Nearly three hours past the scheduled meeting time, state lawmakers spoke yesterday before the joint House and Senate finance committees to present their revisions to the Chafee-Raimondo pension reform bill. The legislation, spearheaded by the state's governor and treasurer, has been billed by Rhode Island policymakers as a way to rein in the state pension system's massive $7.2 billion unfunded liability and ensure the system's survival for future retirees.
The House and Senate finance committees are scheduled to vote on the finalized version of the legislation in separate sessions this afternoon.
In a statement released yesterday prior to the hearing, Gov. Lincoln Chafee '75 P'14 voiced his disapproval of some of the proposed revisions, specifically a change that would exempt the 36 municipal plans not included in the state system from reform. As a result of this change, retirees enrolled in these plans would continue receiving cost-of-living adjustment payments that would be frozen for employees in the state system under the original bill.
The changes move the bill closer to Rhode Island General Treasurer Gina Raimondo's position on cost-of living adjustments, yearly increases in pension payments that are indexed to inflation. Raimondo supported cost-of-living adjustment freezes on state-run pensions and opposed Chafee's desire to extend freezes to the state's municipal plans.
Under the new bill, retirees would receive cost-of-living adjustment payments in their pensions every five years until the system's unfunded liability is stabilized, or 80 percent funded. The original bill would have frozen these payments entirely until the system could be considered healthy.
The partial restoration of cost-of-living adjustments and other proposed revisions increase the new bill's cost by approximately $27 million relative to the original bill.
The revisions also mandate that the funded ratio of all plans operated by the state be collectively evaluated before cost-of-living adjustment payments are restored to being paid out annually. No state workers will regain yearly adjustment payments until the entire state pension system reaches an 80 percent funded ratio.
State judges — excluding active Supreme Court justices, whose compensation cannot be reduced under the state constitution — will also face reduced cost-of-living adjustments if the new bill is enacted.
Retirement eligibility has also been altered from the original plan. The bill now matches eligibility to receive a state pension with Social Security payment eligibility by mandating a retirement age of 67 for employees born after 1960. The revised plan caps eligibility at 67, so that increasing the age to qualify for Social Security would not affect state pension eligibility.
Depending on their years of service, active workers approaching eligibility for the current state-run plan would now be able to retire before 67, but no earlier than 59 years. Their benefits would be reduced under the new plan.
The revised bill also allows part-time employees, excluded from the original bill, to receive pension payments based on the 10 years during which their salaries were the highest to avoid increasing payments for employees who transition to full-time at the end of their careers.
Other revisions mandate actuarial studies to determine funding of municipal plans to be completed no later than April 2012. Plans determined to be under 60 percent funded must submit improvement plans to a 14-member commission headed by the state director of revenue, the auditor general and municipal employees and officials.
The bill has sparked considerable opposition from the state's public employees and retirees. More than a thousand of them protested the legislation outside the Rhode Island State House in a rally Tuesday organized by the Rhode Island Retirement Security Coalition, a group of Rhode Island public employee unions.