Moody’s: Raimondo-Chafee pension bill good for Rhode Island
October 24th, 2011 at 1:55 pm by Ted Nesi under Nesi's Notes
The Raimondo-Chafee pension bill is winning support on Wall Street.
Passage of the proposed retirement overhaul “would be credit positive for Rhode Island,” Marcia Van Wagner and Baye Larsen, senior analysts at Moody’s Investors Service in New York, wrote Monday in a research note. In June, the agency kept its rating on the state at Aa2 but lowered its outlook to negative.
“The reforms are more far-reaching than those recently adopted by many states that change benefits [only] for new members and increase employee contributions,” Wagner and Larsen wrote.
The legislation would slash the state government’s share of the state-run pension system’s unfunded liability in half, from $5.5 billion to $2.8 billion, and reduce the state’s required deposit to the pension fund in 2012-13 from nearly $400 million to about $200 million.
“This cost reduction would provide considerable budgetary relief to the state, whose economic and fiscal challenges pre-date the recent recession,” they said. Reamortizing the state’s pension shortfall over an additional six years mean it “will continue to be poorly funded for an extended period,” not hitting 80% until 2030, they said.
If unions and retirees challenge the changes in court, “Rhode Island will join a host of other states embroiled in litigation over efforts to reduce pension benefits for current employees and retirees,” according to Moody’s. Others include New Jersey, Colorado, Minnesota and South Dakota.
Notably, Moody’s referred to the pension bill as “the governor’s reform package,” a quite different take from The New York Times, which made no mention of Chafee in a 2,500-word story on Rhode Island’s pension debate that ran Sunday.
(chart: Moody’s Investors Service)
Tags: bonds, credit ratings, moody's, pensions, raimondo-chafee, rhode island
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
Is there a link to the Moody’s report?
It’s here; you need a login to access it:
http://www.moodys.com/research/Weekly-Credit-Outlook-24-October-2011–PBC_136772?WT.mc_id=home_banner_wco_recent
………, a participating municipality as defined in the General Laws of
Rhode Island, Section 45 -21 entitled “Retirement of Municipal Employees” and members covered by the Association will participate under the provisions of Section 45-21-52 entitled “Automatic increase in service retirement allowance”, Plan B effective January 1, 1986.
§ 45-21-52 Automatic increase in service retirement allowance
(2) Plan B. All employees and beneficiaries of those employees receiving a retirement allowance under the provisions of this chapter on December 31 of the year their municipality accepts this section, receive a cost of living adjustment equal to three percent (3%) of their original retirement allowance. This adjustment is added to the amount of the retirement allowance as of January 1 following acceptance of this provision, and an additional three percent (3%) of the original retirement allowance, not compounded, is payable in each succeeding year in the month of January.
(c)Upon acceptance of any of the plans in this section, each employee shall on January 1 next succeeding the acceptance, contribute by means of salary deductions, pursuant to § 45-21-41, one percent (1%) of the employee’s compensation concurrently with and in addition to contributions otherwise being made to the retirement system.
MOODY’S ANALYSTS DETERMINE: IF YOU BREAK YOUR CONTRACTS IT LOWERS THE AMOUNT OF MONEY YOU PAY OUT.
Sadly, this is a temporary benefit. Eventually, you meet your contracted obligations under court order.
FOR THE EDIFICATION OF THOSE WHO WOULD ABANDON CONTRACT LAW IN RHODE ISLAND, THE RECENT RULING:
“The case law does not preclude but rather supports this Court’s holding that Plaintiffs, as ten-year veterans of the State, possess a contractual relationship with the State pertaining to retirement allowances and COLA benefits which are not subject to collective bargaining.”
If The Raimondo-Chafee pension bill is challanged and is lost. I say do nothing. Let pension fail. Then all the Municipal Employees will be forced to take massive cuts of 50 to 60% and pay for health care.
Recession has made it difficult to manage the budget of your state? Has federal funding ‘not’ been used effectively (in-competentency). Was the money invested as a trust held on behalf of another, lucrative enough to get your dirty hands on that money? you are still holding that money on account of another, and can easily change the laws governing that trust to benefit the state treasury leaving the pensioners weeping, and after all what can the pensioners do besides weeping. This is breach of trust if someone’s money is illegally reduced, while saying that the trustees can change the rules or the law.
It would be difficult to keep the constituents from speaking out!
The internet has given more freedom of speech and so Rhode Islanders will speak up.
It is no brainer that Moody’s rating agency calls the Raimondo-Chafee Pension bill good for RI.
Similarly I could easily solve my family budget by slashing expenses of my wife and kids, and show surplus. Can I do that? No more buying new clothes, absolutely no entertainment allowed not even cable or satellite subscription. By doing that am I justified??
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