TALLAHASSEE — A lawsuit challenging the new state law making public employees pay 3 percent of their salaries for their retirement plan could punch an $860 million hole in Florida’s budget and take some $600 million away from county governments if it is upheld by the courts.
The lawsuit, filed by firefighters, police officers, teachers and other public employees and their unions, is pending in circuit court in Leon County, with a ruling expected soon from Judge Jackie Fulford.
The judge has expressed doubts about the validity of the state’s move to make public employees pay a share of their of their retirement costs for the first time since the 1970s and to limit cost-of-living adjustments, or COLA, for future retirees.
The public employees have contested the pension changes, arguing that the state violated the original terms of their employment by imposing the new requirements. The state has countered that it has the right to change the pension plan for future years.
House budget analysts said Thursday in a briefing for reporters that the 3 percent contribution represented a $456 million savings for the state, while the COLA limit represented another $404 million.
Those savings, which reflect pension costs for state workers, university employees and school workers, would be wiped out if the lawsuit is successful, forcing the state to scramble to make up those funds.
An additional impact of around $597 million would face county governments, whose workers also participate in the state retirement plan, but their funding is not part of the state budget.
The 3 percent contribution represents about $212 million of that estimate, according to the Florida Association of Counties.
Earlier this week, Gov. Rick Scott called the potential loss of pension savings “an unbelievable financial problem,” noting it will impact all levels of government. He also said if the state gets an adverse ruling, which is upheld on appeal, it could force the governments to cut back other programs.
“It will come out of some other pocket,” he said.
Scott also lamented the fact that an unfavorable pension ruling would be another in a series of judicial decisions that have reversed policies advanced by Scott and the Republican-led Legislature.
In a caucus briefing with Republican senators on Wednesday evening, Senate Budget Chairman J.D. Alexander, R-Lake Wales, raised similar warnings about an adverse ruling on the pension lawsuit.
But Alexander also expressed doubt that if the circuit judge ruled against the state, it would be upheld on appeal. Any decision in the case is likely to be appealed, eventually reaching the Florida Supreme Court.
“I don’t know what the judge will rule, but she would be ruling against every precedent and principle in the history of man on the retirement suit,” Alexander said. “We’ll see what she does.”
If the lawsuit is upheld, it could present serious financial problems for the state lawmakers, who are counting on the savings to get them through another difficult budget year.
It could have a significant impact on school funding, where lawmakers will try to formulate next year’s education budget already facing slow growth in state revenue sources, including a drop in property taxes and the need to replace some $555 million in federal funding for the K-12 system.
The loss of the pension savings would also impact Florida’s 67 county governments.
“Local governments have put those savings to a lot of good and important uses for their communities,” said Cragin Mosteller, a spokeswoman for the Florida Association of Counties.
For instance, Mosteller said Volusia County used $4.1 million of its $4.5 million in pension savings to consolidate dispatching services for local governments that will save the communities money over the long term by avoiding duplicated services.
By Lloyd Dunkelberger
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