Florida governor wants cheaper state pensions

MIAMI Tue Feb 1, 2011 6:14pm EST

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MIAMI (Reuters) - Florida's new Tea Party-backed governor said on Tuesday he wants state workers for the first time to contribute to the state pension system to help plug a $3.5 billion gap in the next state budget.

Rick Scott, a Republican, said those contributions and other changes, such as putting new state workers into 401k-like plans instead of more costly traditional pensions, would save Florida $2.8 billion over two years. He wants state workers to contribute 5 percent of pay for pensions.

"We must bring Florida in line with the private sector and nearly every other state in the country by requiring government workers to contribute toward their own retirement," Scott said in a news release.

Florida's 572,000 state and local-government workers now see no paycheck deductions for a fixed-benefit pension program, which supports 319,000 retirees. Governments in the fourth most populous U.S. state now pay between 9 percent and 20 percent of each worker's salary for pensions.

Unlike some other big states wrestling with large pension obligations, such as Illinois and California, Florida's $125 billion pension fund is relatively strong financially and Florida's debt is top-rated by leading credit agencies.

But Florida's once-booming economy was hard hit by the 2007-2009 recession. It remains an epicenter of America's housing crisis and has a 12 percent unemployment rate compared with the national jobless rate of 9.4 percent.

The Republican mayor of Miami-Dade County, home to Miami and the state's most populous county, faces a recall vote on March 15 in part because of an increase in local property tax rates needed to address a $400 million budget deficit.

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California's new governor, Democrat Jerry Brown, said on Monday he was open to changes in state workers pensions as a way to close that state's $25 billion budget deficit.

Scott is due to make his first budget proposal on Monday and the $75 billion plan is expected to include tax cuts. He said in a preview that he proposed eliminating cost-of-living increases for work done after July 1, 2011.

The governor recommended ending admissions to a state program that allows some workers to retire, defer pension payments with a guaranteed investment return, and continue working for the state for as many as eight additional years.

During the campaign and following his election in November, Scott repeatedly said that Florida's retirement system needed to be adapted to a modern marketplace in which employees take their retirement benefits with them when they change jobs.

Speaking to reporters in Tallahassee on Tuesday, Scott said the current pension system will become increasingly burdensome if no changes are made as baby boomers hit retirement age.

"If you have a plan in the private sector, you are generally participating, you're contributing," Scott said. "I think it's only fair that those who participate in the state pension plan contribute."

Florida lawmakers face a $3.5 billion budget gap going into the fiscal 2012 budget year starting on July 1 as increased healthcare cost and reductions in federal stimulus funds combine to put more pressure on them to cut costs. The legislature, which must approve changes to pensions, convenes on March 8.

Employee groups, including Florida's largest teachers union, are expected to fight the proposed pension changes.

(Additional reporting by Michael Peltier in Tallahassee; editing by Mohammad Zargham)

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