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Speaker Fox looks back, ahead; pension reform a priority

December 30, 2011

PROVIDENCE – Agreeing with, well, just about everybody, that local pension plans will be issue number one in the coming General Assembly session, House Speaker Gordon Fox says he believes enabling legislation that will allow cities and towns to craft individual solutions would be preferable to mandating a single fix to an array of diverse problems.
The General Assembly, meeting in a special fall session, passed a massive and controversial reform of state pensions in 2011, but deliberately left the local plans that are not part of the state Municipal Employees Retirement System (called non-MERS) out of the legislation, except to require the cities and towns with their own plans to conduct actuarial studies to prepare them for reform. Of the 36 locally run plans – some communities have two, three, or more plans – 24 are considered to be in trouble because they are less than 60 percent funded.
In municipalities such as Central Falls and East Providence, pension funding problems have led to more profound fiscal difficulties.
“Because of the financial integrity issues we have seen pop up with a lot of communities, I think pensions as a piece of the fiscal health of cities and towns in general is going have to be part of it, they have to be,” Fox told The Call in an hour-long interview Thursday.
“What is going to come out of it, I can’t tell you right now, but it is something that I am committed to and the governor has committed to continuing to work on.
“Each of these plans is separate and disparate and unique,” Fox explained, “some of them are way above 80 percent funded, some are well below that. I don’t think it is going to be a one-size-fits-all. I think locals have to be a part of it. I think that term ‘enabling’ has to be a piece of it.
“Legally, because everything is susceptible to legal challenges, you want to make something that is legally sustainable,” he adds, “so I think that leads you to the direction that each one has to be viewed differently.”
Local officials, Fox said, “have to be part of the solution. I would support and almost demand that there be an enabling piece to it because people have to be able to help themselves. So I think local councils and mayors and administrators have to be involved. These are all local plans, they are all locally operated, they are all done by collective bargaining agreement. Inherent in that is that there were two sides at the table who created them, so I think they all have to be part of the solution as well.”
Because the plans were created by different union contracts, many have to be dealt with in different ways. “That’s another issue you have to work through,” Fox said, noting that some changes might have to be implemented once current collective bargaining agreements expire.
He said he once again expects to work with General Treasurer Gina Raimondo, Gov. Lincoln Chafee, Senate President Teresa Paiva Weed and the House and Senate finance committees to hammer out legislation. “It seems like that is the model that works best,” Fox said. “It worked the last go-round, so I don’t know why we would change that recipe. Obviously there will be a lot of city and town folks sitting around the table as well.”
The Speaker said it will not be necessary to convene another special session to deal with the non-MERS pension plans. That, he said, was part of the reason for requiring the cities and towns to complete their actuarial studies by April 1, to give the legislature time to formulate a solution before budget issues begin to dominate the discussion after the spring Revenue Estimating Conference.
As Chafee works toward presenting his budget to the General Assembly this month, Fox said the estimated $125 million deficit seems “not so bad,” when compared with recent years when the budget debate started with the assumption of a $350 million deficit.
“I think that is a reflection of hard choices we made,” he said, “the pension being one of those, and we have tried to cut costs wherever we can. It’s been hard. It has not been fun sitting here saying, ‘O.K., where can we cut money out of all sorts of what government support is going to be, but I think it shows that, if we had not done those things, where would that deficit have been?”
As it has in the past several years, Fox said the legislature is going to resist hiking what are often called “broad-based taxes” such as the income and sales tax. Like his Senate counterpart, President Teresa Paiva Weed, Fox said that if Chafee resurrects his proposal for broadening the sales tax that was slapped down last year, it will be rejected once again if brought forward in a similar form.
One tax that might get attention this year, even though it is levied at the city and town level, is the automobile excise tax. The General Assembly, after years of gradually raising the vehicle value that is exempt from tax, and reimbursing communities for the revenue loss, recently allowed that exemption to $500, leading to large sudden hikes in taxes for car owners.
“It is a tax that people hate,” Fox conceded. He said the legislature could just prohibit a tax on vehicles, “but that would have a devastating impact on the finances of local communities. Everyone in this building would be committed to doing something to repeal that tax.”
One area where work is being done, the Speaker said, is on how the value of vehicles is determined. A “working group” headed by Warwick Rep. Joseph McNamara will begin working on the vehicle valuation issue on Wednesday, the day after the General Assembly reconvenes.
Fox acknowledges that, with Massachusetts having approved three new casinos and a slot parlor, that it is getting late in the game for Rhode Island to allow table games at Twin River, but he does not think it is necessary to move up the scheduled November referendum on that question. Because the April presidential primary will involve only Republicans, since President Barack Obama does not face any challengers within the Democratic Party, moving the Twin River vote to that time would not give a representative sample of public opinion, he said. The statewide primary is in September, but that is only about six weeks before the already scheduled November vote.
“We’re getting close” to moving too late, Fox concedes, “I’ve always said we have to keep our eyes north,” and Massachusetts does not require voter approval for casinos as Rhode Island’s constitution does. “We’re getting long in the tooth in that regard, but I think we are still in good shape.”
Rhode Island can catch up fairly quickly because table games can be moved into the existing Twin River, while Massachusetts has to write its regulations and the casinos still have to be built, the Speaker said. Fox said he would not oppose a late move by Newport to include Newport Grand in the table games referendum, but he said he has not heard from city officials on the matter and the City Council has not passed the necessary resolution.
If the federal government approves Internet gambling, as Congress is said to be mulling, “that really could hurt” Rhode Island in terms of lost revenue. He compared it to the loss of state sales taxes from Internet purchases. “Internet gaming is just another example of that – technology has changed the way people live their lives. Government is going to have to come up with a way of regulating it or not regulating it and taxing it or not taxing it. You are going to see a decrease in revenues coming in, so it is a concern. It’s probably something that’s going to have to be done at the federal level. How do you tax it? How do you regulate it? How do you make sure people aren’t being ripped off?”
On another issue with the federal government, Fox said. “I am going to reach out to see where we can go” to start establishing compassion centers to dispense medical marijuana. The General Assembly has approved up to three centers to allow people with a medical marijuana certificate to safely and conveniently obtain the drug. Chafee indicated his approval, then suspended the licensing of the centers under threat from the federal government of raids and prosecutions.
“We have a state law that says we should be doing this, so many people are relying on this. Those folks have articulated to myself and other representatives that they are suffering and this was a solution. I think we have to push this forward because we have heard from so many people who say they see this as improving the quality of their lives. How could we not do it?”
Asked about the allegedly powerful influence of public employee unions on the General Assembly, Fox retorted, “Would pension reform had passed if, as some said, unions control this place? I don’t think so, not in the form that it is.”
Responding to the fear among some members of the public that binding arbitration for school teachers might be approved as sort of a consolation prize to the unions for the pension reform they opposed, Fox noted that the House stopped a binding arbitration bill at the end of last year’s session after it had been approved by the Senate. “There has been no discussion of that at all,” he said. “It’s not on my agenda right now.”

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