Raimondo opposes Chafee move to cut pension-fund deposits

Nee, left, Raimondo and Chafee

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Treasurer Gina Raimondo is urging lawmakers to reject a little-noticed proposal by Governor Chafee to shave $2.6 million off the amount taxpayers must put into the pension fund next year.

The governor’s proposed 2012-13 budget would scrap a seven-year-old law mandating that if the state’s required pension contribution rate falls from one year to the next, taxpayers must put 20% of the reduction into the pension fund anyway.

Raimondo said her staff examined the requirement while crafting last year’s pension overhaul. “After thoughtful analysis, Treasury concluded that the policy should remain in effect and therefore did not recommend a change to this statute,” she wrote in a letter to House Finance Committee Chairman Helio Melo obtained by WPRI.com.

Rhode Island AFL-CIO President George Nee praised Raimondo’s position. “The labor movement appreciates the treasurer weighing in on the side of our members,” he said in an email. “The present law is sound fiscal policy and should remain unchanged.”

Chafee’s proposal would free up $2.6 million in next year’s state budget but cost the pension fund an estimated $3.2 million, according to the treasurer’s office. Christine Hunsinger, the governor’s spokeswoman, said the state’s contribution rate is projected to go down every year starting in 2015-16.

“In each of these years, we would need to provide this additional funding instead of having the savings accrue to the budget,” Hunsinger told WPRI.com. “Our proposal helps address the projected out-year deficits by not having to allocate funds to this purpose.” The state is on track to run a $349 million deficit in 2015-16.

In addition, Hunsinger said, “to the best of our knowledge, the state’s actuary did not take this extra funding into account” last year while putting together long-term forecasts of the pension fund’s asset levels. “As such, this change would have no impact on the projected health of the fund,” she said.

Raimondo, however, argued that keeping the 20% bonus payment in place “will strengthen the pension fund more quickly for its members,” whereas getting rid of it “offers only modest budgetary savings while delaying our efforts to return the pension system to a healthy funding level.”

The new pension law is meant to be “a fair and lasting reform, and to avoid further near-term adjustments,” Raimondo wrote, using the acronym RISRA, short for Rhode Island Retirement Security Act. “I urge you to give RIRSA a chance to work before considering changes that might weaken its impact.”

Nee, who fought passage of the pension law last year, stressed that he and Raimondo had found common ground on this issue.

“Though we still have disagreements over the pension bill just enacted, it is reassuring to see we both agree that the long-term financial health of the pension system is a shared goal,” he said, adding that Chafee’s proposal “is not in the best interest of the state or the hardworking teachers, state employees and retirees.”

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

(photo: Greater Providence Chamber of Commerce)

25 thoughts on “Raimondo opposes Chafee move to cut pension-fund deposits

  1. This state is just too much.

    While I agree that the pensions needed to be cut back this behavior in the article is what put the state in that position in the first place.

    I am the first one to say that this state has a bad reputation for corruption etc – The fact that the state is changing the employee pensions can also be a reason for business not to come here.

    Can Rhode Island be counted on to maintain the agreements made to businesses after they move here?

    We have cut pensions now we have to make good on what we cut them down to.

    What Chafee wants to do shows a complete lack of character.

  2. Accountability, responsibility, trustworthy! Lack of these qualities was the reason we had to write a law in the first place (RIGL 36-10-2) that forced the GA to make pension contributions on time.

    Now we want to modify the rules again??? I stand with the unions on this one.

  3. Wow. The ink isn’t even dry on the legislation and the politicians are trying to short-change the pension fund AGAIN. Thanks for the heads up Ted!

    • It’s the “politicians” in the General Assembly that over the past 25 years continually approved massive enhancements to the plan, never doing what was fiscally prudent nor using actuarial studies to support the changes. This is what ultimately broke the system. It is the taxpayer that was short-changed. Participants still have an incredibly robust retirement package, particularly in comparison to the private and non-profit sector. Gump’s proposed change, although suspect, is pennies on the dollar to what was done on the opposite side of the spectrum.

  4. Just another reason for more companies not to setup shop in Rhode Island. Do you know how many companies hire people to do research on what locations to open up operations? The world is watching!

  5. The General Assembly has done this each time they have passed pension reform legislation. The Governor is just following their lead. I think it is interesting that the Treasurer opposes the Governor’s proposal to save $2.6 million but offers no alternative as to how she would save the money. What cut would she make or what revenue increase does she propose that would keep the budget in balance?

    • Ace

      This is not as cut and dry as it appears. What the business community wants to see is that RI is consistent and reliable in carrying out it’s laws. Consistency is critical in business planning.

      What we now have is a very clearly written law that laid out the consistent steps that would be taken to fund the pension system, even in the reduced benefit environment we now have.

      It’s not Ms Raimondo’s duty to figure out a way to break the law. It’s the Gov’s duty to find the money.

      There are places to find the $2.6 mil. But why bother if you can break a law.

      That sends a very bad message to the business community. That’s a problem.

      • Win Née praises Raimondo, you dam well no there was a back door deal between these two. I’m still trying to figure why Gina, left the Judges, and RISP pensions alone . Maybe win she runs for Governor she will answer it.

  6. Not that I am a Gina rumpswab, Albert, but Judges and State polices pensions, we’re certainly affected by the legislation.

  7. Gina should have factored in any short fall being contributed by the
    union pension recipients not whacking the taxpayers again.
    Score one for the Governor and give Gina a penalty for backsliding a bit

    • jjc

      It may appear that Ms Raimondo has some say on this, but in reality, she doesn’t. She is a trustee in the pension plan trust fund and under RI law, she must act like a trustee over the fund.

      Also RIGL 36-10-2 lays out the following statutory steps:

      1) The Treas receives the annual report sent in by the state actuary which includes the amount needed to be appropriated from taxpayers (the actuary does the numbers for the annual funding, not the Treas);
      2) The report is then presented to the Pension Board;
      3) The Treas then sends the needed appropriation that was calculated by the actuary over to the Gov;
      4) The Gov then sends it over to the GA for funding based on what the actuary calculated under RIGL 36-10-2.

      Treas Raimondo does not do the calculation. The GA laid out the steps for her by writing a law that she has to follow as a trustee.

  8. The jig is up. R.I. is broke thaNKS TO PUBLIC EMPLOYEE unions. They will suck us dry and then say we have to support public employees. Know this, we are paying the most in R.I. for firefighting services per RIPEC studies. Our per student K-12 education expenditures are the 2nd highest in the country. So why should we use Mega Bucks lottery expenditures to fund more money down the education enterprise in R.I. drain? Wise up, the NEA and AFT are sucking you dry. They only want you to spend more money on the below average education system in the whole country while we spend the 2nd most per capita for K-12 education in the country.

  9. Isn’t playing tricks with the pension what got Rhode Island in trouble in the first place? Clearly something is wrong in the process if the state continually needs to find ways to lower the burden on taxpayers. With pensions being as volatile as they have ever been (http://on.wsj.com/qB3BON), and Rhode Island being something of a poster child for pension issues, it seems extremely unwise for the Governor to start short changing it again, even if he does have taxpayers best interest at heart.

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