Moody’s: Raimondo-Chafee pension bill good for Rhode IslandOctober 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)