PROVIDENCE, R.I. (WPRI) – The proposed settlement to end a union lawsuit against Rhode Island’s 2011 pension overhaul would require taxpayers to put $32 million more into the pension fund in the 2016-17 budget year, according to a leaked analysis.
The actuarial valuation of the settlement’s cost was obtained and published by The Providence Journal on Wednesday. The letter says it was sent by the state’s outside actuaries at Gabriel, Roeder, Smith & Co. to Gov. Gina Raimondo, General Treasurer Seth Magaziner and their aides on March 13.
The three pages of the letter published by the newspaper so far do not include one crucial piece of information, however: the actuaries’ estimate of how much the settlement would increase Rhode Island’s total shortfall for employee retirement benefits, which excluding municipal workers currently stands at $4.4 billion.
The unions argue the changes made by lawmakers in 2011 – most notably, freezing pensioners’ annual cost-of-living adjustments – were unconstitutional; the state argues they were necessary to save taxpayers roughly $4 billion. A previous settlement died last year, but now a revised settlement is being weighed by workers and retirees.
R.I. Superior Court Judge Sarah Taft-Carter has placed a gag order on all the parties in the pension case, which has blocked state and union leaders from releasing details about the settlement. Nevertheless, some information has emerged over the past week.
The 2011 pension law reduced the state’s pension shortfall from $8.9 billion to $4.8 billion, according to an analysis Gabriel, Roeder, Smith released last year. The benefit increases proposed in last year’s settlement proposal would have raised the shortfall by $232 million, to $5.05 billion, which state officials argued was a relatively small price to pay to lock in the rest of the savings. The new settlement would presumably increase the shortfall slightly more than that.
Those figures, however, represent the entire long-term shortfall in the pension fund that has to be made up over many years. The numbers included in the March 13 Gabriel, Roeder, Smith letter lay out the extra cost to taxpayers only in the 2016-17 budget year, which it says is the first year the settlement’s higher costs would need to be paid, and puts the tab at $31.6 million. (Budget years run from July 1 to June 30.)
Even without the settlement in place, Rhode Island’s state government is already facing a budget deficit of $256 million in 2016-17, according to projections released earlier this month by the Raimondo administration.
The letter says the new settlement would take effect on July 1 and contains most of the same provisions as last year’s failed proposal, with the following three noteworthy changes.
• Retirement age: All current and future non-public-safety workers enrolled in the pension system would be allowed to retire with full benefits at either the date allowed under the 2011 pension law or at age 65 after 30 years of work, age 64 with 31 years of work, age 63 with 32 years of work, or age 62 with 33 years of work – whichever is earlier. Municipal police and fire employees could retire with full benefits at age 50 with 25 years of work or at any age with 27 years of work, whichever is earlier.
• COLA calculation: The 2011 pension law capped COLA increases to be calculated on a maximum of $25,000 in benefits; the settlement would raise the cap to $30,000 for workers who are already retired.
• One-time stipends: Current retirees would receive two one-time stipends of $500 each, one paid out the month after the settlement is approved and one paid out a year later.
The new effort to settle the pension lawsuit emerged last week after Judge Taft-Carter refused a plea by lawyers to delay the start of the trial past April 20 and appointed former R.I. Chief Justice Frank Williams as a special master in the case.
Williams quickly worked with the attorneys to revamp last year’s settlement and begin presenting it to union members and retirees at closed-door meetings, where they say he’s told them their side is likely to lose if they continue to press their case in court.
Retirees who showed up for a vote at Twin River Casino on Monday gave the settlement overwhelming approval. Current employees are voting on it through Friday, and at least one small union has rejected it. Due to the gag order, officials have not said how the votes will be tabulated or whether individual groups of workers and retirees can settle separately.
Meanwhile, with no final settlement in place yet, the case is continuing to move forward toward trial. Lawyers on both sides are scheduled to appear before Taft-Carter on Thursday morning in Providence County Superior Court to tackle dispositive motions.