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Pension reform passes

November 18, 2011

PROVIDENCE — The General Assembly culminated an historic special fall session by overwhelmingly approving a radical overhaul of the public employee's pension system designed to save the state hundreds of millions of dollars over time and preserve the integrity of the pension funds going forward.
After more than 5 hours of debate in which scores of amendments were proposed only to be rejected, mostly by wide margins, the House voted 57 to 15 and the Senate voted 35 to 2 to pass the bill that has been decried by labor unions but boosted by business and taxpayer groups in intensive advertising campaigns, multiple rallies and press conferences and word-of-mouth advocacy for several months.
Gov. Lincoln Chafee has indicated that he will sign the bill into law despite his reservations that the measure does not go far enough to address seriously distressed local pension plans.
In a written statement issued after the bill passed both chambers, Chafee said, “Tonight's vote marks a turning point in the recent history of our great state. With the passage of the Rhode Island Retirement Security Act, Rhode Island has demonstrated to the rest of the country that we are committed to getting our fiscal house in order.
“While this is an important step toward comprehensive pension reform,” the governor added, “it is incomplete. Our job is not done.
Tonight, we have taken a significant initial step toward that goal. Now we must continue the difficult work of taking on challenges that have been decades in the making: shoring up our independent municipal plans, helping our cities and towns and the Rhode Islanders who are struggling to pay skyrocketing property taxes, and fixing our chronic structural deficits.”
General Treasurer Gina Raimondo, widely credited as the architect of the comprehensive reform plan, released a statement of her own that said: "Today we saw what can happen when a thoughtful process and leaders come together for the people of Rhode Island," Raimondo said. "The Rhode Island Retirement Security Act passed because Rhode Islanders called for action and change. Passage of this bill is a great step forward as we continue to work to put our state on a secure path toward growth and prosperity."
She said the legislation will:
* Save taxpayers approximately $4 billion over the next 24 years
* Keep costs steady and predictable for taxpayers for decades to come, while sharing the risk fairly among all groups - state employees, teachers, municipal employees and taxpayers
* Provide retirement security to all of our public employees
* Immediately reduce the unfunded liability by about $3 billion
* Bring the funding status of the state-administered pension system from 48 percent funded to over 60 percent funded and put it on a healthy path.
Immediately after the House vote, Speaker Gordon Fox told reporters, “To me this is not celebratory. I think it shows this General Assembly is willing to tackle and able to tackle tough issues, notwithstanding that they may not on their face seem like the perfect answer. This is one of those that is going to be measured in the long-term good.”
Fox acknowledged that the legislature is going to have to address reform of the municipally run plans (called non-MERS) when it reconvenes in January.
Council 94 AFSCME, the state’s largest public employee union, declared after the vote, “Today our elected officials have unwisely chosen to steal the retirement security of Rhode Island public employees. This injustice leveled against the hard working members of Council 94 and all public employees in our state will not be forgiven or forgotten.”
House Finance Committee Chairman Helio Melo implored the chamber to pass the legislation that has been 11 months in the making, “Don't let it be said that we had a chance to fix this and failed.,” Melo, who represents part of East Providence, said.
“I don't want to be responsible for the day that the retiree gets a drastic reduction in his or her check or no check at all. I never want to see that,” Melo added. “This does the job, it is responsible and fair as possible.”
“I don't know if this is a proud day; I tend to think it is a sad day,” Republican Rep. Robert Watson said. “There are quite a few people who are here today who are responsible for the mess we are in. There are people right here on the floor who probably will cast a vote to atone for their prior sins.
Watson told House Speaker Gordon Fox, “I have to give you an awesome amount of credit for being the Speaker who has been finally willing to tackle the gorilla that's been in this room for some 20 years.”
A motion by Watson, which would have required the General Assembly to vote to set a COLA every year as part of the budge, the first test of the day of a pro-union amendment was shot down on a vote, 18-50.
The bill halts the 3 percent annual COLAs that reform advocates say threaten to bankrupt the system in the long run, replacing them with a pledge to revisit COLAs every five years and awarding an adjusted amount on the first $25,000 of salary if the fund has achieved 5.5 percent growth over that period. It also implements a defined contribution plan to supplement reductions in the defined benefit plan public employees have enjoyed until now Raimondo has said the legislation will cut nearly in half the $600 million taxpayers would have had to kick into the fund without reform, That number would increase to $1 billion in the near future. It also increases the retirement age for employees not already eligible to retire.
What the measure does not do is significantly change the 36 municipally-run plans, 25 of which are said to be critically underfunded. A parade of mayors, including Pawtucket's Donald Grebien, lobbied to get the legislature to pass enabling legislation that would allow them to freeze the COLAs in their local plans. Although that provision had the strong support of the governor, it was not included in the final language of the bill.
Despite Raimondo's oft-stated intention that this would be the last time the General Assembly has to deal with pension legislation, numerous items were pushed off until next session, including tweaks to the retirement age, the inclusion of Department of Environmental Police and Airport Police officers with other public safety employees for the purpose of calculating pensions and COLA readjustments.
Lawmakers on all sides of the debate agreed on one thing: no matter what form the bill takes when it passes, it will be challenged in court and will likely go all the way to the state Supreme Court. In fact, Rep Joseph Trillo put in an amendment that would require costs associated any legal challenge to the bill would be paid from the pension fund.
“They can chew up a lot of our money fighting us,” Trillo said. His amendment lost, 3-65.
Local legislators who voted against the bill in the House included Reps. Roberto DaSilva of East Providence; Raymond Johnston, Mary Duffy Messier and William San Bento of Pawtucket, and Rene Menard of Lincoln.
Menard introduced an amendment that would decrease the pensions of elected officials who serve in a part-time capacity such as city and town councilors, then take a full-time job. It would base their pensions on their salary for their entire service rather than the last three or five years.
During debate, Menard said, “I could have the best idea since sliced bread, but it wouldn't matter today.” Sliced bread notwithstanding, Menard's amendment went down to a 25-44 defeat.
Woonsocket Rep. Jon Brien said that for him, “this vote comes down to a simple question: Is the state of Rhode Island and are our cities and towns better off if this bill passes than if it (doesn’t).
House Minority Leader Brian Newberry noted that, “Burrillville, if this doesn’t pass, has to put in $1.8 million next year into the state pension system. According to the town manager, that is going to equate to a tax increase on the average residential property of $320 per year. The town of North Smithfield has to put in about $1.5 to $1.6 million. The tax figure is about $250 to $260.”
There was raucous hooting from the union members who filled the galleries whenever anyone suggested that legislators had employees best interests at heart. Fox threatened to have people thrown out of the gallery if the heckling and catcalling did not cease.
Coventry Rep. Scott Guthrie made two attempts to change the effective date of the legislation, one until after an existing court challenge by public employee unions gets adjudicated at the highest level, and another until an independent actuary verifies the information in the bill. Both motions failed by lopsided margins.
Lisa Baldelli-Hunt put forward a motion to reinstate the $6,000 car tax exemption until the pension fund is 80 percent funded. Fox ruled the amendment “not germane” to the original bill and was upheld, 65-6.

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