Phase out most pensions for government employees
One of the priorities of new Florida House Speaker Will Weatherford is to phase out pensions for state workers. Taxpayers should hope he succeeds. This isn't a question of being chintzy to score points with conservative voters. Growing pension obligations threaten the security of today's workers and programs while unfairly shifting costs of unknown size to the future. The high costs and uncertainties of pensions have caused most private companies to drop them in favor of the 401(k) retirement plan. Weatherford wants to shift to that sort of system for new state workers. Existing pension promises would be kept. One argument against reform is that Florida's pension fund needs more new employees paying in to keep it financially healthy. If the base must keep growing to keep the top from collapsing, that describes a pyramid and confirms Weatherford's description of the system as a "ticking time bomb."That's not to say Florida's pension fund is in trouble. It is funded at 86.9 percent and is among the nation's best. Workers are not going to be short-changed. Nor should the lack of an old-fashioned pension make it harder for the state to recruit new workers. Pensions are very hard to find outside of government. Companies prefer contributing to employees' personal retirement accounts, which rise or fall along with the investments in them and come with no performance guarantee. The Bureau of Labor Statistics reports that only 9 percent of establishments with fewer than 100 workers offer some form of pension. Some of these pensions have been frozen or have capped the years of credited service. In state and local governments, 99 percent of full-time workers were offered pensions. Weatherford's reform will not pass without a fight. The reasons public employee unions cling to pensions are the same reasons taxpayers should support Weatherford's proposed reform. Pensions guarantee a certain level of payment to retirees for life, regardless of the state of the economy. This is great for the retiree, but can be bad for taxpayers on the hook to make up the difference between what the former employees are owed and how the pension fund's investments have performed. The worse the economy, the higher the potential public costs. Pensions reward best those who stay on the public payroll for their entire careers. Interruptions in service, say to work in the private sector, cut deeply into lifetime pension payouts. This is not good public policy in an era of an increasingly mobile workforce. A 401(k) system would not trap public workers in their government positions. Pensions are a form of deferred compensation. To take them away could be seen as a cut in compensation, especially if the state Supreme Court overrules the Legislature's decision to require government workers to contribute 3 percent of their pay to their pensions. It also is true that for lower-paid workers, the size of the monthly pension check is not extravagant. But a few years of high-salary work near the end of a career can boost lifetime pension checks far beyond a fair payback. Tinkering with the system has proven politically difficult. The best approach is major reform, as Weatherford proposes. State and local government may want to keep pensions for first-responders. If so, let's fund them 100 percent and not count on the growth in the value of equities in the fund to cover shortfalls. The goal should be to make the total cost of benefits transparent to everyone, with no costs silently shifted to the future.