Gov. Rick Scott and the rest of the Florida Cabinet were given news Tuesday that poses a challenge for critics of public pensions.
As of Monday night, the pension had reached $137 billion, an 11 percent increase from last year, said Ash Williams, executive director of the State Board of Administration.
If you are a House Republican, this is one trend that undermines a pillar in the campaign to close the pension off to new employees. During this year’s session, Florida House Speaker Will Weatherford tried unsuccessfully to pass HB 7011, which would have prevented new employees from enrolling in Florida’s pension system. The bill would have required new employees to enroll in private, 401(k)-style investment plans that don’t provide a guaranteed benefit.
Weatherford gave several rationales for this move, which was supported by the Florida Chamber of Commerce and the free-market-loving James Madison Institute. Among them: pensions were, in essence, Ponzi schemes that will end up going bankrupt, perhaps bringing the rest of the state’s finances with it. Close them now, or pay later. Weatherford and the Chamber vowed they'd return next year with another bill.
But the quarterly report that Williams and his staff provided Tuesday shows a pension currently enjoying robust health.
Through March 31, the pension has actually grown by $5 billion since January. The fund had surpassed quarterly, annual and three, 10, 20, 25 and 30-year performance benchmarks. When compared to the 10 largest public and corporate pension funds, Florida’s fund beat the average.
“Economically, on the investment side, the only part we’re responsible for, we’re doing fine,” Williams told the Times/Herald afterward.
He said the Legislature’s campaign to close the pension was a separate discussion unrelated to the investment side that Williams has been responsible for since 2008 after a previous stint between 1991 and 1996 as the executive director of the SBA.
Williams said it’s up to lawmakers to establish parameters that are vital to the health of any pension: reasonable benefits, responsible funding. But he scoffed at the argument that the fund was unsustainable.
“It’s a historic fact that it’s been in existence since the 1970s,” Williams said. “Draw your own conclusions.”
The actual debate has little to do with finance, Williams said.
“It comes down to a broader philosophical discussion of, ‘How do you want to allocate public resources?’” Wiliams said. “There’s been an evolution on the private side way from the defined benefit plans so the argument is made, ‘Well we should be more like the private sector.’”
But he said that’s a false equivalency.“Compensation in the public and private sector just aren’t the same, they just aren’t,” said Williams, whose private sector experience includes managing director at Fir Tree Partners and president and CEO of Schroder Capital Management. “In the private sector, pay tends to keep up with the marketplace. People who excel get bonuses and raises. They have perks. They have expenses. They have all kinds of things. I came from the private sector. I can tell you it’s very different.”