November 28, 2011

How Easily the Hybrid Pension Reform Can Be Undone

Justin Katz

Here's a question: As Rhode Island legislators seek forgiveness for their pension reform votes, just how much will the unions have to improve their overall negotiating stance in order to completely eliminate the adverse effects of the hybrid component of that reform? The answer: Seen in terms of annual raises, a 2.5% increase — that is, a 4% average annual raise becoming a 6.5% average annual raise — will leave a 30-year employee with exactly the same pension as if the hybrid had never happened.

Of course, employees will be receiving the raises, not to mention a 1%-of-pay annual deposit into their defined-contribution accounts. The upshot is a 0.75% or so increase in pay every year above what otherwise would have been given will completely undo any savings in lifetime pay and pension that the people of Rhode Island gained by implementing a hybrid pension system.

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But it might take a few years for this to be borne out with the contract negotiations, raises to take effect and then for someone to realize that there's a pension problem. By then, the politicians of today will be long gone and the current crop will be complaining about the "sins of the past" and will be revisiting it again, "once and for all".

Kinda like amnesty for illegal immigrants.

Posted by: Patrick at November 28, 2011 9:34 AM

Yes. It'll take a couple of years for the salary-end boost to kick in. Then, it's going to take the better part of a decade for the struggling pension system to run its course of remediation. Then, it'll take a few more years of putzing around with Retirement Board-driven tax increases and a few more years for the GA to figure out that it has to reclaim its legislative authority from the board.

Of course, the continuing pension problem won't easily be traceable to the inadequacy of current reforms, so the narrative will be that employees have already made their sacrifices, and it's time for taxpayers to feel the pinch.

Posted by: Justin Katz at November 28, 2011 12:22 PM

When was the last time state workers received a 6.5% contract raise? If you think that they are going to get a 6.5% raise at any point in our lifetimes, you're out of your mind. But then again, you all still think that labor runs the State House, even when they have lost every vote for the last 6 years.

Will Anchor Rising be happy until there are no government employees of any kind, no government oversight of anything and no taxes? I doubt it.

Posted by: Sick and Tired at November 28, 2011 9:59 PM

"Will Anchor Rising be happy until there are no government employees of any kind, no government oversight of anything and no taxes?"

Is that a contractual offer?

Posted by: Patrick at November 28, 2011 11:42 PM

You really seem to be paranoid on this issue Justin. You insist on calling a mostly full glass an empty glass.
More needs to be done. On Disability and on municipal pensions. And more WILL be done-either that or the munis will be forming a conga line behind CF in Bankruptcy Court. For the union pigs, having killed the golden goose, are facing a future of heads you win tails I lose.

Posted by: Tommy Cranston at November 29, 2011 9:36 AM
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