Metro

Raimondo hailed for state pension reform

By
Senior Staff Writer
Wednesday, September 26, 2012

Since Rhode Island successfully passed pension reform last year, the state has drawn significant attention from national news outlets and nonprofit organizations that see Rhode Island as an exemplary model for states with underfunded pension systems

A 2010 report compiled by the Pew Center on the States, a national public policy think tank, projected the nation’s total unfunded liability – the gap between state-guaranteed pension benefits and the funds available to pay for them – at $1.38 trillion. Though states vary considerably in their unfunded liabilities, this means the average public employee pension plan is about 78 percent funded. The minimum funding ratio categorized as healthy is 80 percent, and plans funded below this percentage require immediate attention.

The vast majority of national coverage concerning Rhode Island pension reform has focused on the efforts of State Treasurer Gina Raimondo, who devoted much of her first term to addressing and implementing legislative action to fix the state’s pension system. 

“Once I started to talk about the problem and put the facts out there, it wasn’t very hard to get people to focus,” Raimondo said on the National Public Radio program “Talk of the Nation” Sept. 24. In May 2011, Raimondo released a document entitled “Truth in Numbers,” detailing Rhode Island’s pension system, which had an unfunded liability ratio of 48 percent. Raimondo said pension benefits could realistically disappear within the following decade without cutting benefit or raising public employee payments. She added that without pension reform, cuts to public programs would have been inevitable – the 10 percent of tax revenue paid into the pension system in 2011 would have doubled within a year and continued to grow.

“During pension reform, my mantra was, ‘This is math, not politics,'” Raimondo said.

While the reform requires sacrifice from retirees, active employees, new hires and taxpayers, its passage ultimately serves in the best interest of all parties, Raimondo said. The pension system before the reform bill was “deeply unfair” to vested public school teachers, she added. 

“Because we came together … we now have a system which is stronger and is fundamentally fixed for decades to come,” Raimondo said.

Raimondo is currently a defendant in four lawsuits filed June 22 by a coalition of several public employee unions, a judicial action union leaders advocated and policy makers anticipated prior to the bill’s passage last November. “Treasury will work diligently to defend the important work done by the General Assembly,” Raimondo said in her reaction statement to the lawsuits, the hearings of which will be held Oct. 30.

The unions’ suits argue that the state violated the contract rights, right to due process and takings clause of the state constitution. 

David Draine, senior researcher for the Pew Center on the States, said he supports Raimondo’s initiative. “Retirement costs are crowding out both spending on needed public services but also the ability to hire more public employees and to give raises to those already in the system,” he said.

Raimondo’s reforms have also attracted positive attention from the nonprofit American Legislative Exchange Council, a high-profile, fiscally conservative organization. The group’s annual “Rich State, Poor State” report singled out Rhode Island as the “biggest pension reform success last year.” The authors of the report – all of whom are right-wing economists – praised the state legislature for its “monumental” bipartisan bill but said the removal of language concerning municipal pension reform was a cause for disappointment.

Providence voters appear to be in consensus with the report, according to a survey conducted this month by Brown’s Taubman Center for Public Policy. Nearly 60.1 percent of survey respondents supported Raimondo’s “equal burden” plan, 48.5 percent approved of eliminating cost-of-living adjustments, and 67.3 percent believed Providence’s municipal pension system should adopt the state employees’ 401(k) style plan.

The survey’s release coincides with the Taubman Center’s upcoming Thomas J. Anton/Frederick Lippitt Urban Affairs Conference Oct. 25, an annual event that will address municipal pension reform this year.