Can RI pols fix the pension problem?
PROVIDENCE, RI – Rhode Island's looming pension insolvency threatens the state's future. WRNI political analyst Scott MacKay says the pension issue begs an even bigger question: Can state government solve the really big problems?
It has been 20 years since Rhode Island's political elite faced a situation as daunting as the current need to rework the public employee state pension systems.
Our system is a relic of the 20th century and it must evolve into a 21st century system that is fair to workers and sustainable for taxpayers.
The lessons of 1991 and 1992 come from the state's banking crisis, when insider dealing by politicians and bankers pushed a recession-racked state to the brink of bankruptcy. A group of privately-insured banks and credit unions went belly up, leaving millions of dollars in depositors money at risk.
And on the heels of the banking crisis came a breakdown in the state Workers' Compensation System, as the private insurers who covered Rhode Island industries refused to cover workers when costs soared.
The state got though the banking failure, a yawning state deficit, and the workers compensation mess because business, labor and lawmakers understood the urgency of the situation and worked together to fashion solutions. There was pain all the way around. And yes, taxes went up.
Now, the pension challenge is a steep climb for a General Assembly that has become too used to short-term thinking and one-time fixes.
You can never take the politics out of politics, but for once the State House gang needs to stop pointing fingers and work together on a compromise that won't make anyone happy.
At the start, let's toss out the only-in-Rhode-Island clich s that dominate too much of our public discourse and hyperbolic media coverage. Just about every other state faces pension problems eerily similar to ours.
The saddest part of all this is the tendency of too many people in politics and the media to tar public employees with the politics of envy. For the most part, state employees make middle class wages similar to most Rhode Islanders. Pitting these two groups against each isn't fair or helpful.
So let's figure out what is fair to workers and sustainable for taxpayers. And understand that it may be impossible to fix things for all time. In the immortal words of John Maynard Keynes, in the long term we are all dead.
If the pols can figure out a plan that gets us through the next decade or two, Rhode Islanders should be grateful.
State General Treasurer Gina Raimondo has sounded the alarm, but she hasn't decided how to put out the fire. For this, she and Governor Chafee are going to need good faith bargaining from labor and members of the General Assembly.
In crafting a system that is fair to workers and taxpayers, the amount of money one paid in to the system ought to count for a lot. In other words, the special dealers who took legislative time and morphed it into a juicy pension without paying actuarial value ought to be last in line.
The question no one wants to face must be considered: what to do about money retirees are already collecting. Maybe we just cut from the top, hitting those who collect $100,000 or more and holding harmless the employees who collect average pensions - about $25,000 for state employees and $41,700 for teachers.
Pensions financed largely by taxpayers should not be designed to make people rich. They ought to provide security in old age.
Even the goods news is bad when it comes to public pensions. Retirement ages must be raised because people are living longer, collecting pensions well into their 90s. Compounded cost-of-living adjustments are not sustainable and must be trimmed.
In 2002, three percent of state revenues went toward pensions. In 2018, that is projected at 20 percent, a number the state obviously cannot afford.
Failure is not an option. This problem has festered for too long and the day of reckoning is long past. The alternative is endless lawsuits, a plunging state bond rating and yet another example of Rhode Island's reputation as New England's Third World backwater.
Listen to WRNI's entire series on Rhode Island's pension crisis: The Pench.