Pension Reform News: Florida’s proposed cost-of-living adjustment could cost $47 billion over 30 years

In This Issue:

Articles, Research & Spotlights 

• Benefit Proposal in Florida Could Cost $47 Billion Over 30 Years
• Undoing Alaska’s Public Pension Reforms Would Come With Significant Costs
• Kansas Considers Modernizing Retirement Plan With a DC Option
• Washington Proposal Would Legitimize Bad and Potentially Expensive Policy

News in Brief
Quotable Quotes on Pension Reform
Data Highlight
Reason Foundation in the News
Contact the Pension Reform Help Desk

Articles, Research & Spotlights

The Florida Retirement System’s Proposed Cost-of-Living Adjustment Comes with Major Costs and Risks

Florida lawmakers took major steps in 2011 to manage the state’s exploding public pension-related costs by suspending the cost-of-living adjustment (COLA) benefit, a move that has played a major role in improving the funding of the retirement system. Despite this progress, the Florida Retirement System is still over a decade away from reaching full funding levels to pay for benefits promised to teachers, firefighters, police, and other public workers. A new bill being considered by state legislators, House Bill 945, would grant a 2% COLA, setting previous cost-reduction reforms back. Reason Foundation’s analysis finds this move could cost as much as $47 billion over the next 30 years. Considering the system is currently $46 billion short of needed funding, it would be poor policy to add more expensive and unpredictable costs.

House Bill 78 Exposes Alaska to Significant Additional Costs

The Alaska legislature is considering rolling back major cost-saving reforms of its pensions for teachers and state employees. House Bill 78 would reopen a defined benefit (DB) pension for new workers and close the cost-balanced defined contribution (DC) plan that has been the primary retirement plan for new hires since 2006. Before bringing back the type of retirement plan that has generated ballooned debts and costs on state budgets, policymakers should evaluate the potential risks they would be taking on by reversing course. Reason Foundation analysis reveals that HB 78 could add costs of $11.4 billion over the next 30 years, generating significant pressures on Alaska’s annual budget.

Kansas Senate Bill 282 Would Improve Retirement Options for State Employees

Proposed legislation in Kansas would give public workers (excluding police, firefighters, judges, and correctional officers) in the state an option to participate in a modernized defined contribution plan. In testimony submitted to the Committee on Financial Institutions and Insurance, Reason Foundation evaluated the proposed DC plan. Reason Foundation finds that Senate Bill 282 would set up a DC plan that meets best practices and provides adequate and modernized retirement benefits that meet the needs of today’s public workers.

Washington Bill Would Be Unfair and Potentially Costly

A new bill in the Washington Legislature (Substitute Senate Bill 5058) aims to merge the Public Employees Retirement System Plan 1 (PERS 1) and the Teachers Retirement System Plan 1 (TRS 1) with the Law Enforcement Officers and Firefighters Plan 1 (LEOFF 1). Proponents of the bill are pursuing this merger because the LEOFF plan is exceptionally well funded, while the other two plans remain underfunded. This bill should raise serious concerns among policymakers because the funding set aside for the law enforcement plan would essentially be used to pay for benefits promised to an entirely different group. In this testimony shared with the House Committee on Appropriations, Reason Foundation’s Ryan Frost explains that this bill would cut away at funds saved to secure LEOFF benefits to pay for unfunded promises made to members of the other two plans. Additionally, despite analysis lauding the proposal as a cost-saving measure, this policy would likely cost taxpayers $1.5 billion.

News in Brief

Study Examines Pension Funding and Cash Flow

Milliman’s 2024 Public Pension Funding Study reports that strong market returns over the last two years have boosted the aggregate funded ratio of the 100 largest U.S. public pension plans from 69.8% funded in 2022 to 81.2% funded in late 2024. Despite this notable improvement, the aggregate funding shortfall remains substantial, totaling approximately $1.22 trillion in unfunded liabilities by Milliman’s count. The plans captured in this study have matured over the past decade, driven by a flat number of active public pension participants and a steadily increasing retired and inactive participant population. Milliman’s historical data indicates a consistent rise in contributions and benefit payments, maintaining a relatively stable but persistently negative net cash flow. The full study is available here.

Quotable Quotes on Pension Reform

“I’m concerned about the level of fees we do pay in private equity, infrastructure, in real estate, private credit. We need to be very sensitive around fees … . Performance hasn’t been great in private equity.”
—Steven Meier, CIO and deputy comptroller of the New York City Retirement Systems, quoted in “New York, Texas, Wisconsin pension fund CIOs bullish on private markets, pushing for lower fees” Pensions & Investments, March 5, 2025.

“The next 15 years [of private equity] is not going to look like the past 15 years … . [P]aying yesterday’s fees on tomorrow’s returns will get you to a bad place.”
—Yup Kim, CIO Texas Municipal Retirement System, quoted in “New York, Texas, Wisconsin pension fund CIOs bullish on private markets, pushing for lower fees” Pensions & Investments, March 5, 2025.

“We’re starting to see governmental pensions and others say that we need to make financial returns the principal guidelines, and so the dual mission (returns and ESG), it’s starting to become less of a focus.”
—Maulik Doshi, managing director at Steward Redqueen USA, quoted in “U.S. asset owners, managers to change messaging but stay the course with sustainable investing” Pensions & Investments, March 7, 2025.

Data Highlight

Each month, we feature a pension-related chart or infographic from our team of analysts. This month, we highlight Reason Foudnation Policy Analyst Steve Vu’s look at the strong investment returns achieved by many public pension systems in 2024. Vu notes that rather using last year’s gains to increase retirement benefits, most states should instead focus on reducing unfunded pension liabilities. You can read the full analysis here.

Reason Foundation in the News

If you’re looking for more on Reason Foundation’s analysis of the above mentioned pension proposal in Alaska, including the financial risks and impact on the recruitment and retention of public workers, the research has been cited in numerous local media reports. In “Alaska lawmakers seek public sector pension reform over persistent opposition,” the Anchorage Daily News takes an in-depth look at the issues being debated. In Must Read Alaska, radio host Dan Fagan notes, “Reason Foundation disputes Democrats’ claim that a pension will retain state workers.” On his radio show, Fagan spoke with Reason Foundation Policy Analyst Mariana Trujillo on the bill’s costs and her analysis of Alaska’s current rates of retraining its workers. In the Juneau Empire, columnist Win Gruening links to Trujillo’s research in “The peril of reintroducing defined benefit pensions in Alaska.” And advocacy group Americans for Prosperity commented on Reason’s analysis in “New Public Data Shows Alaska Retains Public Workers Better Than Most States” and “HB 78’s Flawed Math Could Cost Alaskans More Than $11.4 Billion.”