PROVIDENCE — Rhode Island’s biggest pension problem is in the past.
Devising a plan to take care of the retirement needs of current and future state employees is a relatively simple, do-able and affordable matter. It is filling in the massive hole of unfunded pension liability — estimated at somewhere between $7 billion and $9 billion — that the state’s elected officials have been digging over the last several decades that is going to take back-breaking work and bank-breaking amounts of money.
That was an early conclusion reached at the first meeting of General Treasurer Gina Raimondo’s Pension Advisory Group. The group was assembled to advise Raimondo and Gov. Lincoln Chafee, who will provide recommendations for a legislative package that the General Assembly will consider when it meets in special session to deal with the pension problem in October.
Another point of resolve was that the members of this, the third pension study group to be appointed in six years, want it to be the last pension reform committee in Rhode Island. In Raimondo’s words: “We are going to solve this once and for all.”
“This is a challenging issue,” the treasurer said, “none of us wants to be in this room right now, but we recognize it is time for action.”
Raimondo told the group, “at the end of every number is a person, there is someone who is going to be affected, probably negatively, by what we do.
“We ought not underestimate the size of the problem that we are facing,” she said, noting that Rhode Island’s pension system is “one of the worst-funded in the country,” Raimondo said. “Ten years from now, if we do nothing, a billion dollars will have to come out of the state budget to go into the pension. Right now, in fiscal 2013, $600 million is slated to come out of the budget into the pension. The 2012 budget that passed the House of Representatives Friday night has a bottom line of $7.7 billion.
Raimondo said 67 percent of the accrued pension liability goes to retirees and inactive members, individuals who are no longer paying into the system. “A brutal reality of the system we have today is that a huge percentage of our liability is for retirees.
Chafee allowed that, “the problem is very complicated.
“Some teachers are in Social Security, some aren’t in Rhode Island. We have some cities that are in MERS (the state-operated Municipal Employee Retirement System), some aren’t in MERS, and some, such as Pawtucket, are half in MERS -- I believe municipal employees are, police and fire are not. There all these complications as we address our pension funds.
“The big question hovering over everything,” the governor asserted, “is to whom are we going to apply the changes. That’s a key question, one with legal ramifications also.”
Chafee pulled out an old newspaper clipping from May, 2005 and read the first sentence of the story: ‘“This appears to be the year for pension reform.’ Well” Chafee said, “five years later (six, actually), this appears to be the year for pension reform.
The “key question” as Chafee identified it, is likely to become a bone of contention. The desire of members who represent unions to keep much of the future benefit they currently expect foreshadowed some of the difficulty the group could encounter as their work goes on through the summer.
As the panel’s members were going around the table introducing themselves to one another, J. Michael Downey, President of Council 94, AFSCME, the largest state employee union, said, “I have been contributing for 32 years into the pension system, and it was my hope I would be able to collect a pension. We’ve had several changes since I have been a state employee, but I do every two weeks since 1980 contribute to the pension system, both as a taxpayer and someone who is contributing 8.75 percent of my salary.
“I am very happy to be here this morning,” Downey added, “but I do want to let people at the table know that the decisions we make do hurt people personally and I happen to be one of them. I speak for thousands of state employees and municipal employees, approximately 8,000 employees that I represent, and it was my hope that we could somehow preserve some of the promises that were made to them while making some of these changes, and, quite honestly, some of the changes have already been made. I would like to leave here receiving some of my promise that I have been paying for for 32 years.”
Downey’s sentiments were seconded by Phillip Keefe, president of Local 580 Service Employees International Union.
“If we can accomplish one thing, I hope it’s that when we make these changes, they preserve the integrity of the pension system because the people I represent and the people around this table, owe that to this group of people.”
Echoing Raimondo’s desire for a permanent solution, Keefe said, “Second, I hope we don’t have another group like this in two years, three years, five years. It’s not fair to these people to (make them) wonder year after year after year how can I plan my retirement if I don’t know if there’s going to be a major change next year to that pension system. Let this be a one-time fix and not keep taking a bite at the apple.”
Chafee’s Director of Administration Richard Licht joked that, “I was here in the 1970s as a state senator, probably causing the problem. I was here in the 1980s as lieutenant governor when it started to come to light.”
As DOA, Licht said, he will be the chief negotiator sitting across the table with union leaders to hammer out 18 different contracts.
The 14-member working group plans three more full public sessions – July 18, August 17 and September 14, with one more meeting possible September 28. In the meantime, there will be several “subgroup meetings” and “individual meetings” that Bill Foulkes, who will be chairman of the working group, said “I don’t imagine will be open” to the public.