PROVIDENCE, RI – Rhode Island's long-anticipated pension overhaul plan is scheduled to be unveiled Tuesday. The General Assembly will receive the proposal during a 4:00 pm session and then hear from Governor Lincoln Chafee and State Treasurer Gina Raimondo. But details have leaked out about the proposal that's meant to cut Rhode Island's $7 billion unfunded pension liability and put the pension system on stable footing.
Rhode Island Public Radio's Ian Donnis has been following the story and has talked with the state treasurer. He joined host Josie Guarino to discuss some of the plan's details.
JOSIE GUARINO: Ian, remind us again, what will this pension overhaul consist of?
IAN DONNIS: Well, Josie, state officials have previewed many of the planks of this proposal in recent weeks. These include raising the retirement age for some public employees to 67, and introducing a hybrid pension with a 401(k) style component.
JOSIE GUARINO: Ian one of the most controversial details that leaked out is freezing cost of living adjustments, or COLAs, until the pension system is in better shape. Why is that so controversial?
IAN DONNIS: If the plan is implemented, getting the pension back to better health could take 15 years. Unions see that as a long time to go without annual three percent cost of living increases and that will harm the buying power of retirees that can't earn more income. Treasurer Raimondo agrees that suspending COLAs is a sacrifice.
"Every retiree I've talked to has said I want to do my part," says Raimondo. "And what we're going to say to the retirees is, You're going to keep everything you have, but for a while, we're going to ask you to forego the raises.' And it is a sacrifice, but I believe it's one that has to be made if we're going to solve this problem."
JOSIE GUARINO: What are you hearing from the unions about this?
IAN DONNIS: One of the state's two biggest teachers unions, the National Education Association Rhode Island, says based on what it's heard, it will oppose the overhaul plan. NEA head Robert Walsh says freezing COLAs will sap the buying power of retirees with modest pensions. He also says suspending COLA might not hold up as part of a court challenge by public employee unions.
JOSIE GUARINO: What will happen when unions and other special interests try to get lawmakers to change the pension overhaul plan?
IAN DONNIS: That's one of the big questions to keep an eye on. Labor has more influence in the state Senate than in the House, so we'll be watching that going forward.
JOSIE GUARINO: Will the General Assembly tweak parts of the overhaul that's going to be introduced by Raimondo and Chafee?
IAN DONNIS: Raimondo says she expects some minor changes. But she also cautions that the complexity of the overhaul means bigger changes could throw the whole thing off course.
"This is a bill that has been carefully designed, vetted in the public over a number of months," says Raimondo. "Experts have opined on it, actuaries have weighed in on it, and I know that this bill will work, and I will be encouraging the General Assembly to pass it in the form that it's submitted."
JOSIE GUARINO: Are legislative leaders on board with this pension overhaul?
IAN DONNIS: Raimondo says she doesn't have assurances from House Speaker Gordon Fox or Senate President Teresa Paiva Weed that their chambers will pass the pension bill. But there is some momentum for change, based on the amount of attention focused this year on the pension issue. The Finance Committee chairmen in both chambers have cited the need for the pension overhaul. And even without the assurances from legislative leaders, Raimondo says she thinks the General Assembly wants to do what she calls "the right thing."
JOSIE GUARINO: What happens if efforts to overhaul the pension plan come up short?
IAN DONNIS: Well, that's the stick being used by Treasurer Raimondo and other supporters of reform. They point to how the annual taxpayer cost of pensions will roughly double next year, to more than $600 million, without changes.
Raimondo says, "if we don't fix this problem, municipalities are going to see crushing bills with respect to their teacher pension bills, every Rhode Islander will be facing substantial increases in property taxes. You're going to see municipal layoffs, you'll see teacher layoffs. It is absolutely in everyone's best interest to solve the pension," says Raimondo.
JOSIE GUARINO: What's the next step?
IAN DONNIS: Chafee and Raimondo plan to speak to the General Assembly on Tuesday afternoon after the introduction of their overhaul plan. The legislation will go legislative finance committees, which will hold a series of public hearings.
Rhode Island Public Radio will continue to follow the pension crisis next week as Governor Lincoln Chafee and Treasurer Gina Raimondo roll out their overhaul plan. On Monday political analyst Scott MacKay will roll out his view of what the General Assembly should do.
And if you've forgotten the details of how Rhode Island found itself with a $7 billion unfunded pension liability, or want to hear stories from the people who will have to live with changes to the pension system, check out our series The Pench.
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