Florida Gov. to Overhaul Medicaid, End Defined Benefit Plans for New Public Workers, Require 5% Contributions from Existing Employees

Florida Governor Rick Scott is planning sweeping changes that has public unions howling but corporations thrilled.

Budget Plans

Cut property and corporate income taxes by $2 billion
Transfer Medicaid recipients to managed-care plans
Require existing public employees to contribute 5% of their salaries to the retirement system
Put new public employees in 401K plans

The Wall Street Journal has more details in Florida Governor Seeks Cuts in Budget

Gov. Rick Scott called Monday for overhauling Florida's Medicaid program, curbing its pension system and trimming government services as he detailed a budget proposal he had promised would be full of big cuts.

Mr. Scott proposed transferring Medicaid recipients to managed-care plans, a move he estimated would save about $2 billion a year on average.

The savings would come mainly from reduced administrative costs and cuts to reimbursement rates for providers, according to people familiar with the budget. Several Florida counties are already experimenting with such a system, and the governor would like to expand it statewide.

In one of his more controversial recommendations, the governor proposed pension-system changes that would require public employees to contribute 5% of their salaries to the retirement system and would direct new hires into 401(k)-style plans. He estimated the changes would save about $1.4 billion a year.

Battle shaping up over pension proposal

The Miami Herald has some additional details in Battle shaping up over pension proposal

Florida's pension system is currently funded by state and local governments contributing the equivalent of between 9 and 10 percent of an employee's income toward retirement. In the case of high-risk workers like police and firefighters, the percentage is higher.

Scott has talked of a 5 percent buy-in by employees -- basically splitting the difference with the state.

"It's only fair that if you're going to have a pension plan, you're going to do just like the private sector does,'' Scott said.

Right Moves

These are exactly the right moves. I commend the budget plan. Scott's plan will put money in the hands of taxpayers via lower property taxes and require public union workers to pay their share.

Hopefully Governor Scott can get all of his proposals passed and other states follow.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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