PROVIDENCE, RI – After months of talk about Rhode Island's pension crisis, the bill meant to solve that crisis was unveiled yesterday at the Statehouse. The legislation is supposed to curb more than nine billion dollars in unfunded liability and ensure retirement security for public employees.
State Treasurer Gina Raimondo led the charge for pension overhaul in speaking to a joint meeting of the General Assembly's two chambers. She called the months of pension prologue leading to this point exhaustive - and sometimes exhausting. Raimondo boiled down the next step this way: she calls fixing the pension problem a litmus test for whether Rhode Island can succeed as a state.
"The day you pass this legislation you will be sending a signal throughout the nation that Rhode Island is on the right path. Your work in this special session will be a beacon for others to admire and to follow," says Raimondo. Raimondo also warned that without reform, the taxpayer contribution into the pension system is expected to double to more than $600 million next year. She says that figure could balloon to over a billion dollars in a decade with much of the burden passed onto municipalities.
Those costs for municipalities were a particular concern for Governor Lincoln Chafee, who insisted on included 36 severely underfunded municipally-managed pension funds in the overhaul bill.
"To ignore the pension crisis gripping out cities and towns would be dishonest and closing our eyes to reality," says Chafee. "Failure to address these problems now threatens to leave the local property taxpayer bearing all the burden down the road."
For a statewide perspective, Raimondo says Rhode Island needs to replace a pension system based too much on politics with one based on sound actuarial principles. The approach she developed with Chafee has a handful of key components. It would move public employees into a hybrid plan, like a 401(k), where pension recipients bear part of the risk for their investment choices. The retirement age to get pension benefits would go up for most employees, to their Social Security retirement age.
The Chafee-Raimondo plan would also suspend annual cost of living adjustments, COLAs, for most public employees until funding for the pension plan climbs to 80 percent from the current 48 percent.
Raimondo told reporters during an earlier briefing doing that could take almost 20 years. She acknowledges that's a sacrifice, but calls it one worth making to strengthen the pension system.
Some public-employee unions see the issue quite differently. Teachers' union head Robert Walsh says suspending COLAs would retire retirees with modest pensions.
"Well, we're certainly going to be involved in the process, trying to make many changes to this 200 page bill," says Walsh. "For retirees, there was a promise made. Folks retired on the basis of those promises and planned the rest of their life on this basis. That's going to wind up in the courts. There's no two ways about it."
Legislative leaders downplayed questions about whether labor or other special interests might water down the pension overhaul bill. House Speaker Gordon Fox, for example, denied that a deal was in place to pass the legislation, but he pronounced himself optimistic on the outlook.
"If we didn't think that something was going to pass, and that the problem was large enough that we need to pass something, we wouldn't be here today," says Fox. "So something's going to pass, definitely, something's going to pass. I think the treasurer and the governor did yeoman's work in addressing a complex, emotionally charged issue."
The mammoth pension bill will now be considered, starting next Monday, during joint meetings of the House and Senate Finance Committees. The joint Finance committees will also hold three separate hearings to hear from the public about the pension bill. Those are scheduled for next Wednesday, October 26, Thursday, October 27 and November first.
When push comes to shove, the legislative process will reveal whether Rhode Island took a big step to deal with its pension crisis, or put that off for another day.
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