Rhode Island public employees and union leaders packed the State House Wednesday for a joint finance committee hearing on Rhode Island's chronically underfunded pension system.
The room quickly filled to capacity, forcing some members of the audience to view the televised hearing in an overflow room.
The joint briefing, which was preceded by two informational caucuses on pensions and several meetings of the state's pension advisory group, still served as an introduction for some members of the committee. Rep. Helio Melo, D-East Providence, said many lawmakers present were being informed of Rhode Island's pension situation "for the first time."
The state has engaged in an ongoing effort to reform the pension system over the past decade, said Peter Marino, fiscal adviser to the state Senate. Along with other states, Rhode Island saw its unfunded pension liability increase during the recession, as the pension fund was hard-hit by market volatility. "There's no silver bullet," Marino said.
Rhode Island's pension plan was 57.5 percent funded in 2009, making it one of the six worst-funded state plans in the nation, said House fiscal adviser Sharon Ferland. A decade earlier, the plan was 82 percent funded.
The funding decline prompted a series of legislative changes starting in 2005. At that time, public employees, regardless of their age, could retire and receive a pension after 28 years of work. Pension reform legislation mandated a minimum retirement age of 59, extended by a year the amount of time public employees must work to be eligible for retirement and capped cost-of-living adjustments at 3 percent. Since 2010, the minimum retirement age in Rhode Island has been 62. Cost-of-living adjustments are still capped at 3 percent and are limited to the first $35,000 of a pension.
Despite the recent changes, the state's unfunded liability is currently estimated at $9.4 billion by the Rhode Island Public Expenditure Council and continues to rise. Ferland said he attributes two-thirds of the blame for the increased unfunded liability to a recent change in the state's assumptions for the pension system's investment return, a comment that incited groans from the audience. Ferland also pointed to Rhode Island's demographic composition as a drag on the state's pension system. With an aging population and a stagnant workforce, contributions to the system perennially lag behind funding demands, she said.
And efforts to overhaul the system ran into an obstacle this week when state public employees won a victory in court. The Rhode Island Supreme Court affirmed Tuesday that public employees have an implied contract when hired that includes benefit entitlements. But "it doesn't mean they're entitled to those benefits forever," said Ken DeLorenzo, executive director for the union Rhode Island Council 94, at the hearing.
In an interview with The Herald, DeLorenzo lamented policymakers' failure to focus on increasing revenue and said the Bush tax cuts, in particular, favor the affluent over working people.
"There's got to be some way to make up this deficit without beating the tar out of state employees," Sharon Wollschlager, a registered nurse and vice president of the local chapter of National Association of Government Employees, told The Herald. Wollschlager said she lost 10 percent of her promised pension in 2009 and fears losing more.
Wollschlager said the lack of support for public employees in the private sector is likely to influence lawmakers, who are up for reelection in 2012. "They hate state employees," she said. "They think we're all slackers. They don't want us to have something that they think they don't have."
Wollschlager and DeLorenzo both advocated re-amortization, a strategy similar to mortgaging the state's unfunded liability, though Wollschlager said a mechanism to offset the overall increased cost of re-amortization would be necessary. "I hate to say higher contributions, because we're paying high contributions now," she said.
Wollschlager added that she worries changes to the pension system will cause public workers like herself to leave the state. "A lot of people are going to be leaving again. We can't replace them. We're running with the skeleton crew as it is."
