FOR IMMEDIATE RELEASE: Thursday, August 6, 2026
CONTACT: Christina Johnson
Tallahassee, Fla. – Today, Florida TaxWatch (FTW) released A Closer Look At The Deferred Retirement Option Program to examine how the Deferred Retirement Option Program (DROP) works, how its costs and benefits have evolved since 1997, and what the 2023 legislative changes mean for Florida taxpayers and the more than 30,800 public employees who currently participate in the program.
Many of Florida’s longest-serving public employees take part in a program that lets them formally retire “on paper” while continuing to work and collect their salaries. Under the program, their monthly retirement benefits accumulate, with interest, in a trust fund and are paid out as a lump sum when they eventually leave public service.
Florida’s retirement system (FRS) carries a substantial and growing unfunded liability. The system’s unfunded actuarial liability grew from $34.7 billion as of a July 2021 valuation to $45.8 billion as of July 2024, even as the funded ratio remained above 80 percent. Future taxpayers will confront either decreased services, increased taxes, or both as this obligation grows.
Florida TaxWatch President and CEO Jeff Kottkamp said, “Employer contributions to the Florida Retirement System are funded by state appropriations, school district budgets, county and municipal tax revenues, and university operating funds. When contribution rates rise, those increases translate into higher public expenditures, which can require higher taxes and fees or cuts to services.
“In absolute terms the increase is substantial, about $350 million per year. Measured against the scale of state finances it is more modest, roughly 0.3 percent of Florida’s $116.5 billion budget, or about $15 per resident per year.
“Florida TaxWatch recommends the Legislature either close DROP to new enrollees after a defined future date or restrict further participation to only Special Risk Class employees and positions with documented workforce shortages, such as teachers, law enforcement officers, and firefighters. These, and other FTW recommended reforms, would reduce costs for Florida taxpayers while preserving meaningful state workforce retention incentives where they matter most.”
Three years ago, state lawmakers approved sweeping changes making DROP substantially more attractive to more classes of employees. Eligible employees can now stay in the program for an additional three years, up to eight years for most participants or 10 years for certain instructional personnel and special risk employees. The annual guaranteed return credited to DROP accounts increased substantially, from 1.3 percent to four percent, for all participants and new enrollees.
These changes took effect even as professional actuaries calculated the Florida Retirement System’s (FRS’s) unfunded obligations at more than $38 billion as of the 2022 valuation. The FRS remained well-funded overall, with a funded ratio above 80 percent, a level generally considered healthy for a public pension system. Even so, the 2023 changes added an estimated $350 million per year to the employer contributions that fund the FRS.
When this is applied to the approximately 30,800 employees enrolled in DROP in 2024 (see above graphic), the 7.33-point premium translates into roughly $190 million per year in additional employer contributions above what those same employees would cost at the Regular Class rate. This rate differential means employers pay a meaningfully higher share of payroll for each DROP participant than they would for the same employees if they simply retired and were replaced.
The fiscal context of mid-2026 adds further urgency to FTW recommendations. Florida enters fiscal year 2026-2027 projecting a $3.8 billion surplus, but state economists have warned that spending growth is on course to outpace revenue in subsequent years, with a projected deficit of $1.5 billion in fiscal year 2027-2028 growing more than $6.5 billion by fiscal year 2028-2029.
To learn more and access the full report, please click here.
About Florida TaxWatch
As an independent, nonpartisan, nonprofit government watchdog and taxpayer research institute, and the trusted “eyes and ears” of Florida taxpayers for more than 47 years, Florida TaxWatch (FTW) works to improve the productivity and accountability of Florida government. Its research recommends productivity enhancements and explains the statewide impact of fiscal and economic policies and practices on taxpayers and businesses. FTW is supported by its membership via voluntary, tax-deductible donations and private grants. Donations provide a solid, lasting foundation that has enabled FTW to bring about a more effective, responsive government that is more accountable to, and productive for, the taxpayers it has served since 1979. For more information, please visit www.floridataxwatch.org.
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