The Pension Performance Is Already Underway
I wanted to go to last night’s Publick Occurrences event, but after around 10 hours of motivational speeches and get-rich sales pitches, I just couldn’t bring myself to do it. Part of the problem is my suspicion that the game is already set, and like those sales pitches, everything being said right now is just a performance. General Treasurer Gina Raimondo gave Newsmakers a pretty good indication of where leadership is going:
Raimondo signaled a COLA freeze will be a key part of the plan, saying a suspension of the annual increases could reduce the unfunded liability by up to $1 billion, depending on whether the freeze is full or partial and if it continues for “a lengthy time.” That would be the most significant change for current retirees. …
The third major plank expected in the Raimondo-Chafee proposal: reamortization, or stretching out the schedule for paying down the unfunded liability, which raises its long-term cost. The treasurer has criticized reamortization in the past as inadequate, but said Friday she can support it if it’s tied to other changes. …
One policy Raimondo doesn’t support: raising the retirement age for state workers who are already eligible to retire, which she said could result in a rush to the exits before the new plan takes effect.
The game is up. (The “second plank” was a hybrid plan moving forward.) We’re looking at a $7-9 billion shortfall. $1 billion will come from a little temporary tweaking of COLAs, and the rest will fall to reamortization, which only increases the burden down the road, and there’s still a probability that all of the “fairness” and “spreading the pain” talk indicates additional tax increases, beyond what’s already been pushed down to towns and cities by lowering the expected rate of return on pension investments.
Plainly put, the people running the show in Rhode Island aren’t willing to avoid yet another bad long-term repair to the problems they’ve created by making the changes that have to be made for pensioners across the board. So, they’re pretending that a temporarily suspended annual adjustment (in a continuously bad economy) is the end of the world.
That’s why legislators are making such a big deal about “doing the right thing” and voting to reduce the pensions that so many of them and their families are receiving or will receive: Because it’s not nearly enough of a reduction in total benefits, and in a sense, they’re negotiating the public down.