Unions Decry 'Draconian' Pension Reform As Business Leaders Urge Action
The joint House and Senate Finance Committees heard from a long line of residents and union leaders on the governor's and treasurer's plan to fix the state pension crisis.
One union representative after another took the microphone Wednesday to decry "draconian" pension reform, urging the Joint House and Senate Finance Committees to stand pat on the pension crisis, while business executives implored the legislators to stop kicking the can down the road.
"This is not a crisis; this is a problem," said George Nee, president of the Rhode Island AFL-CIO, of the indebted pension system that eats up 10 percent of all tax dollars, a number in danger of rising to 20 percent. "The fund is not going to collapse tomorrow. This is not another Central Falls. Everyone needs to take a pause. We don't need to fix a 20-year problem in two weeks."
Representatives from Council 94, the RI Federation of Teachers and Health Professionals, the National Education Association and other unions echoed Nee's concerns that pension reform proposed by Gov. Lincoln Chafee and General Treasurer Gina Raimondo hits state employees and retirees too hard, and that there's no need to rush to fix the problem.
“If you do nothing, there’s still going to be many years to fix it,” said Robert Walsh, of the NEA-RI. “Nothing is going to explode tomorrow.”
Doing nothing is not an option, according to Paul Choquette, with Engage RI, an advocacy group pushing for the reform. The fiscal integrity of the state is vital to fixing the state economy, he said.
“The pension system is such a dramatic part of that,” Choquette said. “We’ve done the Band-aids before. Now’s the time to resuscitate the patient. We have a real opportunity to do something dramatic here.”
The "dramatic" reform Chafee and Raimondo have proposed includes suspending the Cost of Living Adjustment — an automatic raise for all retirees that matches the rate of inflation — for up to 19 years; changing the retirement age from its current 62 to match an individual’s Social Security age; and adding a defined contribution plan, similar to a 401K common in the private sector. State employees and teachers would contribute 3.75 percent of their pay toward a pension, for which vesting requirements would be reduced from 10 years to five years. They will also contribute five percent of pay into their own retirement account and the state would contribute an additional one percent to that account.
Chafee and Raimondo have said it is critical to enact reforms now. Without immediate reforms, they say impacts on the state’s finances include:
- Doubling of taxpayer costs next year to more than $600 million and more than $1 billion in about 10 years. Much of the increase would likely be passed onto municipalities, which pay for 60 percent of teacher pensions.
- Increases in both state taxes and local property taxes, coupled with budget cuts.
- An increased risk that the pension fund will run out of money before many employees reach retirement.
- A possible downgrading of state and municipal bond ratings, increasing the cost infrastructure projects.
Union officials have pointed to their own plans that they say will fix the pension crisis without reducing benefits to employees and retirees. Robert Walsh, of NEA-RI, among others, called for a reamortization — essentially a refinancing of pension debt — from its current 19 year plan to 30 years, which they say will make up almost all the shortfall. The state plan calls for a 25-year reamortization.
The unions also recommend applying the "hybrid" pension/retirement savings plan only to new employees hired after July 1, 2012; maintaining the current reirement age of 62 for all employees; and decreasing the life expectancy of Rhode Island retirees, which is currently second-highest in the nation after Utah. These reforms, the union leaders told legislators, will allow the state to maintain the COLAs at their current rate.
"Having the second-highest mortality rate in the country doesn't make sense," Walsh said. "In Utah, the majority are Mormons. They don't drink or smoke. I can tell you our members in Rhode Island are not Mormons."
The union leaders and members of AARP decried the state's "draconian" efforts at reform, charging the burden is not shared equitably across the state. Suspending the COLA, they said, is an unfair burden on retirees who will have no way to battle inflation, and breaks the promise the state made to them over their years of service.
"I was figuring I had another 20 years to live," retired Middletown music teacher Ann Gardella told the committee. "I guess I gotta cut it down to five or so."
Despite any promises retirees may feel were made to them, the state simply cannot afford to continue using the same broken pension system, according to Ken Block, head of the Moderate Party and a former gubernatorial candidate.
"It's not fair to taxpayers that more than 20 percent of the state payroll must go to sustain pensions. Taxpayers are already paying a very high number," said Block, who termed pension reform as a critical economic development issue. "If we don't fix this, the wet blanket that sits on top of the Rhode Island economy will never be lifted."
Legislators were expecting to hear from a parade of residents testifying for and against the reform bill, and expect the session that began at 11 a.m. to continue late into the evening. The joint committee is scheduled to resume the hearing on the pension reform bill Thursday at 11 a.m. in room 35 of the Statehouse.
Chmn
7:07 pm on Wednesday, October 26, 2011
The taxpayers should not be paying for state and local pensions. Why don't they pay into social security like everyone else. Let's end the gravy train!
Robert E
7:33 pm on Wednesday, October 26, 2011
Social Security is not a retirement plan but a suplement to a pension or other plan. It was never meant to be a single source of retirement funds.
DownTown
7:45 pm on Wednesday, October 26, 2011
The 'current' retirement age of 62 only applies to those that had under 10 years of service when that change was made a few years ago. It's business as usual for the rest.
Reamortization merely passes along a much higher cost to our children.
Joe Sousa.
6:34 am on Friday, October 28, 2011
To bad they weren't this vocal when all those special pension deals were going on. Fat Cat union leaders walked away with golden parachutes. The problems were known by all involved . All it takes for Misfeasance to exist is for good people to do nothingThe Unions thought it was great when they got their members elected for public office. They proceeded to vote in favor of every benefit and raise that came their way. Now the Chickens have came home to roost. Did you think you could game the system for ever. Pyramid schemes always leave the majority holding the bag , an empty bag.
Gary Morse
6:48 am on Wednesday, November 2, 2011
Jim,
I think the age 62 waiver only applies to those who are retirement eligible as of July 2012. But even at that, the numbers were run for the entire Barrington school system as if we have fast forwarded to the future where at that point, all teachers are under an age 67 retirement requirement. In that environment, shifting the "in/out" career cycle by 5 years is a clear money loser for the school budget with salary increase more than the pension savings using the new 1% pension plan multiplier (the new accrual rate in the pension plan). The pension costs are simply shifted back to the town budgets in the form of wage increase.
DownTown
9:59 pm on Wednesday, November 2, 2011
I was sure this just affected those who were not vested when they changed it.
Have you seen the WPRI city map showing how much a city will have to pony up next year without reform?
http://www.wpri.com/generic/target_12/pensions_probe/pension-liability-interactive-map?2
Barrington an additional (approximate) $3.4 million next year.
East Providence $5.4 million
Providence $12+ million
North Kingston $5.4 million
Cranston $12 million
Woonsocket $6+ million
Bristol isn't bad @ $600,000.00 but we are losing $900k a year in state school aid till the yearly loss hits $8-9 million.
Gary Morse
6:49 pm on Thursday, November 3, 2011
Jim,
I found the below post from "Snow" on Ted Nesi's pension blog. Snow did a better job than I could do with the age 62 explanation. And yes $3.4 mil and a lot more after that even with the pension changes.
Marie, what is your retirement age according to the downward proportionality chart. This is your retirement age following the 2009 pension changes. The new bill allows you to keep that retirement age as long as you have 10 years of service. The caveat is that you must retire using your last five year average salary as of June 30, 2012, and you must also use the percentage you have earned as of that date. You may still keep any funds you have earned in the 401k style account going forward. You won’t be able to keep the 1% the state kicks in unless you retire three years after June 30, 2012, because those funds vest after three years.
Marie, I just realized my reply left out the fact that if you retire after June 30, 2012 according to the third transition rule I mentioned, and you decide to wait until age 62 to retire ( assuming you are age 52 at passage) you may keep accruing 1% towards your pension with out a cap. If you have 50% now and you are 52 and you want to work until you are 82, you can still retire with 80%, plus your 401k, plus the 1% each year the state kicked in to your 401kstyle account.
Joe Sousa.
9:58 pm on Wednesday, October 26, 2011
RI. Red is coming home to roost. Pension and benefit costs continue to rise.
We can only pray the legislature fixes the problem without sticking it to the taxpayers.
I have little hope they will. Greed has brought RI to it's knees. Apathy let it happen.
Q-L&B
7:23 am on Thursday, October 27, 2011
Have already advised and keep advising my newly married daughter to rent for a few years,save her money and relocate out of RI, please don't buy any property or raise your children here-lose lose situation. Draconian? Union drama queens at their best attempt to win an oscar? . What did Gump say "Stupid is as stupid does"
Bear401
9:16 am on Thursday, October 27, 2011
Let's cut your salary 20% - 30%, which is what a retirees pension income is reduced when compared to what they earned while working. Then no raise for the next 20 years. Now let's see how long it will be before you can't pay your mortgage & how you cover the yearly increases in the property taxes, utility rates, healthcare costs, heating oil, gasoline, food, etc, etc, etc. RI ranks near the bottom(49th)as one of the worst places to do business because of the Cost of Living. But it's okay for Carcieri to hand out pay upgrades to non union management/administration types & those who are members of unions that were in his favor, like Local 580. Are those going to be taken away?. He also created & filled 170 contract & management positions with an average salary of $90-K/yr. Will those be abolished?. All of these "drops in the bucket" are contibutors to this mess. The media & all of their "award winning investigative reporters" are out chasing down people selling bootleg CD's/DVD's on some street corner or some other nonsense rather than telling you about these things. These crony job creations/upgrades happen because all of them have, direct or indirect,connections somewhere in the State House. Maybe all current/future retirees should take their retirement checks, pack up, say goodbye to RI & all of the taxes, fees they pay here, just like everyone else does, & move to other states with a more manageable Cost Of Living & contribute to the economy in those states & regions.
Average Joe
9:57 am on Thursday, October 27, 2011
Bear401, you accidently made an error when you stated "RI ranks near the bottom(49th)as one of the worst places to do business because of the Cost of Living. " It is not ranked 49th because of the "Cost of Living", it is ranked 49th because of the "Cost of doing Business in this State is extremely high. Hey, there are several States (our neighboring States of Mass. and Conn. as examples) that have high cost of living, but much lower costs of doing business.
Gordon
9:36 am on Thursday, October 27, 2011
Any business that is planning today or in the next ten years to come to RI will look to the tax burden put on individuals and home owners, the regulatory climate as either pro or con business and the quality of the educational system that their children will go through. When you look at the pension mess and the discussed solutions consider the future without reform today.
Q-L&B
11:04 am on Thursday, October 27, 2011
Bear 401-entirely missing the point. Pensions and COLA's promised were totally unrealistic based on contributions and years of experience. Pipe dream that has come to an end and I feel empathy for the individuals involved. And of course, I hear all kinds of whining and complaining but no fiscal solutions that will remedy the problems, not create more debt from the cry baby leaders. Social Security freezes COLA's, private sector industries freezes pay raises and have modified or stopped generous matches to 401K's, why should public sector pensions and COLA's be immune to difficult financial times???? Especially when there are no $ to fund them. It's so hard to get these fiscal points across to the folks that have been brainwashed by the union leaders.
Bear401
12:03 pm on Thursday, October 27, 2011
Average Joe you are wrong. One of the reasons IS the Cost Of Living. It was a report that came out this past summer & was mentioned on the Local PBS show. "Lively Experiment" by Dave Layman one of it's regular panelist. A very much conservative anti union leaning show by the way. I am not missing the point at all. Joe & Josephine Public have been brainwashed from all of the lies & misleading rhetoric from the State House. I would like to know who these mysterious people are that Raimondo always mentions during her talking points. She is talking about state employees on the high end of the pay scale then applies that to union retirees & employees. That makes her a liar or at the very least a twister of the facts & truth. And Social Security is paying a COLA this coming year the first time in 3 years. And Q-L&B have you had your raise frozen for 20 years? Just curious.
Average Joe
12:43 pm on Thursday, October 27, 2011
Bear401, no, I am correct. Attached is the report showing RI as the 49th State for a favorable business climate:
http://www.wpri.com/dpp/money/east-providence-report-ranks-rhode-island-second-worst-state-in-the-country-for-business
Again, Mass and Conn (which totally surround the State of RI) have a similar, if not higher, cost of living index, but rate much, much higher for favorable business climate. Maybe that is why Mass has an unemployment rate of only 7.3%, and Conn at 8.9% (both below the national average), and RI has one of the highest at 10.5%. See any connection ???
Mike Callahan
12:10 pm on Thursday, October 27, 2011
There are a lot of remedies. Means testing is a hug one. Does a person making a $100000 state pension versus a retired fire fighter making a $25,000 pension. i think not. For the first time, Rhode Island has the chance to be creative and energetic and innovative with their solution - best be is we will punt
RIguy
1:06 pm on Thursday, October 27, 2011
Public or Civil Service Unions - They are the problem and don't want to be part of the solution so of course the unions think of these measures as 'Draconian.' These unions have no problem letting everyone else pay their freight and it is time it stopped.
Rug Doctor
1:48 pm on Thursday, October 27, 2011
The hell with the unions just let the fund go broke and the retirees will get nothing at all. Something is better than nothing....
Rick
4:49 pm on Thursday, October 27, 2011
Another place to start is reducing the number of government employees we have. A lot of the work we have government employees for can easily be handled by the private sector.
Average Joe
8:42 am on Friday, October 28, 2011
I think it is very funny that so many anti-pension reform individuals are actually worried. Did you forget where you live? This is Rhode Island. 90% of the State Legislators are bought/controlled by the unions. So this is what is going to happen after all these hearing.
1. The unions will contact all their State Legislators and remind them who they work for.
2. The State Legislators know they have to do something, but not enough to anger their union bosses.
3. They will get something passed, but not enough to fix the problem long-term.
4. We will be having this discussion again in a few years, but the fiscal hole will be much deeper.
Remember, this is Rhode Island.
Average Joe
11:03 am on Thursday, November 17, 2011
The state Reps and Senators have proposed 74 amendments to the bill approved by the finance committee. LET THE GAMES BEGIN !!!
Jack Baillargeron
1:46 pm on Thursday, November 17, 2011
The shame of all this as well as in washington, is these amendments. Bills should be specific t what ever they are for. Only amendments allowedsould be those that address something in the bill that needs o be corrected due to the lag time of writing it and coming to the floor, which is reasonable. The attachments constantly have to do with give aways, special interest, pet projects and on an on
I know i is a dream, but it is how it should be done. Any bill longer than 10 pages to me is a bill that is smoke and mirrors, or what it addresses is not the real purpose, it is the amendmens that otherwise would not be allowed or pass due to taxpayer outrage and corruption of the system.
To bad it is a dream that will never happen in this state or washington I suspect. Shame on them all.