. Charlie Crist vetoed the cut.
One trouble with DROP is, it never got defined. A few years ago, the Legislature’s Office of Program Policy Analysis and Governmental Accountability issued a report saying lawmakers should decide whether DROP was intended to help people retire or help them stay on the job.
The late Sen. Pat Thomas, D-Quincy, sponsored creation of the program about 20 years ago. For him, the idea was to keep good workers when their kids are grown and their houses are paid for — when they could afford to live on their pensions, Social Security and savings. The idea was to give them their pensions, in escrow, and keep their services for five years.
But DROP also has the effect of putting senior employees on a glide path toward a comfortable exit from their jobs. In that way, it helps the state shed, in five years, people who might stay for 10 or 12.
Put aside anecdotal envy of people who retire with $175,000 or $200,000 piled up in their DROP accounts, and the system is a win-win. Unless the state abolishes your job, it’s going to be paying the pension and the salary to someone. It will probably be a lower salary, at least for a while, if your replacement is far younger and less experienced — but the employer will also be getting less service from the new employee.
Those younger employees also tend to have more dependents in the state insurance system, which probably costs more than any salary difference. Net saving is temporary, almost a wash.
Abolishing DROP next year will probably have another consequence, intended or not — shedding many employees. Last year, when the Legislature cut the interest rate, there was a rush to join DROP and lock in the higher interest rate — before Crist vetoed the cut.
You can bet Scott won’t be vetoing anything that encourages employees to quit.
Contact Senior Political Writer Bill Cotterell at (850) 671-6545 or at bcotterell@tallahassee.com.