Pension ruling could derail state budget

By , Herald-Tribune
/ Wednesday, February 22, 2012

TALLAHASSEE

As the Senate and House move toward completing a $70 billion-plus state budget, a pending court ruling threatens to derail the Legislature’s annual appropriations process.

The highly anticipated decision from a circuit court judge in Leon County could overturn a 2011 law that made public employees pay 3 percent of their salaries for their pensions, leaving an $860 million gap in the current budget year and vastly complicating the proposed spending plan for the coming year.

If Circuit Judge Jackie Fulford overturns the law, it would also bring a huge financial challenge to Florida’s counties, which could lose close to $600 million in the current year.

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“I think it would place the budget in serious jeopardy if we have to go back because of a judge’s order to cut another $1.2 billion out of the budget,” said Sen. Don Gaetz, R-Niceville. “I think it would create some real severe problems for critical services for the people of Florida or it would necessitate a tax increase, which I think a vast majority of the Senate Democrats and Republicans would be opposed to.”

Senate Budget Chairman J.D. Alexander, R-Lake Wales, who will present the Senate’s $71 billion budget bill on the chamber’s floor today, said it was premature to be concerned about the ruling.

“Until we know how she rules, it would just be speculation,” he said.

The Florida Retirement System collects retirement money for more than 655,000 active employees throughout the state and provides benefits to 219,000 retirees.

An analysis by the House last fall showed an adverse court ruling could wipe out $860 million in savings that lawmakers built into the current budget, including $456 million from the 3 percent employee contribution and $404 million from limiting cost-of-living adjustments (COLA) for future retirees.

That figure was confirmed in an annual financial report that Chief Financial Officer Jeff Atwater presented to Gov. Rick Scott and legislative leaders last month.

“The financial impact of a ruling that the compulsory 3 percent contribution is unconstitutional would be in excess of $861 million,” the report said.

An adverse ruling would present a double whammy for lawmakers. They would have to plug the hole in the current budget year, which is nearly three-quarters complete, while having less money for the new budget year, which begins in July.

It could jeopardize their ability to provide an additional $1 billion for public schools, which Scott has proposed. It could also deepen budget cuts for many state programs, including hospitals and state universities, which are already facing major revenue losses.

At the least, a negative ruling may cast into doubt the 2012 Legislature’s ability to finish by its March 9 deadline.

But there are plenty of variables in the case — not the least of which is how Fulford will rule.

Legislative leaders believe they have the authority to make future adjustments in the state’s pension plan. They contend there was no “contractual obligation” between the state and the workers and they can change benefits prospectively.

“If she rules the judiciary is going to take over the appropriations process of the Legislature then, with all due respect, I think she would have breached the separation of powers and an appeal would be in order,” said Gaetz, who will become the next Senate president in November.

But that authority has been challenged by firefighters, police officers, teachers and other public employees and their unions, which argued in the lawsuit that making workers contribute to their pensions violates the original terms of their employment. Public workers haven’t contributed to their pensions since the 1970s.

In the hearing last fall, Fulford expressed skepticism about the new law. “He’s paying more and getting less,” Fulford said about the impact of the law on workers. “You’re punishing him for coming to work.”

Union representatives said they expect a ruling within the next few days, although Fulford canceled a scheduled hearing on the case that was set for her courtroom on Friday.

“We still anticipate a ruling pretty soon,” said Mark Pudlow, a spokesman for the Florida Education Association, which represents teachers around the state.

Pudlow said a ruling in favor of the workers would not necessarily bring great harm to the state budget, noting lawmakers have a number of ways to offset the financial loss, including looking at new revenue sources or tapping budget reserve funds. He also noted the state pension fund has been financially strong because of a robust stock market over the last year.

“They’re going to have some choices,” Pudlow said. “But I’m sure the only thing you’re going to hear is cuts to education, cuts to other programs. You’re not going to hear about taking back corporate tax breaks or finding any new revenue or using the rainy day funds.”

County officials are also closely watching the case, which has a potential $597 million impact on their budgets.

Like state lawmakers, county governments are also preparing their budgets for the next year, said Cragin Mosteller, a spokeswoman for the Florida Association of Counties.

“They are in the middle of the 2011-12 budget,” Mosteller said. “To go back and try to readjust your budgets for some counties in a significant manner would have dire consequences for critical services.”

Gaetz made a similar point, noting an adverse ruling could impact Floridians who rely on a variety of services, ranging from schools to care for the disabled to economic development programs.

“Everybody ought to light a candle tonight to make sure that that ruling doesn’t go the wrong way,” he said.

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Lloyd Dunkelberger

Lloyd Dunkelberger is the Htpolitics.com Capital Bureau Chief. He can be reached by email or call (941) 315-0496. ""More Dunkelberger" Make sure to "Like" HT Politics on Facebook for all your breaking political news.
Last modified: February 22, 2012
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VIEWING 23 COMMENTS
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Bob
Wednesday, February 22, 2012 at 7:59 pm

When is it ever enough for these parasites?

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mark
Wednesday, February 22, 2012 at 8:37 pm

They had no right to steal that money in the first place.All those workers who had to take home shortened checks should be reimbursed with interest.Scott and hid Republican friends are nothing but criminals.Those funds should never have been taken from employees and once they were that money should have been ear marked for each individual employee by name after all it came out of individual salary accounts and should not have gone to a Rick Scott do whatever you please slush fund.They took the money based on a lie…FRS was and still is fiscally sound…Scott has pilfered every fund in the state of Florida while treating his own party and the 1% wealthy with kid gloves…The Rick Scott is a thief slogan is true and factual 100%

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mark
Wednesday, February 22, 2012 at 8:39 pm

It will not derail anything Scott will just have to get the 1% of the wealthy to pay a fair share and to close all those loop holes even Scott enjoys while the rest of little government continues to support the fat money grubbing Republican piggies

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Shameful
Wednesday, February 22, 2012 at 9:26 pm

That money was stolen from the public servants of this state by a thief. The Repubs have demolished the State of Florida and put it on the path of ruination. Shame on them! May the judge rule for these workers. These funds should be paid back in a ‘LUMP SUM’ with interest and damages immediately upon ruling. Workers do not want to hear “it will take us awhile to implement the change” or other lies they are so famous for.

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fedupwithslimemerchants
Wednesday, February 22, 2012 at 11:36 pm

Most telling is the fact that public employees in the top 5% earning bracket, and the politicians now voting on the issue, all of whom collect a pension, exempted themselves from having to pay for it. That’s right, they built in a clause exempting themselves from the 3% tax. Just like it’s 18th century France, let the working class support everyone else. Why make the pork-earning thieves pay for their much pricier pensions when you can scrape a little more from cops who get shot at, firefighters who rescue people from collapsing buildings, and professors who go to school for ten years and borrow 50,000 to make 38,000 a year? Let the public servants kill themselves over pensions that won’t buy groceries, then pillory them in the press, while the 1%, Scott the pig, and his local toadies drink 100 year old scotch and dream about retiring abroad.

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HOHN
Thursday, February 23, 2012 at 6:39 am

Just keep voting for the party of slavery,THE GOP as this is what they want another civil war

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Brian G
Thursday, February 23, 2012 at 7:39 am

Dont worry my fellow Public Servants..Michigan did the same. Automatically helping themselves to 4% of my income to cover the “retirement health care trust fund”. We just got all of that $$$$ back, with interest. But dont be suprised if they do the same thing they are doing up here. Making us “Choose” between staying in a defined benefit (and “volunteering” to pay 4%) or go to a WORTHLESS 401k Defined contribution and not pay the 4%. Now days I guess a promise or bargaining agreement is useless, when it comes to THEM upholding their part of the deal……. Arent Republicans great ?!?!?

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Jan
Thursday, February 23, 2012 at 8:42 am

When I first started teaching in Florida in the early 70′s we all paid 2 or 2 1/2% into the retirement system. I had paid 3% in NY State before that. While it was nice not having to pay it when they changed the regs., I think people need to remember why they changed it. Teachers, law enforcement personnel and even firefighters were leaving the state at high rates due to higher salaries (at one point Georgia was paying an average of $10,000. a year more than most Florida counties), and Florida had a poor reputation in many of these public service areas because they were so poorly funded. As people left the state they were also pulling out what they had paid in so that left the state in a precarious position. While I don’t envy the legislators this year because the budget constraints are a reality – less money coming in means less money to fund services. It sounds like the pendulum is swinging back, however our representatives should look back at what happened before and take steps to avoid those pitfalls. The public would also be more accepting if our reps. would put aside pet projects, district specific line items, and personal issues ( such as JD Alexander’s creating a universal monument to himself without complying with earlier guidelines-picky things like accreditation!). They also need to start with a clean slate on tax breaks and delete the ones which are ridiculous off the books. It is time we looked at minimum base funding for counties (for all services) and then look at a per person allocation on top of that. Once the counties have their allocations they should have the freedom to allocate it for services locally with in the parameters of state and fed regulations. If all else fails, then we probably need to start discussing a state income tax, which no one really wants, and will pretty much insure that no one in that legislative session will be elected to office again.

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Countmeister
Thursday, February 23, 2012 at 10:08 am

3% paid toward pensions sure doesn’t seem like a lot of money, since I have to put in virtually all of my retirement and my employer only matches up to 3%. I do not think government workers should have any better benefits than the rest of us.

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JP
Thursday, February 23, 2012 at 10:30 am

Wow, big deal 3%. Yeah its completely unfair for people to have to contribute to their own retirement. Look around, what company completely funds their employees retirement any more? None. Everyone one else in the country has to save for their retirement. Its the entitlement mind set thats at work in this comments section, and its exactly wrong with our county. Everyone one wants a handout. Yes we know who you’ll be voting for. And for the occupier’s, give it a rest. If you worked 1% as hard as the 1% maybe would have a job or a life. Stop complaining.

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bill
Thursday, February 23, 2012 at 11:04 am

When one takes a job with city/county/state gov. (fed excluded) you sign on because you are willing to accept and trade off a lower rate of pay (compared to private ent.) with minimal annual increases that is not performanced based like private enterprise for benefits and stability. When the ecomony is good and John Q Public is making more money than the governmentworker, NOBODY COMPLAINS! But as soon as John Q Public loses his performance based job and is sitting on unumployement, suddenly the government worker who has not made large sums of money throughout his career is the bad guy because they are now considered “well off or over paid”! I guess it is easy to point the finger when you are staring up from the bottom of the barrel. It is the politicians and thier cohorts, not the workers who are ripping off John Q Public. SO when the economy turns around and your making money John, gov workers will still be making close to the same amount!

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joe
Thursday, February 23, 2012 at 11:07 am

it seems to me that the responses on this site are very heavy on the “I don’t give a da## about the rest of the state. just give me as much as I want.” is 3% of Gross income such a tremendous amount of money? only if the Gross Income is ALSO a tremendous amount of money. 3% of $20,000 is $600, barely enough to purchase a wide-screen TV. of course, if the Gross Income is $100,000, then the 3% would be $3,000 and that might be considered a LOT of money to someone on Social Security who gets $1200 per month. but WTH, you complainers are “public employees” who deserve to live MUCH better than the taxpayers who pay your salaries, right? if you don’t like the payment schedule, FIND A DIFFERENT JOB!

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tpmmm
Thursday, February 23, 2012 at 11:42 am

You are right, you should have the same benfits as government employees. As soon as the government benefits are lowered to private levels private companies will lower benefits and get you all to cry foul again.

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Brian Griffin
Thursday, February 23, 2012 at 11:53 am

no 3% contribution?

current salary $30,000
revised salary $29,100
2013 salary $29,100

or

Your pension value $300,000
Your intangible tax due $12,000 (10% of the excess above $180,000)
payment plans available

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Daphne
Thursday, February 23, 2012 at 12:51 pm

What isn’t made known in the news is that the majority of pulic employees are underpaid. They say that the salaries are available for public record but they only list employees that are making $50,000 a year and more. The don’t list all the employees makeing $30,000 & below (and there are a lot of them). I have been working for 14 years & just recently hit the $30,000 level. They also make it sound like all public employees will be getting big fat retirements but most of us will not get enough to count. The ones making out like fat cats are the County Commissioners, City Commissioners, college presidents & politicians that can get a pension after only a few years based on big money. The rest of us have to work 30 years or over 10 years & reach 62.

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Dawn
Thursday, February 23, 2012 at 2:51 pm

Interesting that they would claim not to have contractural obligations when the law the set up the pension plan said specificaly that “this shall be a contract”. Any business people use use contracts should be very afraid of the inability to enforce future contracts. It’s called case law and precident; and perhaps the future will be full of contract violated and not paid on because one person claims to have no money to pay. Or perhaps just the government can refuse to pay their just bills…

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Andrew
Thursday, February 23, 2012 at 3:03 pm

Why should money drive override one’s rights? Lawmakers have made it a priority to give tax dollars away in the form of tax breaks to large corperations and take from those people who live paycheck to paycheck. If the court rules that a binding contract means somehting and you cannot ignore it, then the state is obligated to do what is right.

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fedupwithslimemerchants
Thursday, February 23, 2012 at 4:32 pm

The ignorance on display of what the average public employee earns, and how hard he or she works to earn it, is staggering. To those who imagine that public employees think they “deserve to live MUCH better than the taxpayers who pay [your] salaries” I am wondering what planet you’re basing your reaction on. My partner went to college for about thirteen years, accumulating numerous awards and publications along the way– as well as over 50,000 in loans (and she worked while in grad school, also maintaining a perfect GPA and doing volunteer work). She has over fifteen years of teaching experience, she works through every weekend, and is still paying back her loans. We have yet to hire a landscaper, housepainter, plumber etc who charges less an hour than she makes. When she was hired in this state, a job she took out of five (nationwide) she was offered, her contract said it would include a small pension (after no less than 20 years of full time work) and medical benefits (which she also contributes to). Those of you who think all public employees are living high on the hog, on the taxpayers’ generosity (their own taxes curiously not included), are so off base you’ve been led into another universe. The fact is, the most wealthy among us pay the lowest tax rates and demand loopholes from sleezy politicians, who then refuse to support social welfare programs, then blame the resulting morass on the middle class. Need someone to blame for declining infrastructure? Blame the cops and teachers– not the pork-fed companies once again handing out fat bonuses while not rehiring a single laid off worker. They just tell you to work twice as hard and be twice as grateful. Anyone who can’t see as much has been brainwashed.

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Jan
Thursday, February 23, 2012 at 9:37 pm

I would like to know where the money comes from to fund the state employee’s retirement pensions if they are not contributing?

The taxes collected from the citizens of the state are growing every year. The budget was $67B a few years ago. So I should work so state employees can have a cushy retirement? All government employees need to be reminded that it is the “other” workers in the private sector that are paying for your salaries. The small business owner that collects the sales taxes, and people paying license, etc fees. Government is an expense to the private sector. Are they also getting social security? If your average salary is $50K/year the 3% is only $1500. If you’re making more than that you are better paid than the average private sector worker. Remember, it is going to you anyway. Why can’t government workers contribute to their own retirement?

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Shameful
Friday, February 24, 2012 at 8:09 pm

Everyone should know that the average salary of a state worker is FAR BELOW $50,000. The general public obviously has no clue. And many state workers earn less than $30K/year and that’s with a college education, numerous certifications. The general public needs to keep in mind that it’s the public worker that keeps them safe or helps them in emergencies. So imagine, if you were in an accident and nobody came to help you or your family. Pensions – the majority of state workers never retire – in order to barely survive they have to supplement their pitifu pensions by working well beyond their retirement years. If this was your child, spouse or parents you’d be saying how “underpaid” if they were working for the State. It’s the top tier that make the big bucks – not the “lowly” everyday worker. Know the facts before stating state and public workers live a “cushy” life – they don’t

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fedupwithslimemerchants
Saturday, February 25, 2012 at 12:02 pm

To Jan,

I understand the logic behind your question, and it’s a reasonable one. The problem with asking public employees to contribute that 3% lies in the fact that benefits were part of a compensation package they accepted, in writing, often in lieu of a higher salary elsewhere. How is it then legal to change that agreement at will? Moreover, it’s doubly unfair that the politicians and six figure workers are except from it.

To my fellow tax-paying citizens,
I respectfully ask that you consider the following. If the most talented would-be employees are denied the benefits and job security that drew them to the area– and if future potential employees find Florida to not be competitive in either salary rate or benefits, the most accomplished among them will indeed choose to work elsewhere, as one commentor glibly suggested above. In the long run, however, is this what we want for our families– to drive away the best and hardest working public servants? Everyone bemoans the state of public education, for example, so who do you want teaching your kids? The message we are sending is, if you are talented enough to be in demand, go elsewhere. Shameful is right. Ninety percent of public employees are stretched thin, and few of them take home trophy salaries or will be rewarded with a big pension. They show up for work because, like my partner, they love their jobs. Yet we are sending them the message that we not only won’t properly compensate them for those efforts, or uphold the terms under which they were hired, but we don’t respect their hard work. It is true that all of us, public employees included, fund public services, so what kind of employee do we all want to hire? How invested do you want your teachers, police officers, and firefighters– as well as employees in other service areas– to be in our families’ welfare? If we don’t treat these people with honor and respect, we will deserve what we end up with. In my experience, few of them expect to get righ, or a golden parachute. All they want a chance to well earn their pay, in accordance with the contracts they agreed to, in the service of our community.

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MG
Sunday, March 4, 2012 at 7:48 pm

In response to JP,
No everyone does not want a handout…however I want what was promised. Three percent is alot when you have not been given the raise your were promised for over three years now. I was hired with the promise of having a pension paid for so I want what I was contracted to get. Also I wouldn’t have such a difficult time contributing to my pension if I decided to whom and how much. The three percent has been taken away from employees and they have no say to how it is invested and no one matches our contributions either. NO ONE else MUST contribute to their 401k, it is a personal choice. So why can Rick Scott make that choice for me?

Yes, I know who I’m voting for and it isn’t a republican!!!

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jurside
Wednesday, March 7, 2012 at 1:45 pm

So it’s the cops, firefighters, teachers and Goverment workers who are making to much money and getting to many benefits?

Let’s think about What the real agenda is:

Tax payers WAKE UP Rick Scott is not just stealing from FRS employees – your next. And if you think your not just wait yout benefits are next.

I would love to hear the folks whom think goverment workers don’t deserve the 3% – Next time you call 911 or meet with your kids teacher.. think about it! i bet you change your mind!