Report: Florida’s Sinking Pension System Keeps Taking on More Water

by | May 27, 2025

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A newly released legislative watchdog report confirms what The Capitolist first reported back in January: Florida’s state pension system is still falling short of its long-term goals, despite recent gains fueled by a buoyant stock market. And once again, Florida taxpayers are footing the bill to keep the whole system afloat.

The report, issued by the Legislature’s Office of Program Policy Analysis and Government Accountability (OPPAGA), shows that while Florida’s major pension funds enjoyed a $27.2 billion boost in market value, the core investment benchmarks tell a more sobering story. Specifically, the Florida Retirement System (FRS) Pension Plan failed to meet its one-year and 25-year investment targets – exactly the kind of underperformance we highlighted in our January story.

Back then, we noted that the system’s so-called “improvement” was due not to reforms or smarter management, but to a massive infusion of taxpayer dollars. State employers (also known as “taxpayers”) had to cough up 15.6% more in pension contributions year-over-year, while employee contributions barely budged. Even with that influx, liabilities ballooned from $3.49 billion to over $6 billion in a single year. Now, the OPPAGA report reveals that, despite a one-year return of 10.5%, the FRS Pension Plan still missed its benchmark by 0.6%. Worse, it fell short of its 25-year investment goal, a critical measure of the system’s long-term solvency.

That confirmation adds more weight to our original reporting: Florida’s pension system is coasting on market gains while ignoring the structural leaks below the surface.

Yes, the markets had a strong year. But in the fine print of the OPPAGA report is a clear admission: short-term gains don’t equal long-term stability. The SBA (State Board of Administration), which oversees the pension system, blamed shortfalls on underperformance in private equity and strategic investments, but offered no solutions, only reassurances.

While the FRS Investment Plan, Florida’s 401(k)-style alternative, posted a 13.1% return, it too fell short of its one- and three-year benchmarks. Again, the SBA downplayed the miss, blaming “active bets against large U.S. tech companies” and “rising interest rates.” That’s cold comfort for the thousands of state and local employees relying on those funds for retirement, and the millions of taxpayers underwriting them.

The watchdog report also details a 15.9% spike in the SBA’s operating budget since the last review, adding 15 new positions and pushing costs for salaries, benefits, and consulting services higher. At the same time, third-party investment fees grew by another $15.1 million, even as the SBA claims to be managing more funds internally to save money. All told, taxpayers are now on the hook for nearly $800 million annually in pension management costs.

Instead of addressing the structural imbalance between retirees and active workers, which now sits at a troubling 1.4-to-1 ratio, which experts say is too low, preferring 2-to-1 or higher. Notably, Florida is in the middle of the pack when it comes to this ratio, but no state meets the recommendations of experts, with the highest ranking states coming in at 1.7-to-1.

Meanwhile, lawmakers have spent the past two years passing laws aimed at banning investments in Chinese firms, boycotters of Israel, and companies with ties to Iran. While those policies appear to be sound and align with voter sentiment, they don’t address the fiscal imbalance at the heart of the system. The SBA reported it’s on track to divest from Chinese holdings (roughly 1.4% of the portfolio) by the statutory deadline. But even perfect geopolitical strategy won’t fix the SBA’s basic math problem.

Back in January, we warned that Florida’s pension system was floating not because it’s seaworthy, but because taxpayers are bailing out the bilge. The new OPPAGA report only reinforces that metaphor. Sure, the tide came in, but the ship is still off-course.

Unless lawmakers confront the fundamental design flaws in the pension system: the shrinking contributor base, the reliance on inflated return assumptions, and the ever-growing liabilities, Florida will face tough choices down the line: higher taxes, fewer public services, or massive borrowing. None of those are pleasant options. But they’re all inevitable if we keep pretending temporary waves are a permanent fix.

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