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Raimondo gives state senators a pension lesson

September 13, 2011

PROVIDENCE — General Treasurer Gina Raimondo told state senators Monday that she would like to fashion a pension reform plan that would not take benefits away from state employees who have already retired, and thinks she can do it. But she isn’t making any promises.
“We would love to be able get this done without touching accrued benefits,” she said at an informational caucus for the full senate, “so if you’ve earned it, it’s yours, and I think that is possible, that is why we are taking so long to carefully go through the numbers.”
She added, however, that “the system today is extremely challenging to young workers. We’re trying to balance this out.”
“This is a crisis we have to solve,” Raimondo asserted. “It’s not going to go away. It’s going to require leadership and bold action to fix it. The system we have today isn’t secure, it isn’t sustainable and, as you will hear from our actuary, many scenarios show it running out of money.”
Saying that nobody wants to be back in a few years trying to change the pension plans again, Raimondo told the solons, “This is it. This is our last pension reform. So let’s get it right and design a system that is self-correcting and sustainable.”
Raimondo made her remarks just a few hours after the conclusion of the final meeting of the committee she and Gov. Lincoln Chafee empanelled to advise them on crafting pension reform legislation they plan to submit to the General Assembly early next month so legislators can consider it during a special fall session.
Both House Speaker Gordon Fox and Senate President Teresa Paiva Weed say they expect lawmakers to work on the pension bill exclusively during that session.
The legislation she and the governor will propose, Raimondo said, will be very complex with many moving parts and changing one aspect of the plan will inevitably affect some other part of the plan, she told Narragansett Sen. James Sheehan. That is not how the legislative process generally works. The legislature, for instance, each year makes wholesale changes to the state budget after it is presented to them by whoever is governor at the time.
Raimondo acknowledged, “obviously, you have to do your job, it will go through the legislative process. My job as treasurer will be to be kind of a watchdog. I am the fiduciary. I will be supportive of any plan that solves the problem, that’s how I am looking at. And my office is here to support you as you do your work.
“I expect there will be some changes” to the original proposal, Raimondo told reporters at the conclusion of the 90-minute briefing. “But we had nine months of open discussion, constant dialogue. At the end of the day, I won’t support a plan unless it solves the problem. It doesn’t have to look exactly like what I propose, but it has to get the job done.
Asked how much noise she is willing to make if the legislature makes major changes to her plan, Raimondo said, “as much as it takes. I am not going to go away or be quiet until the problem is fixed.”
Paiva Weed told the lawmakers that if they have questions or reservations about what Raimondo proposes, it would be better if they were raised through the committee process, rather than attempting last-minute changes when the legislation comes to the Senate floor. That way, actuaries, fiscal advisors and other experts will have time to consider how a proposed change to one part of the plan could affect the whole.
“If we’re on the floor and you have amendments, it’s going to be tricky because you’re going to have to be doing actuarial runs,” Paiva Weed said. “It’s better to let it be known now or in the committee process just so we can do the runs.”
The term runs is actuarial jargon for plotting out how a given change or proposal would play itself out over an extended number of years, or in various sets of circumstances.
The Senate president said she understands that “just the smallest change can make a significant difference. However, while I don’t anticipate there would be a unanimous vote, by any stretch of the imagination in either chamber, I’m confident that, working together, we can address the issues that have been raised.”
A coalition of unions have filed suit in to challenge pension changes made by former Gov. Donald Carcieri and the General Assembly in 2009 and 2010. Superior Court Judge Sarah Taft-Carter is expected to rule in the coming weeks on the state’s motion to dismiss the suit because the pension rules are set by statute so there is no contractual guarantee that changes can’t be made to pension benefits once workers are vested.
Mark Dingley, a deputy general treasurer and general counsel for the office, said the state believes there is not a contractual right.
Asked afterwards if it makes a difference whether workers made payments toward their pension benefits – state workers pay 8.75 percent of their salary toward their pensions and teachers pay 9.5 percent – Dingley said, “that’s an open question.” He said courts in some states have ruled that it does make a difference, and courts in other states have ruled that it does not.
Either way, Raimondo said decisions on pension reform must be made irrespective of court rulings on prior changes.
“We can’t wait,” for a court decision, the treasurer said after the meeting. “We have a crisis we have to move forward. Whoever loses (the case) will appeal, whoever loses that will appeal. So it is foolhardy to think we will have any finality on that issue within the next several months.”
A coalition of public employee labor unions unveiled an effort last Friday to “fight back” against changes that will reduce benefits. Several labor leaders are part of the committee that ended its work Monday.
The unions, Raimondo said when asked about the Rhode Island Retirement Security Coalition’s response. “have not put forth a viable solution. We have a problem. We are 48 percent funded, the fund is on a path to run out of money and it is on a path to bankrupt the states and cities and towns.”

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