Capitol Report April 2, 2021

Week five is over. This week was of major significance to our legislative agenda. The Senate and House Appropriations Committees passed budget proposals. Floor votes are likely next week. The budget proposals do not match up and budget conferencing begins soon. The Senate Appropriations Committee also passed SB 84 (Retirement) with an amendment removing Special Risk Class members from the proposal to shift all new hires after July 1, 2022 to the investment plan. We are entering the last month of session and a lot is still in play. Please read through my summary of these topics below.

Until next week.

Matt Puckett
Executive Director

The Florida Retirement System Overhaul

SB 84 by Senator Ray Rodrigues passed the Senate Appropriations Committee on Wednesday. The legislation was amended by the sponsor to exempt all new members of Special Risk from compulsory enrollment in the investment plan. If the legislation eventually becomes law, all new hires except for Special Risk will be enrolled in the investment plan upon hiring with no option to enter the pension plan. We have lobbied very hard for many years to put Special Risk members in a position to remain in the pension plan.

The Florida PBA is certainly appreciative of the carve out, because it recognizes your hard work and sacrifices. Thank you to Senator Rodrigues and Senate President Wilton Simpson for listening to our concerns and exploring our ideas about the FRS pension plan’s future.

As everything stands today, SB 84 is ready for the Senate floor.

On the other hand, the House has not heard a companion FRS bill at all. It takes two to pass legislation so we will see what happens.

Obviously, removing Special Risk from the legislation is controversial. I will counter the argument against the carve out with this statement – the changes to the FRS in 2017 set this current change in motion. After 2017, every employee except Special Risk members automatically default into the investment plan. The trend to the investment plan since then is north of 75% for non-special risk new hires.

A few issues to consider when evaluating why a carve makes sense.

First, local municipal plans in Florida have separate pensions for police and firefighters. These plans are some of the best in country. Do not buy into the narrative that without all other employees you are doomed. Second, the financial soundness of the FRS is under constant review and the trends are pointing downward. The Unfunded Actuarial Liability (UAL) continues to grow each year. This issue is not going away whether SB 84 passes, or fails. Third and finally, this moment is an opportunity for Special Risk to reestablish the benefit structure for the future. We can easily just say no and continue to watch the system slowly drift into higher unfunded status. That means many of you reading this today while in the middle of your career will begin to feel insecure about your retirement future in another 10 years. The UAL has doubled in less than 10 years and do not think the current trend is going to suddenly reverse course without changes. Now those changes can happen with our input, or without it. I prefer to have a hand in making the changes.

We have been proactive in trying to crawl back benefits for current employees and we are exploring ideas for the future. That’s the way forward.

Earlier this session, we met with the Senate President Wilton Simpson and Senator Ray Rodrigues to study an amendment to the legislation. The study was requested, but has not been returned from the state actuary and it does not appear like it will come back before the session ends. Please read through our study requests below to get an idea of what we were exploring:

All current members of Special Risk could extend DROP by an additional three years
All current members of Special Risk currently in the investment plan who cannot switch back to the pension plan could receive one more option to switch
All current members of Special Risk hired after July 1, 2011 could choose to retire after 25 years of service
*We received a study on restoring the COLA in previous years

And the tradeoff was –
All new hires to Special Risk after July 1, 2022 could still participate in the pension plan for up to 20 years. If the members remained in FRS employment after 20 years, they could enroll in a new investment plan and receive up 20% in employee/employer contributions. By the end of their career at age 60, the officers will have a pension plan with a 60% guarantee of their average highest five earning years plus an investment account funded at up to 20% of their salary during the time in their careers while they are earning the most money.

Not perfect, but we kept the pension open and we are moving in a positive direction with time to improve upon the new structure’s foundation.

Honestly, I do not know if SB 84 passes the full Legislature. What I do know is that this issue is not going away. We are at the table now in discussions on what is needed for future Special Risk members. Change will happen. The Florida PBA is being proactive and putting our ideas out there for study and review. We shall see where this ends up.

Budgets are ready for floor votes next week

Both Appropriations Committees passed their respective budget proposals. This is not the final deal. We have a month left and a lot of negotiations ahead. The bills hit the floor next week if everything goes according to plan. Please read through the list below:

The Senate instructs each state agency to submit a pay compression proposal to assist the Legislature in implementing increases to the minimum wage. This is an interesting development which may help us address salary compression at our state agencies. Currently, pay raises for state employees are not included in the proposals although the Senate indicated the issue of raises were not completely off the table.

There are no changes to employee health insurance premiums and no increase to the employee contribution for the FRS.

The State Law Enforcement Radio System is an issue at odds between the two chambers. The radio system is 20 years old and in desperate need of replacement. The main issue has been a dysfunctional procurement process by the Department of Management Services (DMS). There is legislation in both chambers to continue to fund the system.

The Chambers are far apart on Florida Department of Corrections’ top priority – further conversion of prisons to the 8.5 (really 16.5) hour shifts. The House funds it, but the Senate does not.

Both chambers are looking to conduct some level of prison consolidation. The PBA supports the concept of consolidating prisons which we believe will help to alleviate the staffing issues and cut down on the insane amount of hours Correctional Officers are working. We actually believe the Department should be pursuing consolidation instead of conversion to the 8.5 (16.5) hour shifts. Both plans will take into account proximity to other prisons before closing a facility. The potential monies saved by consolidation are slated to be used for salaries in both proposals.