Tuesday night state leaders became poised to make history as the General Assembly met during a one-day special legislation on the proposed pension reform. For 10 months, Rhode Islanders from across the state, from state employees to retirees to teachers to public safety workers and cities and towns have been anticipating Gov. Lincoln D. Chafee and General Treasurer Gina Raimondo’s proposal to save the state from its only 48 percent funded pension system and $7 billion unfunded liability.
The Narragansett Times staff is breaking down the 200 page bill that local legislators will soon vote on in November if and when it is passed out of the House Finance Committee. Be sure to check out Friday's issue to see what local representatives' initial thoughts on the bill are and how the pension plan affects the municipal pensions of Narragansett and South Kingstown. Also, find out how local union leaders are taking the proposal.
After 10 months of devising a plan to change the pension system, a campaign promise she made 12 months ago, Raimondo said her plan is fair to all interested parties, teachers, state employees and retirees and that everyone has a shared sacrifice. Raimondo said the plan will save the state from its only 48 percent funded pension system and $7.3 billion unfunded liability. 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.
Key changes to the pension system:
- A new hybrid plan that combines a traditional pension guarantee with a 401(K)-style plan. This would shift some of the current taxpayer risk to the public employees.
- Suspension of cost-of-living increases for Rhode Island’s retired government workers for up to 19 years.
- Higher retirement age up to 67 years old for current workers 51 years of age. The legislation does not touch the benefits earned by all current employees through June 30, 2012. After that date, employees will move into the new hybrid system.
Savings to the pension fund: (Source – RI Retirement Security Act of 2011 Executive Summary)
- Reduction of the unfunded liability by more than $3 billion and increase the funding status to over 60 percent.
- Maintenance of the current levels of tax payer contribution to the pension system for the next year ($300 million).
- Save taxpayers over $3 billion in next decade.
- Save cities and towns $100 million next year due to decreased contributions to the teacher pension and the MERS system.
- Suspension of COLAs saves taxpayers $353 million. Without reform, state and local contribution to the pension fund would increase from $370 million this year to $615 million next year.
Pick up Friday's The Narragansett Times for more information.