RIPEC supports the pension bill – but warns it’s not enoughNovember 15th, 2011 at 1:50 pm by Ted Nesi under Nesi's Notes
The Rhode Island Public Expenditure Council is calling on the General Assembly to pass the amended Raimondo-Chafee pension bill, but warns the legislation kicks the can down the road by failing to fix the 36 locally run municipal plans.
“The pension system in its current form is unsustainable,” RIPEC declares in a 29-page analysis of the bill released Tuesday. The bill voted out of the finance committees last week is “a significant reform” and “a positive step” that “goes a long way toward reforming pension systems across Rhode Island.”
But the committees’ bill dropped even the weak compromise language on the 36 locally run pension plans originally proposed – a move that reportedly split the quartet into two camps: Governor Chafee and Speaker Fox, who wanted to fight for the measure, and Treasurer Raimondo and Senate President Paiva Weed, who didn’t.
Those 36 plans “are of great concern,” RIPEC says, and the bill offers only “a positive starting point” by ordering new studies of their financial health. “The concern is that these studies will show a much deeper problem than current identified,” RIPEC says, adding that the 36 plans “face the same challenges – or worse – than the state.”
Bu despite punting on the locally run plans, RIPEC thinks lawmakers should pass the committee bill, saying it “will have a fundamental impact on the Rhode Island of the future” by sharply lowering the state’s pension costs and overhauling the compensation it offers state employees for their retirement.
RIPEC’s chief concern is the structural budget deficit, and pension costs “have a significant impact” on that. Under current law, pension spending will rise from 7% of general revenue in 2010-11 to more than 14% in 2015-16; the proposed bill would reduce that to between 8.2% and 8.5% in 2015-16 (which is still more than other states spend).
Without changes, RIPEC warns, the state pension system will put more pressure on property taxpayers; crowd out other spending priorities; make it harder to attract employees who don’t plan to spend their entire careers with the state; and likely force further reductions in benefits for current workers and new hires to subsidize retirees.
RIPEC’s full report on the pension bill is available on its website.