Move Out of the State? That Might Only Buy You Some Time
Former RI Auditor General Ernest Almonte says moving out of the state is, right now, about the only way that Rhode Islanders can avoid paying the $13,000 apiece we “owe” to fund public employee retirees (present and future). This is the big headline that came out of a conference held at URI last night.
Also discussed was the Pew Center for the States research (RI fact sheet in this PDF), which found that Rhode Island had only 59% of its $11.5 billion pension liability covered in 2009, ahead of only five states (Illinois, 51%; Kentucky, 58%; New Hampshire, 58%; Oklahoma, 57%,West Virginia, 56%). However, as General Treasurer Gina Raimondo pointed out, Rhode Island is now even worse off (probably because of the recent decision to re-set the pension rate of return) and now sits at 48%. Worst in the nation. Yay.
Raimondo was on with Dan Yorke earlier in the day and left little doubt that we are screwed and that there is no more road left to kick the can down. She sounds ready to dig in and fix things. She said it wasn’t “a problem” but “THE problem” facing the state right now. Unfortunately, Raimondo still seems to be clinging to the idea that a defined benefit plan–rather than moving to 401(k) style defined contribution plans–is still a viable option. I don’t think so.
As Michael Barone recently wrote, “the U.S., in general, just can’t afford generous defined benefit systems” anymore. Meanwhile, European countries are coming to the conclusion that social welfare benefits and programs aren’t untouchable, after all.
The paradigm is shifting whether we like it or not. Promises were broken and it sucks. But it’s economic reality: there is no money. We have to deal with current pensions and benefits, not just “future” pensions and benefits for workers not yet hired. That was the easy, low-hanging fruit. It’s time for politicians–the people who are supposed to lead–to step up and really deal with this. That’s why they were elected. If they don’t, we’ll have to find someone who will.