Is it time for state pension talks?

Nov 16, 2012

Rhode Island’s state pension overhaul faces a Superior Court hearing next month. RIPR political analyst Scott MacKay wonders if  it’s time for the parties to negotiate.

Our state’s landmark pension overhaul heads to Superior Court on December 7. Rhode Islanders of a certain age recall that as the day that lives “in infamy,’’ in the immortal words uttered by President Franklin Roosevelt, to a stunned nation in 1941 after the Pearl Harbor attack.

No lives will be lost over the legal fate of  Rhode Island ‘s 2011 landmark pension changes that sought to bring solvency to the state retirement system. But state government and our struggling cities and towns would be in for a serious financial strafing if the state loses in court to the state employee unions challenging the law approved in a special session by the General Assembly.

Some history:  After warnings from State General Treasurer Gina Raimondo, Rhode Island lawmakers approved and Governor Lincoln Chafee signed into law historic changes in Rhode Island’s state employee retirement system. Faced with unfunded liabilities of  $7 billion or more, the state raised the retirement age for state employees and public school teachers and trimmed back so-called cost of living raises that went automatically to retirees. Some younger employees were switched into a retirement program that reduced taxpayer contributions.

The pension changes were approved to make the system solvent and sustainable for both taxpayers and future retirees.

State employees and teachers and the unions that represent them were furious. The unions say cutting pension benefits meant breaking a promise to retirees and their families. So the unions went to court, sparking an epic legal battle that is likely to reach the Rhode Island Supreme Court.

Unless, of course, cooler heads prevail and the parties sit down and negotiate a deal that averts a protracted and costly legal marathon. For a way out for both sides, we take you to Providence and the administration of Mayor Angel Taveras.

When he took office last year, Taveras was hit with a financial tsunami…a deficit of more than $100 million and hundreds of millions of dollars in pension liabilities. After many rounds of negotiations, Taveras was able to win concessions from all of the major unions representing city workers, with the exception of the police union. Talks with the police union continue and the mayor is hopeful of   reaching an agreement.

As far as the state employees and teachers are concerned, their union leaders have made “direct and indirect overtures’’ on negotiations  that would settle the legal battle, says George Nee, president of the state AFL_CIO.

The unions believe, says Nee, that the Taveras path is the best way to resolve the issues because then labor and management can craft an acceptable deal, rather than having a solution imposed by an outside force, such as the state Supreme Court.

Treasurer Raimondo has opted for the court route and has recruited David Boies, a prominent New York lawyer, to help defend the lawsuit. Governor Chafee and Assembly leaders have not publicly supported negotiations, but they are more likely to do so than Raimondo.

The legal route carries risks for both sides. Superior Court Judge Sarah Taft-Carter has already denied state government’s attempt to establish that the state can unilaterally reduce the pension benefits and cost-of-living benefits of state workers and retirees.

Judge Taft-Carter stated clearly that pension benefits cannot be changed “at the whim of the state.’’

But that is just the first round and the unions know there is no certainty they will prevail as their lawsuit moves forward. If the unions lose in the end, their members are stuck with whatever the court imposes. And if the state loses in court, hold on to your pocketbook, because state taxes and local property levies would have to be sharply increased to pay the pension tab. The only guaranteed winners in a never-ending court joust are, of course, the army of lawyers each side has hired.

The state situation is a bit different than what has transpired in Providence. State pensions are set by law, not contract. So any negotiations would have to include all parties – the treasurer, the governor, the Assembly and the unions would have to hammer out an agreement that could win Assembly approval and be signed into law by Chafee.

And there are political complications. Raimondo is already seen as running for governor in 2014, and Taveras is seriously considering making the run. If the economy rebounds Chafee may want a second term. We just got over the 2012 political cycle (to the extent that Rhode Island ever gets over anything political) so it would be nice to see some governing happen before everybody gets all ginned up about electioneering for 2014.

In the end, the RI Supreme Court will probably cut the baby in half, ruling that core pension benefits cannot be cut but that cost of living allowances and pension plan design are the province of the General Assembly. But who wants to bet their paycheck or tax bills on a court decision?

Unions always prefer negotiation to legal confrontation, so Nee’s stance is no surprise.

Nothing would be lost – and much might be gained- by both sides sitting down at the state level and trying to work things out.

And if  negotiations fail, well, the court house doors aren’t closing any time soon.

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:40 and 8:40. You can also follow his political reporting and analysis at our `On Politics’ blog at