HEADLINES : Florida
Billion-Dollar Florida Pension Battle Shows Challenge of Cutting Benefits
A court order forcing Florida to forgo $1 billion it planned to take from state workers to shore up its budget is the latest sign of how difficult it can be to reduce government-backed retirement benefits.
Of 41 U.S. states that made significant pension changes in 2010 and 2011, at least 13, or almost 30 percent, have faced court challenges, according to the National Conference of State Legislatures.
"It can be very difficult," said Ron Snell, a senior fellow at the organization who has studied pensions. "There are many obstacles in the way of policy makers."
States such as Florida (STOFL1), whose $152 billion retirement fund is the third-largest of any state, increased employee contributions and eliminated cost-of-living-adjustments to free up tax dollars. With 29 states facing a total of $47 billion in budget shortfalls next year, according to the Center on Budget and Policy Priorities, orders to repay workers may create new obstacles to solvency.
At the same time, some pensions are ailing. Investment losses left state and local pensions with $3.6 trillion in unfunded obligations, according to an October 2010 study by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester.