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Fri April 4, 2014
The Endless R.I. Public Pension Debate
When will Rhode Islanders stop debating public employee pensions? RIPR political analyst Scott MacKay says that won’t happen anytime soon.
As if the 2014 Rhode Island election campaigns won’t provide enough grist for everyone’s political mill, here comes the vote on the proposed public employee pension settlement crafted by their union leaders, Gov. Lincoln Chafee and State General Treasurer Gina Raimondo.
This process is important and as difficult to navigate as sailing through a foggy dawn on Narragansett Bay. The ballots are being counted for the first round of balloting. That’s where about 24,000 state employees and retirees have mailed in their votes.
Union leaders have urged retirees and eligible current employees – those with 10 or more years in state employment – to support the pension settlement deal. The settlement comes in the aftermath of the 2011 pension overhaul that sliced pension benefits and clipped retiree cost-of-living allowances.
The goal was to reduce pension payments so that taxpayers wouldn’t be overly burdened with the legacy costs of supporting public employee retirees. Proponents also asserted that the changes in the system would keep it solvent for younger state employees so that the state system didn’t land in receivership, a la Central Falls.
Unionized employees, through their leaders and lawyers, went to court to overturn the changes, saying that by unilaterally reducing benefits the state had broken its promises to state workers and retirees. The judge in the case, Superior Court Judge Sarah Taft-Carter, ordered the sides into mediation. After 13 months of tortuous negotiations, a settlement was reached.
The settlement restored a few cuts in the employee pension plans. But it mainly preserved the vast majority – about 95 percent – of the changes that shaved retirement benefits and saved the taxpayers millions of dollars.
This first vote included about 24,000 ballots. The process has triggered a noisy debate among politicians, taxpayers, retirees and the usual gang of media pundits. Much has been made of the way the count is being handled, with ballots that are not returned counting as "yes" votes.
Some say this means this plebiscite is rigged in favor of the settlement. Well, no this isn’t a Vermont Town Meeting, filled with pure democracy. The system merely gives the eligible workers and retirees a say in whether this complex legal case goes back to Judge Taft-Carter so that she can consider whether to push it to a second vote, in which more than 60,000 workers and retirees.
One element of the settlement advocates are using as a selling point is that the state agrees to give all retirees an immediate cost-of-living payment of $500. The COLA formula would also change to make retirees eligible for an allowance after four years, rather than five. And the COLA allowance would be based half on the Wall Street pension return and half on the consumer price index, which measures the actual cost-of living. The pension overhaul calculated the COLA exclusively on the investments.
This election has sparked a vigorous joust among workers and retirees. The arguments are vivid on all sides. Talk to Pat Azarian of North Providence, who worked for 30 years at the state public defenders’ office, and you will hear a familiar refrain.
"It is extremely unfair because they had a contract with me and they broke it," says Azarian. "Now they want to make me feel better for $500. I do understand the state is in trouble, but who thought it was a good idea to give Curt Schilling $75 million? Not me."
On the other side is Barry Spadea, who was a Johnston teacher for 22 years. Spadea says regardless of the fairness of the settlement, retirees have to be pragmatic and come to grips with the need for a sustainable system that provides benefits well into the future.
If workers and retirees vote down the settlement offer, this case heads back to court for what will be a long round of lawyering that will almost surely land in the Rhode Island Supreme Court. Yet, if this initial vote approves, and the judge believes it was conducted fairly, there will be a second of voting. In that round, more than 60,000 workers and retirees, including management workers not represented by the unions that sued, will be eligible to vote. And a group of about 50 retirees late last week filed yet another lawsuit challenging the settlement; these retirees claim they have a right to all of their cost-of-living allowances.
So you’re confused by now. Well, join the club. This only sails deeper into the fog. If the second round of balloting succeeds, the settlement goes back to Smith Hill, where the General Assembly would have to approve it. There has been much pabulum about the taxpayers, who partially finance the pension system, not having a say. That’s false; the taxpayers do have representatives; after all they vote for the General Assembly.
In this matter, taxpayers don’t have a lot to gripe about. Ask most lawyers if they would accept a settlement that gets their side 95 percent of what they want. Or go to court, where the outcome is uncertain. Just about any lawyer would take that deal rather than rolling the dice in court.
Public employee union leaders in Rhode Island don’t get much love from the media. But in this case, they look like responsible citizens who are doing the best they can to balance the interests of members who have contradictory interests. That would be the younger workers who want to be sure there is money for their retirement and the current retirees need for certainty so they can make life decisions.
Is all this messy? Yes it is. In the imperishable words of Winston Churchill, democracy is the worst form of government. Except for all the others.