Pension Reform Takes Hostages (In Addition to Taxpayers) For Ransom: Current Employees Must Continue to Contribute To The Retirement Fund for The Sake of Retirees
On Friday, General Treasurer Gina Raimondo sat down for an interview with WPRI on Rhode Island’s Subject Du Jour. The indefatigable Ted Nesi is posting it in three parts on WPRI’s blog. This morning, he released Part Two, which brings into focus the burden which current public employees would carry under the pension reform plan proposed by the General Treasurer and the Governor. [Emphasis added.]
Raimondo acknowledged the proposed hybrid plan in her bill still won’t allow younger workers to opt out of participating in the state pension program. “We need younger people to continue to pay into the system,” she said, or it won’t have enough money to cover the unfunded liability for retirees and older workers.
But the treasurer noted the share of an employee’s 8.75% paycheck contribution that currently goes into the pension fund would drop to 3.75% under the bill, with the rest going into an individual retirement account, a bit like a 401k.
On his program Friday, WPRO’s John Depetro and I discussed and and then disagreed about the adequacy of the adjustment – solely a suspension of the COLA – that would be made to the pensions of current retirees and vestees under the proposed reform plan. I contended that it was not big (meaning sufficient); he emphatically stated that it was.
I stand by my view. COLA’s are dessert to the six course meal that comprises a public pension in this state. Their suspension is a very good first step. But more needs to be done because Rhode Island still cannot afford the meal itself! With $4.3 billion of the $7.3 billion shortfall not addressed, we’re still looking at tax hikes EVEN IF the local pension shortfalls and the unfunded retirement health coverage on both the state and local level are wished away.
Now add to that the clarification that current public employees must divert some of their earnings away from their own retirement and towards the state’s moribund (okay, 60% moribund if this pension reform is passed) pension system for the benefit of retirees and vestees.
All the more is it clear that, with this pension reform proposal, not enough has been done to adjust the extremely generous pension benefits promised by elected officials who, over the decades, put their cognitive capacity (heh) into gear just long enough to solicit and deposit campaign contributions from the future beneficiaries of those promises but then threw it into neutral and walked away from the vital matter of fulfilling those promises.