REPUBLICAN-IN-GOVERNING-ONLY:

A Democrat Bites Union Story: In Rhode Island, liberals take the lead on pension reform. (WSJ, 11/25/11)

The Ocean State has been running a $7 billion unfunded pension liability, one of the largest per capita in the nation, and its annual pension bill was expected to double next year to $600 million. While public unions wanted to keep partying like it's 1995--when its pension liability was $1 billion--the state's left-leaning independent Governor Lincoln Chafee and Democratic treasurer Gina Raimondo took a more sober view.

Earlier this year they appointed a 12-member commission to recommend reforms that would reduce the pension bill and shore up retirement funds. Some panel members reported that the state would have to modify current worker and retiree benefits going forward to realize immediate savings. Merely tweaking benefits for new hires wouldn't save much money for another 20 to 30 years.

In contrast to President Obama's decision to ignore his own Bowles-Simpson deficit commission, the Rhode Island reformers then moved to implement these recommendations. What a concept. The reforms suspend annual 3% cost-of-living increases for retirees until the pension funds became solvent, raise the retirement age for most workers to 67 from 62, and shift all workers to a new hybrid pension plan that includes a modest annuity and defined-contribution component. They estimate their plan will lop $3 billion off the state's unfunded liability and cut its pension bill in half next year.

These reforms are far more comprehensive than those adopted or proposed in other states. Most have reduced future workers' benefits or required current workers to contribute more to their retirements. Only a handful have modified cost-of-living adjustments, which is where most immediate savings can be found.

Posted by oj at November 26, 2011 6:31 AM
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