TALLAHASSEE -- Gov. Rick Scott is proposing to overhaul the state’s pension system for tens of thousands of teachers, police officers and other state and county workers by requiring them to contribute to their retirement accounts and by not offering the pension plan to new workers.
The proposal, which must be approved by the Legislature, would save the state $2.8 billion over the next two years. The state is facing a budget shortfall next year that could top $4 billion.
In announcing the plan Tuesday, Scott said he wants current employees to pay 5 percent of their salaries into their retirement accounts. State employees currently do not pay for their retirement.
New employees would not receive a traditional defined benefit pension plan, but would be eligible for 401(k) retirement accounts typically offered in the private sector.
“We must bring Florida in line with the private sector and nearly every other state in the country by requiring government workers to contribute towards their own retirement,” Scott said in a statement released by his office.
The governor is also calling for an end to the popular program -- known as the Deferred Retirement Option Program (DROP). It encourages older workers to retire by allowing them to draw a pension check and return to work for the state. He also wants to end cost of living adjustments for retirement accounts.
The announcement was the second in a series of sneak previews Scott is making before he unveils his first budget at a rally of tea party supporters Feb. 7.
But as with his proposal Monday to save $1 billion by folding the Department of Community Affairs into the Department of Environmental Protection, Scott released few details.
The governor’s office would not disclose how it calculated the projected savings of $2.8 billion.
Legislative analysts estimate that requiring employees to contribute 5 percent of their salaries would save closer to $890 million a year -- with $500 million coming from school district personnel, $300 million from county workers and only about $90 million from state workers.
There are 655,000 active employees in the Florida Retirement System, including 91,000 in Miami-Dade County, 62,000 in Broward, and 3,700 in Monroe, 50,000 in Hillsborough, 30,000 in Pinellas and 19,000 in Pasco.
The state currently contributes about 9 percent of workers’ salaries to their retirement accounts. But some workers, including sheriffs deputies, firefighters, paramedics and other high-risk officers get a higher percentage.
Scott’s budget proposal “is not a binding document” and is viewed by legislators as a recommendation, said Sen. Jeremy Ring, D-Margate. But as chairman of the Senate committee that charged with implementing pension reforms, Ring said Scott’s proposals are “heading in the same direction” as lawmakers.
‘No magical tree’
“There’s no magical tree growing money,” Ring said. “You can lay off a huge amount of workers, or you can adjust pay and benefits. There has to be a belief that we’re all in this together and the reality of the situation demands adjustments and reforms.”
Because school districts make up half of the members in the retirement fund, the savings to school districts would be greatest.
Rep. Alan Williams, a Tallahassee Democrat who represents many state workers, called the governor’s proposals “a 5 percent tax on Florida Retirement System participants” and warned it would hurt morale of employees who haven’t had a pay raise since 2006.
“Now is not the time to balance a budget on the backs of Florida’s public servants,” he said.
Ring said that Scott’s proposal may be more aggressive than legislators are prepared to consider.
Lawmakers, for example, have talked about scaling back DROP, the popular program that encourages older workers to retire with a pension and return to work. Scott wants to eliminate it.
The program was designed to encourage senior workers to retire on time but receive a lump sum to defray the cost of health insurance until they become eligible for Medicare. But abuses by several high-salaried employees who returned to work while drawing a state pension have drawn criticism.
Scott wants to lower the accrual rate or multiplier for calculating benefits based on years of service. Scott would hold that rate to 1.6 percent for most employees, but give special risk employees a 2 percent rate.
Scott also proposes reducing the accrual rate, the portion of an employee’s retirement compensation that is calculated based on years of service. Scott wants most workers to receive an annual service credit of 1.6 percent, while special risk members would get a rate of 2 percent.
Scott’s plan also calls for eliminating the 3 three percent cost of living adjustment for service after July 1 and eliminating the benefit for new hires. Retirees would not be affected.
Doug Martin, director of governmental affairs for the American Federation of State, Local and Municipal Employees said the proposal “is a catastrophically bad decision.”
It will cause the government to pay more in contributions to keep the pension financially sound because fewer employees will be paying into the system.
“Those contribution rates are going to go up,” he said.