NEW: Raimondo—Pension Reform Needed to Avoid Budget Disaster
Monday, May 23, 2011
General Treasurer Gina Raimondo pleaded for comprehensive pension reform Monday afternoon, warning that inaction would soon cause the annual cost of the pension fund to skyrocket to $1 billion a year—threatening vital public services.
The current liability is at least $6.8 billion, but could be as high as $9 billion, Raimondo said, in a press conference at Crossroads Rhode Island. Within a few years the annual cost will double from $312 million in 2010 to $615 million in 2013.
“Each day that the state avoids comprehensive reform, the liability grows. It is unfair to ask taxpayers to pay for the growing level of required contributions and it is dishonest to let state employees, teachers and retirees believe that full benefits will be there for their retirement,” Raimondo said.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTHer plan outlined five “possible areas of reform.” According to her report, those are:
1. Raising the retirement age: Setting the retirement age at 67 would cut the unfunded liability by about $700 million.
2. Accrual rate: Reducing the accrual rate to one percent for future service would reduce the state’s yearly contribution by about 7 percent of the employee’s salary.
3. Suspending COLAs: Hypothetically, the suspension of all cost of living adjustments for all active and retired employees would reduce the unfunded liability by about $1 billion.
4. Hybrid plans and portability: Adding defined contribution plans to the benefit package would offer employees an additional source of retirement income.
5. Other options include “anti-spiking provisions” to prevent high increases in pension levels at the end of one’s career and re-amortizing the pension debt.
The comprehensive report detailed how the state got itself into this mess, outlined how the pension crisis would affect state services, and tax rates, and pointed to how reform should proceed.
Raimondo said she would convene a group of experts to advise her on pension reform. Later this year, she said she plans on releasing a report with recommended reforms to the Governor and the General Assembly.
Click here to read the full report.
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