10/20/11

Finally, A Pension Reform Plan on the Table

After months of hearings around the state and bits and pieces of General Treasurer Gina Raimondo’s proposed overhaul plan being leaked, we finally have the full package delivered to the final arbiters of pension reform, the Democrats who control the House and Senate.

Kudos to Gina Raimondo and Governor Chafee for putting forward a plan that respects the numbers as well as the rights of current retirees, who will not have their core retirement payments reduced.

While their past and present ties to special interests still provide reasons for concern regarding their true commitment to finally reset the pension system, we have to hope that House Speaker Gordon Fox and Senate President Teresa Paiva-Weed really mean it when they state that comprehensive pension reform is their final objective.

As for the issue of conducting “actuarial” analyses of any “tinkerings” the legislature may try to make, the numbers have already been run by the General Treasurer’s office and their consultants. Again, if the legislature skews the numbers they risk making the whole plan unworkable, so let’s hope they don’t go there.

The proposed plan is a balanced plan that will significantly reduce the unfunded liability while transitioning the system to a hybrid-style defined contribution system. COLAS, like automatic longevity pay – which have no standard equivalents in the private sector – are out for now while the new retirement ages come into line with Social Security retirement age yardsticks.

The non-state controlled plans owned by the various cities and towns are a big problem, too, and some action on fixing them came late to the Raimondo generated plan. More work needs to be done here, but at least the plan provides a starting pathway for local plans to reform themselves along the lines of the state plan – ideally those plans will join the state plan down the road. The legislature should take up providing relief to those plans come January. Cities and towns with grossly underfunded pension plans that they own need relief before July 1st 2012, and that involves legal relief from having to continue COLAS.

Now the real action starts, and the key constituency to watch is labor and what position they will take and what influence they may come to exercise as the Raimondo-Chafee reform plan gets debated and we move to a final vote. Let's hope this doesn't get derailed in the process.