Uncle Sam: Florida Pension Fund Owes $267M

September 11, 2003 (PLANSPONSOR.com) - The state of Florida's public pension fund should fork over $267 million to Uncle Sam to pay for pension overcharges, according to a finalized federal audit.

The US Department of Health and Human Services (HHS) inspector general’s office said Florida charged the federal government too much between 1999 and 2002 for employees working in federally funded programs such as Medicaid, the Associated Press reported.

HHS officials even suggested how to pay the bill. The audit said the state should refund the money from the $12.8 billion in surplus funds in the $93-billion pension plan, either by paying all at once or over the long term by reducing future pension costs for the federal agency. The bill was actually substantially less than the one for more then $500 million in a draft audit revealed earlier this year (See Sunshine State Pension Overcharged Uncle Sam $517 Million ).

Florida state officials in Tallahassee now have 30 days to respond to the HHS audit. Florida Governor Jeb Bush’s staff said the governor hasn’t yet decided on his next course of action. However, state leaders said they’ll fight the findings, arguing that the department’s assumptions about what rates the state should charge would undermine the pension fund’s long-term strategy for meeting its financial obligation to the state’s retirees and beneficiaries.

“This is one dispute that is going to land in the courts and the attorneys are going to have to sort out,” said state Senator Ken Pruitt, Senate budget committee chairman. “As strong as the feds feel we owe them money, we feel just as strongly we don’t owe it.”

The audit has been the subject of much controversy over allegations the federal officials agreed to delay it during Bush’s re-election efforts. It was originally scheduled to begin in April 2002, but Janet Rehnquist, daughter of US Supreme Court Justice William Rehnquist and then HHS Inspector General postponed the audit until July 2002 after receiving a call from Kathleen Shanahan, Bush’s chief of staff.   Shanahan and Bush said the delay was requested because both Florida agencies that would be involved, the state’s investment staff and its retirement division, were in the midst of leadership changes.

But Democrats, noting the delay insured the audit would not be finished until after November’s election, contend Bush’s office sought the delay to avoid negative publicity about the pension fund.   “It is very possible that this was a deliberate action on the part of the state to make our budget look better than it really was,” said Senate Minority Leader Ron Klein, a South Florida Democrat.

Rehnquist resigned in June, saying she wanted to spend more time with her family and pursue other opportunities. Her decision to delay the audit was among a number of controversial actions that led to an investigation of her management by Congress and a committee of fellow inspectors general (See  Janet Rehnquist Ends Controversial Tenure with Resignation ).