Economic Policy Institute report blasts
RI’s pension overhaul; Raimondo responds
The Providence Journal (Rhode Island)
By Katherine Gregg
June 20, 2013
This is the headline on a new report from the Economic Policy Institute: “Rhode Island’s new hybrid pension plan will cost the state more while reducing retiree benefits.”
Among the key findings, being hailed by the state’s largest state employees union as affirmation that the dramatic 2011 pension-overhaul, crafted by state Treasurer Gina Raimondo, went too far:
The new defined contribution plan “doesn’t save the state money, but will cost retirees…[and] result in an average benefit cut of 14 percent for future full-career employees. [EXPAND Read more]
“Furthermore, due to the market risk introduced by the DC plan, many future employees will likely do even worse than this average: For the quarter of future employees who are in the lowest quartile of investment returns on their DC plan, the cuts will be 22 percent or higher.”
“These cuts to retiree incomes stemming from the hybrid DB+DC plan are not projected to translate into savings for the state, and will do little, if anything, to improve the health of Rhode Island’s pension funds. The changes will actually increase the average annual cost for taxpayers.”
The conclusion: “Rhode Island can and should make its pension funds solvent without exposing future retirees to the risks and higher costs of DC plans.”
J. Michael Downey, president of Rhode Island Council 94, AFSCME, stated, “These two documents affirm many of the objections Council 94 made to the 2011 pension changes, including: the rate of return was lowered to exacerbate the unfunded liability, the cuts were draconian, and the arguments supporting the passage of the changes were faulty.”
Joy Fox, spokeswoman for Raimondo, said Thursday afternoon in response:
“The Rhode Island Retirement Security Act addressed a $7-billion unfunded liability and a plan that was less than 50 percent funded. It was unacceptable to allow this crisis continue to grow.
“The passage of comprehensive pension reform represented the culmination of 11 months of thoughtful, fact-based analysis and input from retirees, employees, labor leaders and taxpayers. It was carefully designed by the General Assembly in an effort to save our state-administered retirement system.
“The treasurer’s top priority continues to be retirement security. She remains proud of the work that state leaders have done to strengthen the defined benefit pension program and to move our state pension system onto a secure and sustainable path. Our valued public employees and retirees deserve to have retirement security.” [/EXPAND]