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Chafee: Reform has 'momentum'

November 3, 2011

PROVIDENCE – Gov. Lincoln Chafee says “there seems to be good momentum for comprehensive pension reform” now that a joint General Assembly committee has concluded a series of public hearings on the controversial but potentially historic pension bill he crafted with General Treasurer Gina Raimondo.
After 10 months of public workshops and endless behind-the-scenes computer runs of “what if?” scenarios trying out different minimum retirement ages, cost-of-living adjustments (COLAs), years of service requirements and other permutations of the actuarial arts and sciences, the resulting proposal is about to be fed into the sausage-making maw of the legislative process that will likely produce a law that nobody can yet predict what it will look like, never mind what its long-range ramifications might be.
Even though this proposal is the first potential legislative achievement of an administration that saw his first budget largely blown out of the water by lawmakers, a wildly unpopular effort to win in-state tuition at the state colleges for undocumented Rhode Island students and a principled but lonely stand to prevent a Woonsocket murder suspect from being turned over for federal prosecution and possible exposure to the death penalty, Chafee says he agrees with the city and town mayors who want the bill amended to strengthen provisions to fix locally administered pension plans that are currently outside the state’s purview.
Mayors testifying before the legislative committee this week sought the authority to suspend COLAs in the local (called non-MERS in pension jargon, referring to the Municipal Employees Retirement System) plans, as the state is proposing for the plans it administers, to line up other benefits in the local plans to what the state pension system offers and, eventually, having the state plan for municipal employees absorb the new hires who would otherwise join the local system.
“As you remember, even in the tough budget year, I had in my budget a plan to address the municipal pensions,” Chafee said recently. That plan, called the MAST (Municipal Accountability Stability Transparency) Fund was a carrot-and-stick approach to getting cities and towns to make their annual required contributions to their pension funds, an obligation that some municipalities perform more faithfully than others. It promised additional state aid to communities that did so and threatened to cut aid to those that didn’t. The General Assembly chopped the $18.2 million proposal from the budget.
“So I’ve had an interest in this subject right from the first days of my administration. That was all about helping the towns get their pension funds solvent. That didn’t make it through the General Assembly but we are back at it now.”
When the governor appeared before the Joint House and Senate Finance Committee a week ago, he urged them to consider the amendments the mayor’s were seeking to his own plan.
While the pension bill was in the making, Chafee said, “there were questions about legality (of legislating changes to benefits that are part of collective bargaining agreements) and whether we should come back and do the municipal plans. I pushed hard for them to be included in the bill. Ultimately, the bill does include the independent plan, but the mayors criticized that it didn’t go far enough. We’ll look at what the mayors have recommended. I’ve been like a terrier with a bone on the non-MERS because I believe so firmly that they are a real danger to the state’s economic well-being. I’m absolutely determined to everything in my power not to see what happened in Central Falls retirees happen in any other community.”
When the tiny city of Central Falls went to federal Bankruptcy Court earlier this year, Chafee-appointed Receiver Robert Flanders slashed the pension benefits of police and fire department employees by 50 percent or more as part of the city’s reorganization plan.
Chafee said he is looking forward to working with legislative leaders to find what they have gleaned from the nearly 40 hours of testimony in three different hearings.
Asked what he has taken from the testimony, Chafee said, “age of retirement is probably the most contentious for the critics.” The plan calls for a new minimum retirement age tied to the Social Security schedule, currently between 66 and 67, depending on the year an individual worker was born.
He noted that AFL-CIO President suggested at a Chamber of Commerce breakfast that workers could perhaps raise their contributions to the system in exchange for flexibility on the retirement age, an idea that was echoed by other union leaders during the hearing.
Might he be open to such a change?
“The general treasurer was at that breakfast and she said it’s a math issue, which is true,” Chafee said. “If we can make that work, that’s a possibility.” He also noted that there is no requirement that people actually keep working until 67; they just can’t start collecting a pension before that age.
But he acknowledged the general sentiment that the bill is a complex mechanism that can’t be changed too radically without upsetting the internal arithmetic that makes it work.
“The mantra is comprehensive, one-time, pension reform and I think that’s what everyone wants,” the governor asserted. “If you start pulling threads out of the tapestry, it raises the likelihood that we have to come back at another date to do more reforms. There are self-correcting mechanisms built in. Nobody wants to come back because the lawmakers have gone through this experience, from their perspective, too many times already. ”
State employee unions, many of whom supported the Independent Chafee in the four-way race that he ultimately won with just 36 percent of the vote, have made no secret of their opposition to many parts of the pension proposal. They have also been vocal about now expecting the help of the governor they supported during the election.
“I owe them retirement security,” is Chafee’s answer. “The reality is the two biggest factors in why we have to do these reforms are the crash of the stock market and people living longer. We just have to make adjustments for that.”
Even though the state is now proposing to renege on the deal for which state employees have been paying 8.75 percent of their salary every payday (9.5 percent for teachers), Chafee said, “the changes that have happened are not the state’s fault or the employees’ fault, those are the crash of the market and people living longer. We just have to make changes and amend some of the promises, all for the health of the system, which is in everybody’s interest.”
While the media has largely given Raimondo the credit for writing the massive, 200-plus page legislation, Chafee says he and his administration have been part of creating “every facet” of the measure.
“It was a huge issue for the state, it had to be confronted,” he said. “So whoever gets credit now is, I think, irrelevant.”
So now that the bill is in the legislature’s hands, what part will the governor play going forward?
“Ultimately,” he said, “my legal role is the potential of a veto, but, just practically, nobody wants to see that happen.”

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