Detroit may be 1,000 miles away from Tallahassee, but the government employee pension situation that helped Detroit go bankrupt is much closer to home than you may think.
Consider the facts:
- Detroit’s government employee pension system is underfunded by as much as $3.5 billion,
- The retirement dreams of far too many Detroit workers have been shattered, and
- Detroit’s opportunity to create a sustainable public pension program is long gone.
A thousand miles away in Florida, taxpayers are spending at least $500 million this year to cover the unfunded liability of our government employee pensions. Simply put, Detroit’s bankruptcy should serve as a wakeup call for Floridians.
Taxpayers are straining to keep the Florida Retirement System (FRS) solvent. According to our partners at the James Madison Institute,
- Florida contributes $5.5 billion every year to the FRS,
- Florida needs to contribute $11 billion every year for the FRS to be financially sound, and
- Every Florida household would need to pay $765 per year to fully fund the FRS if pension reforms are not put in place.
For decades, state of Florida government entitlements such as defined benefit retirement plans for government employees have grown far beyond benefits for the private-sector.
Locally, property and business owners are paying taxes to help support underfunded local pensions. For example, in the City of Daytona Beach, one-third of property tax revenues were used to make up the unfunded portion of local police and firefighter pensions. Similar situations are playing out in communities throughout Florida – property tax revenues are paying for underfunded pensions instead of improving the quality of life for taxpayers.
Government unions oppose efforts to protect public pensions and modernize this taxpayer-funded and unsustainable system. In fact, union dues enable them to have thousands of people working against making Florida and America more competitive. It seems some big unions want America to follow France and Greece.
Think about it…The $500 million Florida taxpayers are spending this year to prop-up unfunded government pensions are costing taxpayers twice. Once for the unfunded pension liability, and again in lost services such as better pay for teachers, technology in the classroom, better roads, clean water and so much more. These services are lost because union pensions are taking resources from everyone and everything else.
Florida is fortunate because we still have time to act. Unlike Detroit, bankruptcy is not our only option.
Protecting state employee pension plans without burdening taxpayers and causing fiscal instability is a must. By fixing Florida’s unsustainable retirement program and bringing it more in line with the private-sector 401(k)-style savings, Florida will be more competitive.
“Protecting the longevity of public employee pensions is essential to securing Florida’s future without putting taxpayers in financial jeopardy,” Florida Speaker of the House Will Weatherford said recently. “The Florida Chamber’s long-term focus on pension reform is right.”
Make no mistake about it, government employee pensions are in serious jeopardy and businesses and families are left to bail them out. To make Florida more competitive and lower the tax burden on families, we must protect government pensions, make them more sustainable, and strengthen Florida’s governance systems.
Florida can learn a lesson from Detroit…prevent financial disaster by reforming the Florida Retirement System.