June 24, 2005

Rhode Island Unions Again Resist True Pension Reform

Marc rightfully noted the good news on pension reform passed earlier this week, followed by a word of caution.

The caution flags are now out in full force because the week wasn't even over before the unions of Rhode Island were out attacking the pension changes passed in the State House:

Unions representing state employees are objecting to proposed changes in the state's pension system and are presenting their own plan, which they say is fair to taxpayers and workers affected by the cuts.

The proposal put forward...by Working Rhode Island would restore some of the benefits that state employees would lose under a proposal endorsed this week by the House Finance Committee.

The unions' proposal, billed as "The Fair Pension Amendment," would also reduce pension contributions from workers affected by the cuts.

"We're asking the governor. We're asking the General Assembly to embrace these proposals as a fair compromise," Bob Walsh, secretary-treasurer of Working Rhode Island, said at a press conference today at the State House...

Walsh estimated that the unions' proposal would save $25 million to $30 million next year, while state lawmakers estimated their proposal would save the state and local communities about $44 million.

The pension reform package...would cut benefits to some 4,350 state workers and 7,000 teachers. The changes would affect only those workers who haven't served the 10 years required for vesting. It would not affect state troopers, judges or correctional officers and employees at quasi-public agencies...

Changes proposed by the lawmakers' include the institution of a minimum retirement age of 59.

The lawmakers' plan would also reduce the maximum benefit available to retirees and make them work longer to get it. For example, workers can now receive 80 percent of their salary after serving 35 years. Under the lawmakers' proposal, workers would have to serve 38 years to receive a maximum benefit of 75 percent of their salary.

Cost-of-living increases would also be tied to the Consumer Price Index and capped at 3 percent under the proposal.

Walsh said..."these proposals went far beyond anything we thought was fair."

For example, he complained that non-vested employees would see their benefits reduced without a reduction in their contributions to the system. He said teachers currently contribute 9.5 percent of their salary to their pension, while other employees contribute 8.75 percent.

Under the unions' proposal discussed today, those contributions would drop to 8.5 percent and 7.75 percent, respectively, starting in July 2006, then drop further as the pension fund becomes healthier.

Walsh said the problems in the pension system were not created by the employees who would be affected by the lawmakers' proposed cuts...

Walsh blamed the system's unfunded liability in part on government decisions, such as early retirements in the late 1980s and underfunding during the state's banking crisis. He said poor investment decisions had also hurt the system. He also acknowledged that longer life expectancies were playing a role.

The union also takes issue with the lawmakers' proposal to cut the maximum benefit from 80 to 75 percent. Under the unions' plan, the service time required for the maximum benefit would increase to 38 years, as the lawmakers have proposed, but workers serving that long would receive 80 percent of their salary in retirement...

The unions also reject the idea of tying the cost-of-living adjustment to the consumer price index, with a 3 percent cap...

Here is another ProJo article:

A spokesman for Republican Governor Carcieri said: "The union leaders' proposal appears to be a cynical attempt to head off real reform.

"The governor has been working to reform the state pension system for two-and-a-half years. He has had a comprehensive pension-reform proposal on the table since January. The union leadership has resisted the governor's efforts every step of the way," spokesman Jeff Neal said

"Now, at the eleventh hour, after the governor and the General Assembly appear to have reached agreement on this issue, the union leadership has come up with a half-hearted proposal that doesn't do nearly enough to solve the state's pension crisis.

"If the union leaders were serious," Neal said that they would have come forward months sooner. "Instead, they waited until the very last minute when they realized that their efforts to crush the reform movement had failed."

General Treasurer Paul Tavares, a Democrat, keyed his objections to the unions' suggestion that the state string out, over a longer period of time -- in the same way a homeowner refinances a mortgage -- the payments it needs to make each year to the state retirement fund to cover about $8 billion in pension obligations to state workers and teachers.

The notion: pay less now even if it costs millions more over the longer payment period.

The state has about 25 years left on the last pension refinancing by the state Retirement Board in 2001. Doing so again now, when "the system has a significant unfunded liability that is growing," would be "counterproductive to the system's fiscal health," Tavares said yesterday.

The unions just don't get it. RI Public Pension Problems are well documented and doing less is not a financially viable option. They appear willing to bankrupt this state - as long as they get theirs.


Bankrupt pensions, extraordinary healthcare insurance benefits, related issues with private and public sector unions, and the misguided incentives that exist in public sector taxation have been discussed previously on Anchor Rising:

Public Sector Issues
Misguided Incentives Drive Public Sector Taxation
Bankrupt Public Pensions: A Time Bomb That Will Explode
Why Truly Free Markets & Timely, Transparent Information Are Needed to Protect the Freedom of American Citizens
RI Public Pension Problems
The Cocoon in which Entitled State Employees Live
The Union's Solution for the Future: Get More People in Unions
Bankrupt Public Pensions, Part II
How Public Pensions Make People Well-Off at Taxpayers' Expense
Public and Private Unions
Making Headway Toward Fiscal Sanity
Now Here is a Good Idea
Be Watchful

Private Sector Issues
If You Won't Deal With Economic Reality, Then It Will Deal With You
Underfunding Pensions, Public and Private, can Hurt Taxpayers
Why Truly Free Markets & Timely, Transparent Information Are Needed to Protect the Freedom of American Citizens
Outrageous Employee Compensation Liabilities Continue to Haunt General Motors; Will American Taxpayers End Up Paying the Bill?
Why the Big Three Auto Companies Could Easily Fail