TALLAHASSEE, Fla. (AP)—Florida’s massive retirement fund now has a $19.2 billion gap between the amount of money it has and the amount of money it needs to cover all current and future benefits.
A report released Monday shows that the Florida Retirement System—home to some 900,000 active and retired public employees—is now underfunded by 13.1 percent. That’s an increase of $1.2 billion over last year.
The overall pension fund is worth nearly $128 billion.
The size of the gap is still within a range considered healthy by many financial experts, but it could still fuel a political debate in the Florida Legislature.
Gov. Rick Scott has complained about the long-term health of the pension plan—and whether the state is overestimating the amount it expects to earn off investments.
Florida in 2011 pushed to require public employees to start paying 3 percent of their salaries to cover part of their pension costs but that money is not being used to help make up the gap. Unions challenged the 3 percent contribution requirement and the case is pending before the Florida Supreme Court.
The new numbers on the pension plan were prepared by the actuarial firm Milliman and presented to a group of state economists.
The numbers could change between now and December, when a final report is drawn up. Some of the economists on Monday said the state may need more information on some of the assumptions underlying the new report.
Florida’s pension chief has already said that the state may need to ratchet down expectations on how much it expects to make off investments in the coming year.
Ash Williams, executive director of the State Board of Administration, has echoed the concerns expressed by Scott and others that the state is relying on investment returns that may not be achievable in the wake of the 2008 financial meltdown and record-low interest rates that have made it harder to yield large investment returns. Scott once called state and local pensions a “ticking fiscal time bomb” although he did not propose any serious changes this year.
The state now assumes that it will earn 7.75 percent on its investments in order to pay off its pension plan obligations. The state has not consistently met those targets. But if the state were to lower its investment returns it would increase the unfunded portion of the pension plan.
This is the fourth year in a row that the pension fund has been underfunded, which largely occurred because the 2008 financial crisis cost the pension fund billions.
There is right now an expectation that lawmakers will spend roughly $500 million in the coming year to help bring down the size of unfunded portion of the pension plan.