RI taxpayers bear biggest pension burden for troopers, judges

October 12th, 2011 at 6:00 am by under Nesi's Notes

Rhode Island taxpayers continue to pick up a much larger share of the cost of pensions for judges and state police officers than they do for the rest of the state work force or teachers.

All the employees contribute a similar portion of their wages to the state pension fund: 8.75% of pay for state workers, judges and troopers, and 9.5% of pay for teachers. But the additional contribution that taxpayers have to make on top of that to fully fund each pension varies widely.

New teachers have the least lucrative deal. The pension contributions they make are enough to cover 80% of the future of cost their pensions, according to state actuaries Gabriel Roeder Smith & Co. State employees’ contributions pay for nearly as much as their educator colleagues, covering at 77% of the future cost.

It’s a different story for state police and judges.

The pension contributions a newly hired trooper makes from his paycheck are enough to cover just 29% of the pension he will eventually receive, Gabriel Roeder Smith’s projections show, leaving taxpayers to shoulder more than two-thirds of the cost.

And judges’ pension contributions are enough to cover only 35% of the pensions they will get after retirement, according to the projections.

All the above figures – known as the “entry-age normal cost,” to use actuarial terminology – only apply to newly hired individuals whose pensions incorporate both the various changes enacted by the General Assembly since 2005 and the new, more conservative assumptions adopted by the state Retirement Board last spring.

The reasons state police and judges get treated so differently are partly because of differences in the durations of their careers and the size of their pension benefits, said Robert Walsh, executive director of the NEA Rhode Island teachers union, who served on the Chafee-Raimondo pension advisory group.

“Judges work for a relatively short period of time to get a higher percentage of salary,” and usually begin working at an older age, Walsh told WPRI.com. That means fewer years of contributions by the judges to help defray the eventual cost of their pensions, which can be worth up to 90% of final average salary for a judge appointed after 2009.

“For state police it’s similar but different, in that the work comes earlier in their life but they get a pension right away, at an earlier time,” Walsh said. State police hired since 2007 can retire after 25 years and start collecting a pension equal to 50% of their final salaries.

Walsh said his members will be watching closely to see whether the forthcoming Raimondo-Chafee pension bill forces state police and judges to share the burden along with other state workers and retirees. ”They keep saying the changes will affect all categories, and of course we think they should be equitable changes,” he said.

• Related: RI has no pension data for many state police, judges (Sept. 22)

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9 Responses to “RI taxpayers bear biggest pension burden for troopers, judges”

  1. teddy says:

    The heck with pensions for these workers! Going forward, there should be NO pensions. I don’t know anyone that works for companies that get pensions anymore-why should these state workers be any different? They want retirement-do like the rest of us-either invest in a 401k or IRAs!!!

  2. Rlewis says:

    Teddy: Maybe you should read the post about AMICA’s pension….

  3. GaryM says:

    Ted

    The numbers look wrong! Did GRS provide these numbers? If so, I’d like to ask how they arrived at this because they appear wrong by a large percentage based on the current assumptions used in the pension plan.

    For example, if teachers are indeed paying 80% of their benefit, how is Treas Raimondo concluding the future looks grim? The problem actually lies with the future taxpayer liability which shifts dramatically with the newer assumptions.

    Someone at GRS needs to check their math if they did this chart.

    1. Ted Nesi says:

      Gary, thanks for the feedback. I take responsibility for the number in those charts – I calculated them based on the most recent GRS valuation for each plan (after the assumption changes).

      I got them by dividing the normal cost – for *new* employees starting today – into two parts, the worker contribution and the employer contribution.

      Teachers: 9.5% worker / 11.82% normal cost = 80% worker share
      State workers: 8.75% worker / 11.39% normal cost = 77% worker share
      Judges: 8.75% worker / 25.29% normal cost = 35% worker share
      State police: 8.75% worker / 29.86% normal cost = 29% worker share

      The problem is, these are only for *new* workers. If the pension system was opened today at these rates, the future wouldn’t look grim. But the system is carrying a huge unfunded liability for teachers and state workers who earned benefits over the last 75 years, and the state is facing a huge bill for that cost.

      1. GaryM says:

        Ted,

        Got it!

        I assumed the chart represented the state vs employee actuarial “present value” of the liabilities which is a very different calculation.

      2. Ted Nesi says:

        No worries, Gary. Sometimes it’s tough trying to write these deep-in-the-weeds pension stories for both a general audience and the expert crowd like yourself.

  4. Al Moncrief says:

    RAIMONDO IS NOT BEING “AN HONEST BROKER” AS CLAIMED, SHE KNOWS THAT THE COLA IS AS MUCH A CONTRACTED BENEFIT AS ANY OTHER PENSION PROVISION, SHE WEARS HER BLINDERS WITH ARROGANCE. REFORM PENSIONS PROSPECTIVELY AND LEGALLY!!

    Raimondo is terribly confused, for such an educated person she apparently has a quite limited grasp of reality. Her stated intention is not to impact accrued pension benefits, then in the next breath she states that she intends to attempt to take accrued pension COLA benefits. I know that she has the intellectual capacity to understand that a COLA is an accrued benefit, that the COLA has the same force in law as any other pension provision. However, at some level she refuses to accept this.

    If Raimondo worked as a treasurer for an insurance company, and one of the products that was sold by the company was an annuity with a COLA, would she argue that the insurance company did not have a contractual obligation to pay the contracted COLA? Perhaps the company desires to use funds set aside for the COLA to construct a new headquarters building. Would Raimondo argue that it was acceptable for the insurance company to breach its contracts with customers who purchased annuities in order to divert funds to another purpose? Also, for an elected official to even consider theft of a contracted benefit from retirees with the hope that their theft may someday withstand court muster is immoral, and a sad commentary on the state of our nation. If you don’t like the terms of a contract, you should not become a party to that contract. This truth is apparent to nearly all Oxford graduates.

    Prospective, legal pension reform options are available. Visit the NCSL website to find a list. If the conservatives of Utah were able to reform their pension system two years ago legally, and prospectively . . . tell me why this is not possible in Rhode Island. Raimondo has stated that she doesn’t want the legislature to have to revisit this issue in two or three years. That is exactly what will happen if the Legislature adopts prima facie unconstitutional pension reforms.

  5. firngwell says:

    Do you know what the actual rate of return of the pension fund has been for the last 40 years? And how does that number compare to its target index?

    1. Ted Nesi says:

      Firngwell, I will add that to my list.