FRS double-dip retirement expansion will make it harder for private sector to compete with state

by | Apr 2, 2023




  • Some Florida lawmakers want to extend the time state workers would be allowed to “double-dip” by collecting retirement benefits even while still employed in their state jobs.
  • Florida elected officials – including state lawmakers – are also eligible to participate in the double-dipping program, known as the Deferred Retirement Option Program (DROP).
  • The bill will make it harder for the private sector to attract and retain talent because the state benefits are so lucrative.
  • The Florida Retirement System (FRS) already faces a $36 billion debt and is only 82% funded.
  • The bill will cost taxpayers $3.1 billion in the upcoming fiscal year and do little to address FRS’s unfunded liabilities.

On Tuesday of last week, the Florida House Appropriations Committee voted to advance a bill aimed at significantly expanding state retirement benefits with the goal of attracting and retaining state workers – particularly police officers, firefighters and other first responders, but also teachers and some 90,000 state bureaucrats – because the vacancy rate for those jobs is currently over 16 percent.

The current plan to address the worker shortage includes an expansion of the controversial Deferred Retirement Option Program, known as DROP, which allows state bureaucrats who’ve reached retirement age to “double dip” by collecting retirement benefits even though they haven’t actually retired. The retirement payments go into a special bank account, where they can also earn interest, too. Under current rules, the state allows employees to remain in the DROP program for five years. But HB 239 would allow DROP participants to collect retirement benefits while keeping their job for up to 8 years, and it doubles the interest they currently earn on those retirement funds while they’re employed.

In defending the bill, Republicans are sticking to talking points centered around first responders, but the excuse doesn’t quite make sense when it comes to DROP benefits.

“These restrictive windows prompted many public employees including our law enforcement officers and first responders to retire before they were ready,” says State Rep. Demi Busatta Cabrera. “These changes will help our state and local governments and departments to retain experienced staff for a much longer period of time.”

Indeed. And yet, the bill goes out of its way to ensure “special risk class” members in the retirement system, which includes police and firefighters, can “retire” five years before regular members like elected officials and teachers. During testimony on Tuesday, one firefighting association thanked lawmakers for allowing them to retire early so they aren’t exposed to five additional years of dangerous chemicals, PTSD or other trauma. So for police and firefighters, the DROP program, which would entice them to stay and work even longer, seems to run counter to the very logic police and firefighters used to convince lawmakers to reduce the years they’re required to work before they can retire.

If there’s one class of state employee that might be a worthy recipient of the DROP program, its teachers. In that case, DROP might help address the ongoing workforce shortage. For virtually every other class, DROP is just another way to game the system and rake ever more cash out of FRS.

So allowing access to the controversial DROP program is bad enough, but HB 239 expands the benefits of DROP across the board, allowing any and all state employees who reach retirement age, no matter how critical (or not), to double-dip from the system for up to eight years. And that’s not the only change: the bill will also increase the interest rate earned on their double-dipped dollars from 1.4 percent to 4 percent.

The original intent of the DROP program was to allow the state to retain rare skill-sets and experience in mission-critical jobs that are essential to the state. That argument makes sense in certain situations, and perhaps for highly-specialized jobs when there simply isn’t a new crop of fresh, young workers to come in and fill those positions. But it makes no sense that Florida’s financially unsound state retirement program would also expand retirement benefits for many of the more cushy bureaucratic government jobs that can easily be filled by younger, less costly workers, especially for some positions that rarely face any chance of layoffs, pay cuts, or the other potential drawbacks of competitive private sector work.

It would be one thing if government workers were leaving in droves to take more lucrative private sector jobs. But there’s little evidence that is the case. The fact of the matter is that the private sector itself is also experiencing the same workforce shortage across a broad range of industries – and private sector companies already locked in eat-or-be-eaten competition for workers within their own industry cannot also compete against the Florida government for the same talent.

Where are the GOP budget hawks?

Of course every single Democrat on the House Appropriations Committee voted in favor of extending and expanding government benefits paid to our state’s bureaucrats. After all, Democrats never say no to a chance at expanding government.

The real surprise came from the fact that not a single Republican budget hawk exists on the House Appropriations Committee. No GOP committee member expressed the slightest concern about changes that are going to increase the cost of FRS to the state by untold billions of dollars over the coming years if HB 239 passes. The Florida Retirement System (FRS) currently holds a staggering $36 billion in debt, with only 82% of the assets needed to cover long-term benefits. Yet after hearing a parade of law enforcement and first responder union representatives testify in support of expanding their own retirement benefits (no surprise there), not a single member of the Appropriations Committee asked any questions about the bill. The committee members voted 27-0 in favor.

Perhaps now is the time to note that, yes, elected state representatives are also part of the Florida Retirement System. And they can count their years of service in the state legislature toward their overall retirement, which counts in the calculation used to determine the amount of money they get to double-dip in the DROP program, when they eventually qualify. Many lawmakers currently serving will take other elected or appointed government jobs in the coming years, allowing them to qualify for the double-dipping DROP benefits they helped expand.

FRS isn’t getting healthier

Lawmakers voting to feather their own nest is disturbing. But even more disturbing is the fact that the proposed changes will do little to address the shortcomings in the current pension system, which is already woefully underfunded, structurally unsound, and reliant on state contributions and risky investments to stay afloat. Expanding eligibility and increasing retirement payouts, while also increasing interest paid on those double-dipped dollars, is going to cost FRS a whopping amount of money. At the same time, the bill only slightly increases the state’s contribution to FRS itself. That means that over time, the FRS’s unfunded liability – the amount it owes to retirees but can’t actually pay – is only going to grow.

This proposed expansion to the state pension system will cost taxpayers $3.1 billion in the upcoming fiscal year alone. Part of those dollars include a Cost Of Living Allowance (COLA) adjustment that is long overdue for state workers in a rapidly inflating economy. Thankfully, we have the money this year. But will we have it next year? Are lawmakers certain that the state, national and world economies are going to continue to produce budget surpluses that we can lavish on state workers at the expense of the private sector?

In 2011, when then-Governor Rick Scott inherited a state budget that was billions of dollars short thanks to the unforeseen 2008 economic crisis, he and state lawmakers were forced to make tough choices by cutting back on COLA and radically overhauling FRS. While those changes led to a balanced budget, they failed to make the pension system structurally sound. In fact, FRS is even worse off today than it was in 2011.

Now that we’ve got a budget surplus, a better use of the cash would be to make FRS solvent for the long-haul. Instead, lawmakers are rolling back changes to the system to provide state workers with benefits the private sector cannot afford and does not enjoy. If the economy sputters in the coming years, Florida will be on the hook to pay its retirees because the funds are contractually obligated. That means the cash forked over to retired state employees (and some who are double-dipping), will come from other programs, including education budgets, health care programs, or Florida will have to increase private sector taxation. None of those options are attractive.

As Leonard Gilroy of the Pension Integrity Project at the Reason Foundation points out, “if the system is underfunded, the money has to come from somewhere, and the larger the pension debt grows, the more that pension costs crowd out public services like safety, corrections, and healthcare.”

Florida’s pension system needs a radical overhaul, and it will have to be even more radical if HB 239 is passed. But that requires Republicans with a long term view of the problem and a commitment to do something about it.

 

16 Comments

  1. Deborah Coffey

    This is how Republicans govern…make themselves richer, deplete promised retirement funds and tell everyone how fiscally responsible they are. I think Florida is about to find out that 95% of America…does NOT WANT to be Florida…ever!

  2. Anonymous

    I think they should get rid of DROP. My experience once people go into DROP they basically stop working and it’s almost impossible to get rid of them

  3. dolphincritic

    The DROP and a generous retirement program is a great way to reward police officers for their service. It allows officers to retire while they are approaching the end of their most productive years with enough money to buffer their old age requirements. They don’t get this money unless they continue working as an officer in an honest and faithful manner. It is probably the same for firefighters. In times like ours, police officers are at a premium. We ask them to perform paradoxically. They must be honest, truthful, brave and even fearless while they have to be kind, sensitive and diplomatic. We currently reward them by exposing them and their families to public criticism. Short-sighted people want to save a dollar, yet expect the same level of service. The far left want to siphon off the money required to have and maintain top notch law enforcement. Lawmakers are riding on the backs of our public safety team but that’s an issue for the polls. We must create the best retirement system public employees can expect in order to compete with private business for this talent pool.

    • Brian Burgess

      That’s where we disagree. The public sector cannot compete against the government because the government can tax the private sector into oblivion and it will always win.

  4. Stan

    The public sector and private sector are both in the market, they need each other and at the same time are in competition. DROP is not double dipping because the retirement check is owed anyway and the market for experienced government workers signals higher wages. I totally agree that the governor/legislature should really tackle the tougher issue of FRS health.

  5. Ron Kirkland

    DROP only benefits the well paid folks that can contribute and 10 years ago dropped the amount! Not really that interested in the program then. Did not help the average working class workers struggling paycheck to paycheck!

    • Karl Young

      The DROP isnt about saving for the last 30 years.
      Its about officially retiring.
      Then working up to another 5 years maximum.
      Then recieving a pension payment equal to the additional time you worked of up to five years.

    • Karl Young

      Do you really understand the
      Deferred Retirement Option Plans?
      There everywhere in local and state governments across America.
      5 year max. Not forever. You must be at retirement age usually 30 years for most.
      25 for Firefighters and Police.

  6. Karl Young

    Not a Big story here. Some larger Florida cities local governments have had the drop plan for years. Especially police and fire drop plans.
    So whats the “News” in this for state employees. The theory of the plan is to keep experienced employees in the work force longer. To compensate the employee for staying when they can readily retire now the employee agrees to entet the DROP plan.
    An employee “retires” at 30 years of service. The employee continues working another 5 years (max) in the same position. Now they are at 35 years of service. However the calculated retirement benefit is based on 30 years of service when they entet the DROP plan,not 35 years of service.
    At thirty-five years the employee “DROPS” back 5 years. Their 5 years of extra work of wbich the employee could have been retired and recieving pension benefits is then paid to the employee in a lump sum. The DROP sum is either taxed at full value when taken or placed in a 457b deferred compensation retirement account to defer taxes.
    No a bad offer for those that have it available.
    The government entity gets to keep an experienced employee for up to an additional 5 years. They keep the retired employee’s pension money for an additional amount of time in the pension fund to theoretically grow the fund for up to five years.
    I suppose the program is viewed as a perk for some local and state government employees.
    However a lot of local governments are exempt from the FEDERAL Social security system. Thus the employees don’t pay into social security. They will not receive SSI. Just Medicare if the employee did work and earned the mandatory 40 work credits to receive Medicare.
    People must see the larger picture. Then come to a conclusion. The double dip description is not appropriate in this article.

  7. Anonymous

    FRS is one of the strongest retirement systems in the United States. It blows away every leftist controlled state.

  8. Anonymous

    For those claiming that it’s some sort of scam, where government employees are “double-dipping”obviously have failed to conduct any actual research and just want to write catchy headlines.

    Once an employee goes into the DROP, from the employer perspective, they are retired – which means the employer will save significantly because they aren’t contributing $1,000’s annually towards the retirement system. Additionally, it can’t be double-dipping as the monies come from two completely different sources – 1) a fund that the employee and employer have been contributing to for decades and the other 2) a budgeted operating expense.

    The net financial effect for the employer (State or local government) and the tax payers is a savings.

    • IKnowWhatImTalkingAbout

      “The current plan to address the worker shortage includes an expansion of the controversial Deferred Retirement Option Program, known as DROP, which allows state bureaucrats who’ve reached retirement age to “double dip” by collecting retirement benefits even though they haven’t actually retired. ”

      That statement right there told me all I needed to know about this poorly-written piece. It’s a piece of utter crap. Burgess obviously did not do his homework. It’s not just poorly-written, it’s outright lies. And if there’s one thing that ticks me off, it’s this kind of crap journalism.

  9. TheTruth

    The DROP is a way for the State of Florida to have use of billions of dollars at 1.3% interest. Employees on the DROP are paid 1.3% on their retirement account for 5 years. It’s not difficult to imagine a good financial manager averaging well over this.

    Most all vacancies with the state will be filled at or above what DROP participants are currently making. There will not be a savings here. DROP is a great way to retain knowledge and skills. The public does not realize how frustrating it would be to deal with state agencies full of inexperienced employees. You want to deal with people in the know. The same applies for shopping at Home Depot and wanting information on plumbing or electrical supplies. It is a pleasure dealing with knowledgeable people.

    I firmly believe that anyone wanting a state job bad enough could have found one sometime in their life. They probably just thought it didn’t pay enough. So why all of a sudden are you worried about state employees retirement? Besides all this someone has got to do the job, and the private sector will be charging 4 to 5 times what public agencies can do it for.

    From a state employee’s standpoint the DROP must be fair across the board. Some employees are forced out at 62 because they had to enter DROP at 57 or lose the opportunity. This leaves a tremendous insurance gap before Medicare. Employees who are able to enter DROP at 62 have it made. They can leave DROP at 67 with Medicare and much higher social security benefits. The DROP would be very good for the State of Florida if it were 8 years for all state employees and 10 years for employees entering DROP at age 57. Now the State of Florida could really make some serious bank with those billions.

    This article is full of inaccurate information. Double dipping has long been done away with. It was a way for an employee to retire and then sit out a year, come back to work and possibly work enough years for a second retirement. I guess it’s just human nature to make things look so terrible so others will follow you and agree with your assessment.

    • IKnowWhatImTalkingAbout

      THANK YOU! Finally! A few people here get it!!!

  10. IKnowWhatImTalkingAbout

    The comment above mine from “The Truth” nails it. I am 54 and have been staff in higher education in Florida for 29 years. Fortunately I do not have to enter DROP at 30 years next year, but I do have to enter at age 57 or face a penalty for every month thereafter that I do not enter. This means I would have to retire at age 62, and that seems such a penalty for me. All of the work I have put into my job over the years, the dedication, and the loyalty— and the insurance would be nearly unaffordable between 62 and 65. If DROP were extended, I would DEFINITELY retire at 65. And I would be making room for someone else. In the meantime, I would continue doing my job to the best of my ability as I do now.

    I also agree that this piece is inaccurate and full of anti-public sector employee bias. DROP is NOT Double-dipping. Double Dipping was public sector employees retiring and then returning after one year to work. That is a serious problem that HAS BEEN ELIMINATED! In fact, in higher education, every University has put into effect the required ban on retirees being allowed to return to state positions after retirement. Basically, you can’t OR you lose your retirement benefits.

    When a person goes into DROP, they are no longer eligible for pay increases, the salary remains the same and as they complete those final years, the matching retirement benefits remain in the FRS Trust Fund earning interest. It allows good employees to continue working, while preparing for retirement. My generation (X) is probably the last generation that will ever work for the same company for 30 years so I don’t know why you’re all so worried about it. If DROP remains five years, a lot of people who began working with the state, who will hit 30 years BEFORE age 57, will be penalized. WHY do we want to do that? A lot of good people work in the public sector. My generation would like to keep working and not be penalized for staying with the same employer for 30+ years. It is so hard to find people willing to work hard and do their job right anymore, why would you want to get rid of it when you have it?

  11. Anonymous

    How is this drop double dipping. Instead of retiring and just collecting your benefits, you are retiring, and continuing working in a position for which a replacement would needed and paid for anyways. There is no additional costs to tax payers as benefits would be have to be paid out anyways and the position will still be paid a salary.

 

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