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Rick Scott comes to Arthrex
Changes are coming to public pention
Photo by GREG KAHN, Daily News // Buy this photo
NAPLES — In front of a crowd of private sector employees, and with Naples-based Arthrex Inc. as a backdrop, Gov. Rick Scott announced proposed changes to the state’s public pension plan on Tuesday that would make it run more like a private 401(k) plan.
Scott told about 200 Arthrex employees who gathered inside their company’s factory on Creekside Parkway that his proposed pension changes would shave more than $1 billion off the expected $3.6 billion budget deficit this year.
“I need to make sure it’s a viable pension plan,” Scott said, “and two, it’s fair to you as a taxpayer that somebody who works for the state isn’t treated better than you’re treated as a private citizen, and you’re paying for their pension plan.”
Scott’s plan would require that state employees contribute 5 percent of their salaries to their pensions starting July 1, and transition from a defined benefits plan to a defined contribution plan.
He also called for limiting vesting to 1.6 percent per year for most government employees and 2 percent for law enforcement officers, corrections officers and firefighters, down from 3 percent; eliminating the deferred retirement option program — DROP — which allows employees to accumulate retirement benefits while they continue working for up to five years; and phasing out cost of living increases.
“Existing employees have a cost of living guaranteed increase. You don’t under your plan,” Scott told the Arthrex employees.
Florida is the only state that doesn’t require at least some employees to contribute to their pension plan. State workers haven’t had an across-the-board raise for five years.
Scott’s plan would destabilize the pension system for decades, said Doug Martin, a spokesman for the American Federation of State, County and Municipal Employees Florida. Martin said his organization is working with the Legislature, and would like to work with the Governor’s Office to shore up the pension plan.
“Moving to a 401(k)-style plan for new hires would essentially close the pension system, so that you would have a shrinking base of active employees,” Martin said. “That number would shrink and shrink as employees retire. You’d have a shrinking number of active employees paying for an increasing number of retirees.”
When asked why he announced a change to the public retirement system in front of a group of private sector employees who wouldn’t be directly impacted by the proposals, Scott said “that’s exactly the point.”
“Private companies know that you cannot have a defined benefit plan,” Scott said. “You can’t afford it. You can’t pay for it. So they’ve gotten away from it years ago. Governments haven’t done that. That’s one of the reasons why we have many programs at the state, county and federal levels that can’t afford the commitments that they make.
“I don’t want to be in that position. I want to be sure that in the state of Florida we know what our commitments are, and we can live up to our commitments.”
During his speech, Scott repeatedly distinguished between private sector employees, who he referred to as “taxpayers,” and state employees. He said he has to treat both groups fairly.
“There are many, many Floridians who feel like public employees don’t have to endure the same kind of economic anxieties of people working in the private sector,” said Susan MacManus, a political scientist at the University of South Florida. “It was not a surprise at all he made the choice to (make the announcement) where he did.”
Established in 1970, the Florida Retirement System had 655,367 participants as of June 2010. Florida’s defined benefit plan, which has historically been one of the top three funded public retirement plans in the United States, had an actuarial funding level of 87.9 percent as of July 1, 2010, according to Florida House of Representatives records.
State Sen. Garrett Richter, R-Naples, who toured the Arthrex facilities with Scott, said transitioning from a defined benefit to a defined contribution plan is “common sense.”
“I think there will be an immediate reaction of concern,” Richter said of government employees, “but I think as it gets rolled out and gets implemented, I think that concern will begin to minimize, and we’ll go on with a new day.”
Scott spoke underneath a banner that read “Arthrex creates Florida jobs.” Arthrex is a medical device manufacturing company.
His decision to make his pension announcement at Arthrex, a successful business in his home town, was poignant, state Rep. Kathleen Passidomo said.
“We have a governor who is not afraid to make tough decisions,” she said.
Scott is slated to release his first state budget on Feb. 7.
On Monday, Scott announced plans to merge at least five state agencies and realign the regulatory functions of the Department of Community Affairs with similar functions at other agencies — moves that he said would save the state $1 billion over two years.
When asked Tuesday if state employees should be concerned about their job security, Scott said “State employees are going to be very comfortable that their jobs are jobs that they are going to feel good that they can accomplish because they’ll know what they’re going to do.”
Scott added the state has 10 to 15 percent employee turnover every year. The jobs he hopes to eliminate from the state ranks “are duplicates, or they haven’t been filled,” he said.
“No, employees should not be concerned,” Scott said, when asked again if state employees should be worried. “We’ll be creating opportunities for people to move around. We’re going to direct employees in areas that are going to be more efficient.”
The Associated Press contributed to this report.
Connect with Ryan Mills at www.naplesnews.com/staff/ryan-mills/