Raimondo: Anti-bill legislators face defeat, labor disingenuous

October 23rd, 2011 at 6:00 am by under Nesi's Notes

Raimondo and the reps last month

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Treasurer Gina Raimondo is warning state lawmakers they’re likely to be defeated in next year’s election if they vote against her pension overhaul plan as she calls on organized labor to drop its opposition to the proposal.

“If you don’t vote for pension reform you have to go to your constituents and explain why you voted for property tax increases, state income tax increases, a lack of funding for public education,” Raimondo told WPRI.com on Friday during a 40-minute interview in her first-floor Statehouse office. “That’s what will happen.”

Woonsocket City Council President John Ward, who also works as Lincoln’s finance director, warned at a forum Friday that “Lincoln will be extremely inconvenienced” but Woonsocket “will be devastated” if their pension costs soar because the Raimondo-Chafee bill doesn’t pass.

Raimondo cited Ward to back up her warning to lawmakers. “A legislator who votes against this has to explain to their constituents why they voted to devastate certain communities in Rhode Island,” she said, adding that she thinks the pension bill is “politically popular.”

‘They just don’t like this one’

Members of the General Assembly aren’t the only ones in the treasurer’s crosshairs. She also suggested labor leaders are being disingenuous with their rank and file.

“The unions have to be accountable,” Raimondo said. “Union leadership has to lead their members and be accountable to their members. … They have an obligation to embrace reform, because if they don’t then 30 years from now, when the thing is out of money, the next [generation] will be saying they’re angry the pension fund ran out of money, and who’s accountable?”

The treasurer argued labor leaders are trying to play both sides of the argument by, on the one hand, faulting state leaders for failing to manage the pension fund correctly while, on the other, accusing her of manufacturing a crisis by getting the Retirement Board to adopt new assumptions last April.

“The only people that voted against the move from 8.25% to 7.5% were the six union officials,” Raimondo said, referring to the lowering of the pension fund’s investment forecast. “When we marked to market during the boom, it was the union votes. And today you have union officials saying – their immediate reaction is, they’re going to sue.”

“They haven’t offered a good alternative,” she said. “They just don’t like this one.”

The National Education Association Rhode Island’s Robert Walsh disputes that, and has argued on WPRI 12 and in The Providence Journal in recent weeks that Raimondo could have structured her proposal differently and still saved significant money.

No deals with Sabitoni, Reed

Raimondo has her own ties to organized labor, but she said those have not influenced her decision-making.

Raimondo said she’s discussed her pension policies with Armand Sabitoni, general secretary-treasurer of the Laborers’ Union and its regional manager in New England, who served on her transition team.

Asked whether Sabitoni – whose union is the largest in Providence’s underfunded locally managed pension system – pushed her not to touch the plans outside the state-run Municipal Employees Retirement System (MERS), she said: “Oh, heavens no. I haven’t actually talked to him about non-MERS versus MERS. But I’ve talked to him and George [Nee] and Bob [Walsh] and all these guys the whole time about pension reform.”

Raimondo said she’s also discussed the issue with U.S. Sen. Jack Reed, her political mentor and childhood friend, as well as Reed’s brother Paul, president of the state firefighters union.

“I’ve talked in a more limited way to Senator Reed, and he’s basically said, ‘I have full confidence in you to solve this problem,’” she said. “Paul’s upset. I’ve known Paul forever; my mom used to babysit Paul. To be fair, I haven’t talked to him since I’ve launched the bill, but leading up to the bill his position has basically been: whatever you do, we’ll sue you.”

Raimondo also said she has not made fundraising calls for Engage Rhode Island, the deep-pocketed new advocacy group that’s buying print and broadcast advertisements to rally support for the legislation she and the governor submitted.

Hybrid mandatory but risks lower

Raimondo acknowledged the proposed hybrid plan in her bill still won’t allow younger workers to opt out of participating in the state pension program. “We need younger people to continue to pay into the system,” she said, or it won’t have enough money to cover the unfunded liability for retirees and older workers.

But the treasurer noted the share of an employee’s 8.75% paycheck contribution that currently goes into the pension fund would drop to 3.75% under the bill, with the rest going into an individual retirement account, a bit like a 401k.

“There’s all kinds of risk,” Raimondo said. “There’s investment risk, and the defined benefit is designed to protect the employee from investment risk. But there’s also political risk. … Some politician down the line can choose to change it to an 80 retirement age.”

“The amount of money that’s in [an employee's] defined-contribution [account] isn’t subject to political risk – it’s subject to investment risk, but no one can touch it,” she said. “No politician can get their hands on it, ever. It’s theirs. And I think that’s appealing.”

Raimondo also said concerns about whether the state’s new investment return forecast of 7.5% is still too optimistic are misguided and fail to understand how the bill would minimize the risk that involves.

“It matters much less in the new system, because with the hybrid [plan] the rate of return is irrelevant,” she said. “Not only does this bill fix the problem for the budget for next year and the next year’s, but it’s a fundamental design shift and a risk shift. … Right now, the risk is all on the taxpayer, and this is putting a lot of the investment risk on the employee.”

In addition, the bill calls for cost-of-living adjustments (COLAs) to vary based on whether the state meets its investment goals going forward, with no COLA being granted when the fund earns 5.5% or less. “The COLA is automatically tied to the rate of return,” Raimondo said.

This is the second of three articles on Nesi’s Notes with details from the Raimondo interview.

(photo: Ted Nesi/WPRI)

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19 Responses to “Raimondo: Anti-bill legislators face defeat, labor disingenuous”

  1. Al Moncrief says:

    RAIMONDO THREATENS THE LEGISLATURE – ABANDONS RATIONAL DISCUSSION OF PENSION REFORM OPTIONS. That’s how I read this article.

    Wow, it sounds like Raimondo is resorting to threats . . . that lawmakers will lose their office if they don’t swallow her plan, and her numbers, and her arguments whole.

    Threats might work in the venture capital industry, but they do not sit well with elected officials. All public policy should be properly vetted. Ivy League degrees grant no license to shove your public policy preferences down a legislator’s throat.

    Raimondo’s diatribe goes well beyond the needed thoughtful discussion of pension reform policy options. Why should the Legislature abandon its function as a deliberative body, as a body that is sworn to uphold the US Constitution? Why should the Legislature not examine legal, prospective pension reform options that have been adopted by dozens of states across the country? Why should the Legislature not require that the pensions cost out what the actuarial required contribution would be for legal reform options?

    Raimondo’s proposal is unconstitutional on its face. It is RETROACTIVE. Why is she surprised that stakeholders will sue? My 10-year old nephew knows that retroactive legislation is unconstitutional. The statutory COLA pension provision has the same force in law as any other statutory pension provision. It is an earned, accrued, fully-vested, contracted pension benefit. The COLA benefit constitutes contracted deferred compensation.

    1. RISailor says:

      Raimondo is NOT threatening anyone. She is simply pointing out that legislators who vote against pension reform will face questions from their constituents and Mr. Moncrief she is correct about that. And if suspending COLA’s is unconstitutional, why has it been done by several states and upheld in the courts? You need to get your facts straight Mr. Moncrief.

      1. Al Moncrief says:

        Hey Sailor, the change to the COLA was upheld by a lower court in Colorado in a very flawed ruling. It will eventually be overturned. You don’t get to break contracts just because it is conveneient for you.

    2. Cosmo says:

      Al, in case you’re considering a second career in law, don’t quit your day job just yet.

      1. Al Moncrief says:

        Hi Cosmo, one does not need a law degree to know that asking someone to work for you, contracting with them for copensation (including deferred compensation, COLA benefit), allowing them to work for you for 30 years, and then trying to escape your contractual obligations is wrong.

        How can you argue otherwise?

  2. Ed says:

    It is about time to bring some balance to Rhode Island. Too many of the elected officals are whores to the public sector unions. They better realize that the last two months Rhode Island has lost jobs at an alarming rate. It is only a matter of time before the people get smart and decide to short sale their house to the bank and if it gets really bad just stop making mortage payments and wait for the bank to supoeana them out of the house. This is how dire the State of Rhode Island is.
    It is time for all public employees, this includes police, fire and especially public school teachers, to take a 20% paycut pay 35% of their benefits, be thankful they get half their pensions and start contributing to 401K.
    Too attract jobs to the state it is time to offer school vouchers to any parent that wants to send their kids to a school other than the pathetic public schools of Rhode Island.

    1. joan says:

      Obviously you have an “ax to grind” with public schools.

  3. John R says:

    Raimondo is terribly confused, for such an educated person she 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.

  4. Citizen Sane says:

    Thank God for Gina Raimondo.

    1. John R says:

      Gina will save us from ourselves. Right!!!

      Where would we be without Gina? Maybe we should erect statues.

  5. CN says:

    Last one out of Rhode Island shut off the lights.

  6. Alan Roberts says:

    I’m a taxpayer and Gina speaks the truth. We are taxed to the max and we can’t pay anymore. The auto excise tax took care of that!!! If the unions don’t want to get on board and voluntarily go along with the program, then can anyone say “Bankruptcy”. Lets face it. The average taxpayer is not going to give up their retirement so someone in a union can have theirs, NOT GOING TO HAPPEN. We just can’t afford the numbers, it’s as simple as that.

    1. Cosmo says:

      Good try Alan, but the union morons don’t care about reality, they’ll drive the bus right into a bridge abutment trying to get what they want.

    2. Al Moncrief says:

      Alan, states cannot declare bankruptcy under federal law.

  7. bob says:

    I keep telling you people, get out now!!! move west or south, just get out of RI.

    1. Cosmo says:

      bob, you really got that right. Let anyone with brains and/or training to make good money get out of RI asap and let the unions try to tax fast food workers and illegal aliens to finance their pensions. Good luck to them.

  8. Bill says:

    I’m a taxpayer too, and a retiree. While it is possible that the theft of retiree benefits may at some point be deemed legal, it will not change the fact that it is morally reprehensible. Just as I wouldn’t allow someone to steal my car or break into my apartment, I will not stand idly by while Ms. Raimondo attempts to take what I worked so hard for.

    Stock up on sunscreen Gina, I hear it’s very hot in hell.

    1. Cosmo says:

      If Gina is going to hell, at least she’ll get to hang out with good union people. Good thing I’m going in the other direction.

  9. [...] lofty goal” and said she’s designed the proposed new hybrid retirement plan to reduce the risk to taxpayers if 7.5% isn’t [...]