October 19, 2011

Defaulting on Democracy Yet Again

Carroll Andrew Morse

It seems that no plan for fiscal reform in Rhode Island is considered complete until it eviscerates democracy in some way. The pension reform plan submitted to the General Assembly yesterday by Governor Lincoln Chafee and General Treasurer Gina Raimondo is no exception.

The offending section is 36-10.2-7 which creates procedures that both municipalities and the state must follow, if they fall behind on actuarially determined pension funding. Section (2) is an early sign of trouble to come...

36-10.2-7(2) In the event that the state or a local municipality, as the employer of a plan, determines that, based on reasonable actuarial assumptions and upon exhaustion of all reasonable measures, the plan cannot reasonably be expected to meet the guidelines of subdivisions (i) and (ii), then the employer’s legislative governing body shall provide a report to the retirement board...
The "employer’s legislative governing body" is a city or town council in the case of a municipality, or the General Assembly in the case of the state. Just by itself, this section is a problem. The General Assembly, supposedly one of the 3 co-equal branches of government, is being required to report to a body outside of the legislative branch, the "retirement board", which is one of those curious Rhode Island combinations of union members, government lobbyists, and executive branch officials...
36-10.2-3(1) “Retirement board” or “board” means the retirement board of the Employees’ Retirement System of the State of Rhode Island as defined in Chapter 36-8...

36-8-4(a) ...The membership of the retirement board shall consist of:

  • The general treasurer or his or her designee who shall be a subordinate within the general treasurer's office;
  • The director of administration or his or her designee who shall be a subordinate within the department of administration;
  • A representative of the budget office or his or her designee from within the budget office, who shall be appointed by the director of administration;
  • The president of the league of cities and towns or his or her designee;
  • Two (2) active state employee members of the retirement system or officials from state employee unions to be elected by active state employees;
  • Two (2) active teacher members of the retirement system or officials from a teachers union to be elected by active teachers;
  • One active municipal employee member of the retirement system or an official from a municipal employees union to be elected by active municipal employees;
  • Two (2) retired members of the retirement system to be elected by retired members of the system;
  • Four (4) public members, all of whom shall be competent by training or experience in the field of finance, accounting or pensions; two (2) of the public members shall be appointed by the governor...and two (2) of the public members shall be appointed by the general treasurer.
So under the new law, the representatives of the people will have to report to a board which includes members drawn from various private interests. Not good. Then it gets much, much worse. In particular, pay close attention to what the "Default A" plan is, and how it flows through the next sections of the law...
36-10.2-7(3) ...the actuary shall provide to the board, and in the case of MERS plan shall also provide to the impacted local municipality’s legislative governing body, at least five (5) funding improvement strategies but no more than ten (10) funding improvement strategies showing revised benefit structures, revised contribution structures, or both...

36-10.2-7(4) In addition to any funding improvement strategies provided by the board in subparagraph (3), the board shall include a default funding improvement strategy (“Default A”) that shall show increases in employer and employee contributions under the plan necessary to achieve the applicable requirements found in subsection (b), assuming no amendments to reduce future benefit accruals under the plan.

36-10.2-7(5) ...the board shall submit the “Default A” strategy as described in subparagraph (4) and one additional funding improvement strategy, as selected by the board, to the general assembly.

36-10.2-7(6) ...the general assembly shall select and enact into law one of the two (2) submitted funding improvement strategies. If no funding improvement strategy is approved by the general assembly by June 30th, the “Default A” strategy as described in subparagraph (4) shall be enacted into law effective July 1st following the date the plan was certified as being in endangered status under section 36-10.2-6.

Ponder for a moment the meaning of the phrase "shall be enacted" in the context of section (6). Does "shall be enacted" mean the General Assembly members must vote in favor of enacting Default A, if the other plan hasn't been approved by June 30? Or that Default A can automatically become law, without a majority vote of General Assembly members, if the other plan is not approved by June 30? Neither is acceptable in a democratic system.

But there's still more. A new section of the law created by the current bill would spell out exactly what the responsibilities of the members of the "retirement board" are...

36-8-4.1(a) A member of the board shall discharge duties with respect to the retirement system:
(l) Solely in the interest of the participants and beneficiaries...
Thus, to add final insult to injury, the law expressly instructs members of the retirement board to serve only their private interests and not the interests of the public when they use their new power to write legislation that the legislature must pass.

General Treasurer Raimondo has stated on several occasions that she would prefer that the pension bill be passed as initially submitted without amendments. The General Treasurer should publicly modify her position and make an exception for sections of the pension bill that attempt to (unconstitutionally) strip the law-making power of the state legislature and transfer it to a coalition of politically favored special interests.

And what do Rhode Island's Senators and Representatives think about Governor Chafee's latest attempt to remove their free and independent judgment from lawmaking process and let a board not accountable to the public write new laws that they are commanded to enact?

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

" Or that Default A can automatically become law, without a majority vote of General Assembly members, if the other plan is not approved by June 30?"

If that is legal, then every Rep/Senator should submit all their bills next year that "shall be enacted" if not passed by some date. For example, the same day.

Posted by: Patrick at October 19, 2011 10:05 AM

Ay yay yay.

Posted by: Monique at October 19, 2011 3:16 PM

On the bright side, even if this stands up to constitutional scrutiny, I expect a future legislature could suspend the rule, so to speak... of course, it would have to want to.

I'm not sure what would be worse: for these power grabs to be part of some ruling class plot or for them to result from a sincere belief that the public has to be protected from the meddling of the political process.

Posted by: Justin Katz at October 19, 2011 9:57 PM
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