How many pensions does Rhode Island have?
PROVIDENCE, R.I. – Rhode Island is a tiny speck of a state, not big enough to be a county in most of America. We have 39 cities and towns. And about 150 public employee pension systems. Yes you heard that right. We say about, because state general treasurer Gina Raimondo, says there are so many of these pension systems in our state that she isn't sure of the precise number.
How did this happen? For this we take you to that eminent philosopher of all things Rhode Island and our most prominent political felon, Buddy Cianci. In his new book, Politics and Pasta, Cianci bluntly lays out the first commandment of Rhode Island public life:``Politics, ' says the former Providence mayor. ``Is simply the art of trade and barter.''
A generation of politicians, Democrats and Republicans alike, traded public employee pensions for political support. They created a system where they used the public treasury - the taxpayers - to buy votes. This led to an I'll-do-this-for-you-if you-do this-for-me culture that now threatens the very existence of our state and municipal governments. The numbers of the unfunded liability in the state pension system are in the billions of dollars.
And that's not the worst of it. Eighteen town and city public employee pension programs are in far worse shape, from the one covering cops in Westerly to the town employees in Coventry to the firefighters in Cranston.
Profligate politicians aren't the only factor in this mess. There are only three sources of money for pensions: contributions from workers, the taxpayers and the stock market return on the investments. The reckless bankers of Wall Street who used the markets as their private casino turned a rainstorm into a flood. But these too-big-to-fail people seem insulated from the harsh world of capitalism the rest of us live in. They still jet off to Nantucket on summer weekends.
When it comes to pension liabilities, even the good news is bad. About half the state pension liability is due to the fact that retirees are living longer, collecting checks well into their 80s and 90s. Women live longer than men and such traditional female bastions as teaching, nursing and clerical occupations are overrepresented public employment. The day of reckoning for decades of political deals and overly generous cost-of-living-allowances is upon us. Treasurer Raimondo estimates that within a year to 18 months, there will come a time when a pension check to a retired cop or firefighter in Central Falls or West Warwick will bounce and the system will begin to crumble.
Over the next few weeks, Raimondo plans to issue a report that puts the public pension burden in perspective. Then she plans to deliver a spectrum of options for the General Assembly and Governor Lincoln Chafee.
The only answer so far is that there are no easy answers. It is easy to demonize the public employees and point to the obvious abuses that get overplayed in the media and on talk radio. The onetime House speaker raking in more than $100,000 a year in state pension benefits. The retired Providence fire chief and his $160,000 annual pension.
But the system isn't nearly as lucrative for most public workers. The average state employee yearly pension is about $25,800 and the average teacher gets $41,700. The average municipal worker gets $15,400.
When it comes to the state budget deficit and pension problem, every one with a voice in Rhode Island's business, media and political orbit seems to be a self-appointed financial doctor. All of them seem to have a diagnoses; few have a treatment plan and none a credible cure. Why not put all the current employees into a 401k system, you say? Sounds great until you realize that two-thirds of the money that supports retirees now comes from the contributions of current employees. The transition costs of such a scheme are enormous.
Governor Chafee knows that the pension red ink is going to land on his desk very soon. He has an interim plan that calls for hitting up state employees for bigger contributions to keep the system running until a permanent solution is devised.
So now is the time for union leaders, the governor, the general treasurer and General Assembly leaders to get together and craft a solution before our Titanic of a pension ship hits the iceberg.
Chafee had a good record of pension solvency when he was Warwick's mayor. But he says he faces a bigger challenge now: a cynical Rhode Island public that refuses to believe the State House crowd can do anything about the state budget deficit or pension liabilities that don't involve wasting the taxpayers' money on self-serving deals.
For once, could the General Assembly act as trustees of the citizens instead of being so short-sighted and selfish? Before its too late and Rhode Island is once again a national laughingstock, its state and local governments slouching toward receivership. That would be political malpractice rivaling the 1991 banking crisis.
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