The slew of negative ads that Gov. Rick Scott ran two years ago about his opponent's role with the state public pension fund helped him win the election. Scott claimed that once he was on the job, all would be well for the Florida Retirement System's nearly 900,000 current and retired members. Yet, 21 months into the job, he has done little differently, and now outside advisers for a second year have warned the state it is investing too little to secure the pension fund long-term. It's time for the governor's actions to match his rhetoric.
Florida's pension fund remains relatively healthy compared to most states, but it still has not rebounded from billions lost in the 2008 financial crisis. Its nearly $130 billion in assets is enough to cover roughly 87 percent of its long-term liabilities. And changes in benefit accrual approved by the Legislature for state and some local government employees hired after July 1, 2011, will reduce the state's liability decades from now. That hasn't stopped Scott from repeatedly pointing to the state's unfunded liability with dire warnings that employees' pensions could be in jeopardy. His hypocrisy: As one of the three trustees who oversee the pension fund's investments, he has yet to deliver a proposal to improve it.
Outside advisers warned the State Board of Administration — the governor, attorney general and chief financial officer — for a second time in May that its anticipated rate of return of 7.75 percent is too optimistic given current market conditions, something even the most casual market watcher would expect. That same report from Hewitt EnnisKnupp showed lowering the anticipated rate of return just one-half point to 7.25 percent, for example, and lowering the anticipated rate of salary increases from 4 percent to 3 percent (which is also more realistic in this economy) would require increasing the pension cost for employers by 2 percent of payroll. The change would increase from 50 percent to 55 percent the state's chance of meeting or exceeding its rate of return. The report received new attention last month after it was delivered to incoming legislative leaders.
Scott's one token effort came last year when his dead-on-arrival 2011-12 budget proposal included $120 million as a one-time infusion. But by the time he and the 2011 Legislature tapped a new revenue stream for the pension fund — requiring all current workers to contribute 3 percent of their salary toward the pension (a mandate that is tied up in court) — he seemed to have forgotten his campaign promise. A true fiscal conservative would have demanded that at least some of the new money supplement employer contributions for a net increase in pension contributions. Instead, Scott and the Legislature simply shifted the cost, grabbed the short-term savings and used the money to help finance tax breaks and other general government.
Scott also has done little to improve the rest of the pension fund's operation. He has backed the fund's expanding foray into risky private investments and supported extending a state law that cloaks details about many million-dollar deals. Now the question is whether he will continue to support a too-optimistic rate of return so he can enjoy short-term savings during his administration, at long-term cost. Scott promised a stronger pension fund. Florida is still waiting.