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WAKEFIELD ‚ÄĒ Currently touring the state to promote her financial education program, EmpowerRI, state treasurer Gina Raimondo visited The Narragansett Times office last Wednesday to discuss her goals for the upcoming year regarding Rhode Island‚Äôs fiscal health.
She touched upon a number of new initiatives upon which the treasurer‚Äôs office has embarked, including the Crime Victims Compensation Program and the recent state pension reform.
Raimondo also revealed that, although she has given thought to running in next year‚Äôs gubernatorial election, no decision will be forthcoming until the end of 2013.
‚ÄúI am really thinking hard about it,‚ÄĚ said Raimondo. ‚ÄúA lot of people are urging me to run, but I am not fully decided.‚ÄĚ
The state treasurer fielded questions from reporters of a number of local newspapers, including The Narragansett Times, The Standard Times and The East Greenwich Pendulum, discussing the most pressing issues the state faces in the wake of pension reform.
‚ÄúIt is important for people to understand that the work that the General Assembly and I did has had a huge impact on cities and towns,‚ÄĚ said Raimondo. ‚ÄúIn the last week, I have gotten dozens of e-mails about Detroit, saying, ‚Äėthat could have been us and thanks for the work that you did.‚Äô‚ÄĚ
‚ÄúThe pension reform [will save] about $4 billion in Rhode Island for the next 10 years,‚ÄĚ she added.
In 2011, the Rhode Island Senate and House of Representatives passed changes to the state pension system, a process which Raimondo described as painful, but necessary.
‚ÄúThese liabilities are very large in Rhode Island and, at the time I took office, about 10 percent of the state‚Äôs tax revenue was dedicated to the state pension,‚ÄĚ said Raimondo. ‚ÄúIf we didn‚Äôt do the reform, it would be 20 percent.‚ÄĚ
The pension system is now split into two groups: those who participate in the state-run Municipal Employee Retirement System (MERS) and others who manage their pension programs independently. Narragansett, for example, is independent from the state program, while the larger towns of South Kingstown and North Kingstown participate in MERS.
The MERS system requires cities to meet their Annual Required Contribution (ARC) by statute or, if they are having trouble doing so, to develop a plan through which they can meet that goal in a defined amount of time. Raimondo recognized that for many cities and towns, paying into their retirement system has led to difficult choices, but stressed that she has worked as hard as she can to assist municipalities during these trying economic times.
‚ÄúI am completely committed to helping cities and towns fix their pension problems, and it is hard,‚ÄĚ she continued. ‚ÄúMy office has run workshops on the math and legal analysis, but the problem is there is no one size fits all solution. I am trying to help cities and towns, but at the end of the day, they need to do the work, and it has to be done.‚ÄĚ
‚ÄúIt is incredibly painful to let these problems go unaddressed,‚ÄĚ she added.
According to the treasurer, the reform has already brought significant savings for municipalities. During this last year, North Kingstown has saved approximately $5.3 million in pension costs, while South Kingstown has saved $4.6 million. Narragansett, as a non-MERS program, has saved $950,000.
The state‚Äôs pension system has even been recognized by Institutional Investor Magazine as the ‚ÄėSmall Public Plan of the Year‚Äô because of the immediate savings which have been realized through reform.
Raimondo has been the focus of considerable criticism and litigation, however, from state employee and teacher unions because of the cuts to which she has committed for pension plans, but stressed that the long-term sustainability of the state‚Äôs financial health is paramount to her decision-making.
‚ÄúWe need to fix the [more than] $1 billion of liability in Rhode Island, which is a lot for such a small state,‚ÄĚ said Raimondo. ‚ÄúWith the reform that the General Assembly passed, we try to accomplish two goals in that [state employees] deserve to have a secure retirement, but it also has to be affordable and sustainable in the long run.‚ÄĚ
‚ÄúPensions will cost more in the next handful of years, but in the out years, it tapers off,‚ÄĚ she added. ‚ÄúWe have to get through these expensive years, and [pension costs] will level off substantially.‚ÄĚ
The state treasurer also expressed sympathy with municipalities and state employee unions and understands the difficult position in which they find themselves in regards to securing a proper retirement.
‚ÄúThe teachers‚Äô union and state municipal employees have a lot of well paid, effective lobbyists, and that is not a bad thing,‚ÄĚ said Raimondo. ‚ÄúThat is their job, but my job is to look out for every Rhode Island. The job of an elected official is to consider their point of view, but then do the right thing for everybody, not just the lobbyists.‚ÄĚ
‚ÄúAt some point, we all have to realize, we are all in this together, which I know sounds Pollyanna, but it is in nobody‚Äôs best interest for a city or town to go bankrupt,‚ÄĚ she continued. ‚ÄúI wish it didn‚Äôt have to be so divisive, but it is hard.‚ÄĚ
Raimondo further noted that, until the economy becomes more conducive to sustainable growth, issues revolving around pensions and saving municipal services will continue.
‚ÄúThere is not enough money to go around and the economy stinks,‚ÄĚ said Raimondo. ‚ÄúThe real solution to all of this is growth, and in the absence of growth, we just have to do our best.‚ÄĚ
Raimondo is currently promoting responsible finance management to local residents and businesses on her Smart Money Tour, which runs through the end of August. For more information, visit www.treasury.ri.gov.