10 ways to look at the proposed RI pension settlementFebruary 20th, 2014 at 12:32 pm by Ted Nesi under Nesi's Notes, On the Main Site
The pension settlement is complicated. And so, naturally, are opinions about it.
Political controversies are often cast in black-and-white terms – you’re either for something or against it. But on many issues there’s a much wider range of possible opinions. It’s more of a gradation than a clear line.
The pension settlement is a great example of that. I’ve seen more than a half-dozen different opinions about it that vary based on the premises about pensions people start with as well as whether they’re emphasizing the fiscal or legal impacts of the deal. I’ve listed each one below – to be clear, though, these opinions aren’t necessarily mutually exclusive, and this list isn’t exhaustive.
Add more opinions in the comments section below!
The original 2011 pension law wasn’t necessary. Much of the discussion about the pension law starts from an agreed-upon premise that Rhode Island had a pension funding problem in 2011 and needed to address it. But even that is contested, usually from the left. Tom Sgouros, the local activist and writer, has argued that the reason there appears to be a pension funding problem is because of the way policymakers and actuaries have decided to measure and fund those liabilities. If the framework is changed – or if the assumptions are altered, as Cranston’s Paul Valletta has colorfully noted – what appears to be a major problem on paper could, if not disappear, at least appear far more manageable. And if that’s your view, there was no need to make the sweeping changes passed in 2011 in the first place.
The original 2011 pension law law didn’t go far enough. At the other end of the spectrum are those, usually on the right, who argue that public pension liabilities are being significantly underestimated nationwide – including in Rhode Island, even after the State Retirement Board’s 2011 adoption of more conservative forecast assumptions. The most forceful local proponent of this view is probably the conservative writer Justin Katz, now at the Rhode Island Center for Freedom & Prosperity, who thinks the original law didn’t do enough to reduce how much Rhode Island will have to spend on pension benefits now and in the future. A different but related view is that of Josh Barro, who argued in 2012 that Rhode Island “came closer than any other state to success” in its 2011 pension changes “and yet still couldn’t quite manage it.”
The original 2011 pension law was good and the settlement locks in most of its savings. This is the position taken Thursday by the Providence Journal editorial board, which strongly supported the 2011 law and has argued against changing it, but thinks the 94% (at least) savings locked in by the proposed settlement makes it worth supporting. “In our view, a deal that preserves 94% of the savings while removing the threat of losing them all is a reasonable one, however painful,” the editorialists wrote. Over at GoLocalProv, Russell Moore has made a similar argument. These people backed the changes in 2011 but see the settlement as a good deal for taxpayers.
The original 2011 pension law was good and the full savings should be fought for in court. This is the argument we’ve been hearing from Cranston Mayor Allan Fung, among others, as well as the Rhode Island League of Cities & Towns’ Dan Beardsley, who was the only Retirement Board member to vote against the settlement last week. They support keeping the 2011 law in place, in full, and think the roughly $232 million increase in the unfunded liability under the settlement is still too high a price to pay even if it means the end of the legal challenges.
The original 2011 pension law was good and a court decision is needed on the core constitutional question. Does the General Assembly have the legal right to alter pension benefits or are they an unbreakable contract? The constitutionality of the 2011 law turns on the answer, but a settlement cuts off the lawsuit, which means the Rhode Island Supreme Court won’t weigh in with a final answer. myRITV/WPRO host Dan Yorke made this case on his TV show last week, prior to the settlement’s release, saying it’s the job of the judiciary to decide a major constitutional case such as this one, particularly with so much money riding on the outcome. (Indeed, the possibility of an adverse judgment that would set a pension-cutting precedent could be part of the reason unions want to end the case now.)
The original 2011 pension law was good and a settlement creates new legal uncertainties. We’ll give this one to House Minority Leader Brian Newberry, an attorney by trade, who’s been beating the drum on Twitter with questions about the long-term legal impact of passing the settlement. Will it really lock in the savings, or will there be other avenues for workers and retirees to challenge the changes? Will the General Assembly be tying its hands if legislators want to change pensions down the road? Will retirees have a contract right to the pension benefits enshrined in the settlement, as they at least potentially don’t under current law? (See the previous entry.) This argument is less focused on the financial impact of the settlement than on the legal issues it raises.
The original 2011 pension law was bad but the settlement is good. This is the argument of union leaders and lawyers, at least in public, who fought the original 2011 law vociferously at the General Assembly and then filed suit in 2012 to overturn it. (They’d already filed suit to overturn pension changes made in 2009 and 2010, and actually won the first round.) Even though the settlement locks in the vast majority of the pension cuts they fought from 2009 to 2011, they now argue that passing the settlement and accepting its small benefit enhancements will give workers and retirees certainty while ending a costly and uncertain legal fight. They say they still think the original law was unconstitutional, but it’s time to stop pushing for full repeal.
The original 2011 pension law was bad and the settlement is bad, too. This has been the initial reaction from some rank-and-file workers and retirees, such as retired Providence teacher Candace McCall, who’ve expressed shock that their union leaders are willing to end the legal challenge in exchange for a relative pittance compared to how much they’ve lost. They’re not convinced by the argument above that it’s better to settle and accept some minor givebacks in exchange for avoiding a potential negative judgment. One of the biggest questions now is whether this is a minority view, or if enough people will feel this way that one of the union/retiree groups being asked to vote on the settlement will kill it.
The original 2011 pension law was whatever, but the settlement process itself is questionable. I don’t have a clear proponent of this view, but I thought it should be included. Basically, this viewpoint feels less strongly about the positive or negative merits of the original 2011 pension law than it does about the inherent strangeness of a public law being rewritten in secret talks and presented to state lawmakers as a done deal. That ain’t exactly “I’m Just a Bill.”
I have no opinion on the policy merits of the pension settlement at this point. Unlike Republican gubernatorial candidates Allan Fung and Ken Block, who’ve come out forcefully against the proposed settlement, Democratic candidates Angel Taveras and Clay Pell have said little on the policy merits of the deal. If they were governor, would they urge lawmakers to vote “yes” or “no” on the settlement? Gina Raimondo, the third Democratic candidate, is obviously a proponent of the deal; the Taveras campaign has suggested her support for it isn’t consistent with her earlier opposition to mediation. Pell has said all along he favors negotiations on pension changes – but does he support the results as expressed here?
Those are the pension-settlement opinions I could come up with. Got any others you can think of?