As many of us prepare for the first round of midterms, Rhode Island lawmakers are getting ready for a test of their own. The General Assembly will soon convene for a special session to address the state pension system's $7.3 billion unfunded liability. There will almost certainly be major changes in the way Rhode Island doles out pensions, and past and present state workers are bracing for cuts in their benefits.
We understand this issue is probably not at the forefront of many students' minds. Debate over pensions often alternates between simplistic dogma — decrying state workers fighting for their benefits as greedy or the politicians trying to fix the system as heartless — and technical terminology like accrual rates and vertical hybrid plans. Pensions are simply not the most exciting issue.
But this debate affects all of us, not just state employees. The pension problem is so large that it consumes resources we could be using to bolster Rhode Island's anemic economy. General Treasurer Gina Raimondo released a report in June showing that taxpayers' "contribution to state retirement expenses has doubled in the last seven years" and is expected to double again by 2013. At that point, 16 cents of each taxpayer dollar will go toward the pension fund. Raimondo further notes, "In recent years, state aid to cities and towns, which is used mostly for K-12 education, has decreased annually by 8 percent, and state aid for higher education has dropped by 5 percent each year" as lawmakers try to support the pension system.
So far, the process towards pension reform is showing promise. A series of public events allowed lawmakers and the public to get better informed about the issue's intricacies, and Gov. Lincoln Chafee '75 P'14 is set to release a detailed proposal to the General Assembly.
Yet as we enter the decision-making phase, there are new concerns to address. Transparency, for example, is crucial. Many members of the Assembly have a personal stake in the legislation's outcome because they or their close relatives receive or will receive a state pension.
Legislators must avoid the temptation to enact reforms that do not immediately set about closing the unfunded liability. Josh Barro of the Manhattan Institute notes, for example, that many states rely on cuts to future workers' benefits to alleviate pension troubles, delaying savings for "years or decades." A better approach, commonly taken in the private sector, is to apply changes to the future benefits of all workers.
Benefit cuts should be balanced and progressive. Chafee is expected to propose a freeze on cost of living adjustments, depriving current retirees of an increase in benefits. Outside experts say there are at least two simple ways to lessen this move's harm: Spreading the cost of living adjustment cuts out among current retirees as well as near-retirees or structuring the cuts progressively, so high-income pensioners see their adjustments reduced more than less well-off retirees.
Innumerable poor decisions led to the pension crisis. But now is not the time to point fingers. For the sake of all Rhode Islanders, lawmakers must craft a solution that promises a stable pension fund while minimizing the pain for state employees during these difficult times.
Editorials are written by The Herald's editorial page board. Send comments to editorials@browndailyherald.com.
