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PROVIDENCE â A new hybrid plan that combines a traditional pension guarantee with a 401(K)-style plan, a suspension of cost-of-living increases for Rhode Islandâs retired government workers for up to 19 years, and a higher retirement age up to 67 years old for current workers 51 years of age are what Governor Lincoln D. Chafee and General Treasurer Gina M. Raimondo propose will save the state from its only 48 percent funded pension system and $7.3 billion unfunded liability.
State leaders met Tuesday evening during a historic one-day special legislation on the proposed pension reform that Rhode Islanders from state employees, to retirees, to new employees to teachers and cities and towns have been anticipating and what Raimondo has been devising for the past 10 months.
The 200 page piece of legislation, Raimondo says will once and for all solve the pension problem and fix the system.
âThe focus has been on finding real solutions to real fiscal challenges. Fixing the system is in everyoneâs best interest,â Raimondo said. âNo one group bears a disproportionate burden. Itâs designed to be fair.â
As Raimondo courts her legislation as fair to all, at stake is state retirees who were promised cost of living adjustments (COLAs), tax payers who cannot handle paying for the $7.3 billion into the pension system and new employees who cannot make sense of paying 9.5 percent of their salaries into a pension that may dry up before they retire.
âThe fundamental goal throughout this process has been to provide retirement security through reforms that are fair to the three main interested parties: retirees, current employees and the taxpayer,â Chafee said. âOur proposal asks each of the three main interested parties to do their share. Everyone must share in the sacrifice.â
The proposed plan, Raimondo said will strengthen and modernize the system and create an affordable and secure system for retirees and taxpayers.
Without reform, Raimondo said state and local taxpayers will pay almost double next year, more than $600 million to what they pay this year to give state workers a retirement with a pension. Raimondo said this would result in tax increases and painful budget cuts that would burden the cities and towns even more.
In South Kingstown, Town Manager Stephen A. Alfred said reform is necessary.
Between the South Kingstown town and school budgets, $5 million will have to be devoted to paying into the pension system. Without reform, Alfred said that amount would grow by $4 million to $9 million next year. With the tax levy cap currently at four percent, only $2.6 million could be raised next year, leaving $1.4 million to still be raised for the town.
If the General Assembly adopts the pension proposal intact, Raimondo predicts it will reduce the $7.3-billion taxpayer tab for the unfunded liability by $300 million. It will save $1 billion in decades to come, Raimondo said.
For more information, on how local representatives feel about the pension proposal they'll vote on next month, pick up a copy of today's paper.