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.”
(photo: Greater Providence Chamber of Commerce)