Jamestown reps discuss new pension reform legislation
Gov. Lincoln Chafee and Gen. Treasurer Gina Raimondo rolled out their much-anticipated pension reform bill late Tuesday afternoon. Jamestown state lawmakers Rep. Deb Ruggiero and Sen. M. Teresa Paiva Weed both think the proposed legislation is a step in the right direction.
“Fixing the system is in the best interest of everyone,” said Ruggiero, a Democrat who represents Jamestown and Middletown in the state House of Representatives. “Doing nothing is not an option. We need to do something. And it has to be thoughtful.”
The governor and treasurer introduced the legislation – the Rhode Island Retirement Security Act of 2011 (RIRSA) – to the General Assembly in a special session on Oct. 18 at the State House. Although Sen. President Paiva Weed is optimistic that the measure could help dig Rhode Island out of its pension crisis, she said that it wasn’t without controversy.
“I believe that it is a complete piece of legislation that contains some diffi cult decisions in it,” she said. One of the main disagreements is with the unions, but Paiva Weed said that the “employees” she has spoken with have been cooperative thus far. “The majority of employees who have talked to me recognize and accept that unless we make some changes in the current system the long-term security of the pension system is threatened.”
Paiva Weed, who represents Jamestown and Newport, worked closely with the treasurer during the process. She said that during the time that Raimondo – who she called the “architect of the legislation” – has been developing the proposal, she routinely met with her on a “weekly basis. But since we have drawn closer, it’s been more than a weekly occurrence.”
From here, Paiva Weed said, the timeline will be about three weeks to a month of public hearings. “I am anticipating a public hearing process where many sets of eyes will be able to weight in on it,” she said.
Some of the highlights are outlined on PensionReformRI.com, a website that was launched this week so that the public can stay informed of the happenings surrounding the historical reform.
According to the plan’s executive summary, without immediate reform the pension crisis would spiral Rhode Island into an economic collapse. No action would result in the doubling of taxpayer costs to “over $600 million next year and more than $1 billion in just over 10 years.” Much of this increase would be passed onto municipalities, which pay 60 percent of teacher pensions.
The legislation would “immediately reduce the unfunded liability of Rhode Island’s pension system by more than $3 billion and increase the funding status to over 60 percent.”
“That’s $3 billion,” emphasized Ruggiero, “with a capital ‘B.’”
Another bullet point of the RIRSA is the suspension of cost-of-living adjustments, or COLAs, across the board. According to the executive summary, “This is a system-wide suspension, impacting all state employees, teachers, judges, municipal employees and public safety employees, including the State Police.”
Also, the retirement age will increase to match the Social Security age for most employees.
A third change is that state employees would contribute 8.75 percent out of each paycheck towards their retirement under the legislation.
The 8.75 percent is part of a hybrid plan, said Ruggiero and Paiva Weed, which will be broken up into two categories: 3.75 percent for the defined benefit plan, and 5 percent for the defi ned contribution plan. The defined contribution plan works like a 401(k), according to Ruggiero, where 5 percent goes directly into an individual retirement account, with the state matching 1 percent each pay period.
“Barring any reforms in the benefi ts,” Town Administrator Bruce Keiser told the Press in July, “we are obligated to deliver under the town’s collective bargaining agreement with nonpublic safety retirees, people who own a home assessed at $400,000 would have to pay an additional $50 per year in property taxes.”
According to Paiva Weed, the legislation would take some of the burden off of individual municipalities, including Jamestown. “It will certainly [result in] a reduction in anticipated payments,” she said. “That will help the taxpayer.”
Jamestown, according to both representatives, is in good shape. “Jamestown and Middletown are very solvent,” Ruggiero said. “They are very well funded.”
Paiva Weed added, “Leaders of Jamestown have been fiscally prudent.”
Under the legislation, all cities and towns that are funded at 60 percent or below “must do something to put themselves on a path to solvency,” Ruggiero said.
Of the 39 municipalities, according to Ruggiero, 24 are below that mark. She added that three or four are on the “brink of Central Falls,” a city that filed for bankruptcy in August. She mentioned that the Coventry Police Department pension plan is only 16 percent funded.
“We’re lucky,” Ruggiero said. “Jamestown is in good shape.”
“One thing we want is a lot of public interest,” Paiva Weed said, referring to the reason that the website was launched earlier this week. “We want to assure the public that they have a say and for them to contact us and provide their thoughts.”