General Treasurer Gina Raimondo offered the most detailed preview yet on Friday of what her much-anticipated pension reform legislation will include, as she called on union leaders to drop their opposition to the plan.
In an interview on WPRI 12’s “Newsmakers,” Raimondo outlined the planks of the plan that’s taking shape – notably a suspension of cost-of-living adjustments (COLAs), a transition to a hybrid plan for active workers, and a reamortization of the state’s $7.3 billion unfunded pension liability – while emphasizing the details are still in flux.
“If you’ve worked for 20 years, you’ve earned X already, my view is, that’s yours – you’ve earned it,” Raimondo said. “It’s my intent to submit something that doesn’t touch anything that you’ve earned. But on a go-forward basis, things might have to change.”
The legislation Raimondo and Gov. Lincoln Chafee are drafting will be released during the first two weeks of October. Lawmakers are expected to return for their special session after Oct. 10. The treasurer said she thinks union opposition will be the biggest hurdle they face in crafting a solution she supports.
“The pension reform that I propose – that the governor and I propose – will be in everyone’s best interest,” Raimondo said. “People are worried about ‘What’s happening to my COLA?’ They should be worried about ‘Will I get a pension?’ So if the labor leadership and the labor folks want to just say, ‘No, no, no,’ they’re doing a huge disservice to their members and every person in the state of Rhode Island.”
Raimondo signaled a COLA freeze will be a key part of the plan, saying a suspension of the annual increases could reduce the unfunded liability by up to $1 billion, depending on whether the freeze is full or partial and if it continues for “a lengthy time.” That would be the most significant change for current retirees.
“If you’re a retiree earning $1,000 a month, it would be my intent to submit a proposal where you continue to earn $1,000 a month,” she said. “We might just come to you and say, for a while you’re not going to get a raise. … Every retiree I’ve talked to, and I’ve talked to hundreds at this point, has said: ‘I’m willing to do my part. That’s not so bad.’ ”
“The way the system is set up now, many retirees who are 65 and above are making more in retirement than they were when they were working,” the treasurer added, because they get both a state pension with a COLA and Social Security, which also has a COLA. About half the state’s teachers do not receive Social Security, unions say.
Raimondo provided fewer details about the structure of the new hybrid plan, which would combine a limited guaranteed annual pension with a 401k-style individual retirement account. “We’re still hashing out the details of what the hybrid plan would look like,” she said.
For workers vested in the pension system now – those on the job 10 years or more – the transition process would likely mirror the one used in the private sector. A veteran worker would receive the full pension benefit they’d earned up to that point, and then earn credit in the new hybrid plan for the remainder of their government service.
The third major plank expected in the Raimondo-Chafee proposal: reamortization, or stretching out the schedule for paying down the unfunded liability, which raises its long-term cost. The treasurer has criticized reamortization in the past as inadequate, but said Friday she can support it if it’s tied to other changes.
“What you have to do first is reduce your debt load, and then remortgaging might make sense,” she said, comparing the pension liability to a home mortgage. “We need a fundamental restructuring of the system to take that $7 to $9 billion … down to something more manageable that our little state can afford. And then if we do that, then I would be open to reamortizing.”
One policy Raimondo doesn’t support: raising the retirement age for state workers who are already eligible to retire, which she said could result in a rush to the exits before the new plan takes effect.
Raimondo specifically said the National Education Association’s Bob Walsh, who served on the pension advisory board she and Chafee appointed, should accept the changes. “The young teacher in Rhode Island today is paying almost 10% of her pay and in 30 years, there’ll be no pension for her,” she said.
“Look what happened in Central Falls,” the treasurer continued. “They dug their heels in, they opposed reform, and now we’re going to 70-year-old retirees and saying, ‘You’re not getting half of your pension check.’ That’s what’s at stake here. We can’t let that happen. So if you care about public employees, you’ll pass this reform.”
The full episode of “Newsmakers” will air at 10 a.m. Sunday on Fox Providence and is available to watch online.
• Related: What’s next for the pension fight after today’s court ruling (Sept. 13)