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Settling Pension Lawsuit Is Top Priority for Raimondo

When Rhode Island Governor-elect Gina Raimondo takes office this month, one of her top priorities will be negotiating a settlement with public employee unions in the lawsuit challenging the state’s 2011 pension changes.

From the Providence Journal:

Days away from taking the oath of office that will make her the first female governor of Rhode Island, Governor-elect Gina Raimondo anticipates that public-employee pensions will be one of the first big items she tackles. Again.

Specifically, she anticipates “early” action to try to forge a settlement in the state’s high-stakes legal fight with its public-employee unions over the 2011 pension overhaul she crafted as state treasurer. “It is a priority,” she said.

[…]

With the state already facing a potential $200-million deficit, she said: “It is in no one’s interest to have a pension system which is unaffordable and unsustainable because, if you do that, a lot of people will get hurt.”

“So I will be reaching out,” she said Wednesday in a brief but wide-ranging interview in which she confirmed her intent to try to reopen the pension talks and, in the interim, ask lawmakers to extend the Feb. 5 deadline for the submission of her first budget proposal.

[…]

“A lot of work and good will went into the terms of the settlement agreement,” said Raimondo, who hopes to revive it. “It gives them peace of mind that their pension will be there … and that it is affordable for the state of Rhode Island.”

Should the state lose the lawsuit, “there would almost certainly be a number of municipal bankruptcies … [and] if we don’t fix the system, eventually you are going to have to go to retired people and cut their pensions … and that would be a terrible thing.”

Raimondo spearheaded the state’s 2011 pension changes, which cut benefits, froze COLAs and raised the retirement age.

Photo by By Jim Jones (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Many Rhode Island Retirees To See COLAs Unfrozen in 2015

One of the pillars of Rhode Island’s sweeping 2011 pension reform law was the suspension of annual cost-of-living-adjustments for retirees.

According to the Civic Federation, the reform law mandated:

Automatic annual increase in pensions benefits (COLA) is suspended until state employees, teachers, nurses, correctional, officers, judges, and state police plans’ funding level calculated together exceeds 80 percent; interim increases will be paid at 5-year intervals, based on investment returns.

The interim annual increase and all future annual increases will be applied only to the first $25,000 of income (indexed) and based on investment returns.

But in 2015, for the first time in years, many municipal retirees are will receive a COLA. The raise will be to the tune of 2.73 percent.

The increase was triggered by funding improvements that moved many pension systems over the 80 percent funding threshold required for members to receive COLAs. From the Providence Journal:

Good news for many Rhode Island municipal retirees: they will see a 2.73 percent increase in their pension benefits starting next year.

[…]

59 of the 113 municipal plans in the state-run Municipal Employees Retirement System are healthy enough now (at least 80 percent properly funded) that their members will see the COLA next year on the first $25,000 of their pension benefit, reported the state Retirement Board on Wednesday.

The COLAs were approved by the board as it accepted its annual valuation reports for the MERS plans and the Employees Retirement System of Rhode Island, the major retirement plan for state employees and teachers.

Those valuations reports showed that the state’s overall investments earned 8.23 percent last year on a five-year “smoothed” basis, outperforming the state’s 7.5 percent assumed rate of return.

The ERSRI plans are not expected to reach 80 percent funding until around 2031. But since passage of the pension overhaul law, lawmakers approved a provision where some pension increase for those workers could be added every five years if certain investment levels were met.

To see the list of retirement systems receiving COLAs, click here.

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Rhode Island Pension Reform Law Sits in Legal Limbo on Three Year Anniversary – But Raimondo, Other Lawmakers Open To Settlement

It’s been three years since Rhode Island passed into law a sweeping pension reform measure. But the law still sits in legal limbo after being challenged by labor groups.

A settlement has been hard to come by. But incoming Rhode Island governor Gina Raimondo said Monday she is open to a settlement. From WPRI:

Raimondo – who initially resisted efforts to mediate, but ended up supporting the failed settlement after a judge ordered talks – suggested Monday she remains open to settling but only if she can preserve the lion’s share of the savings from the original 2011 law. The previous settlement reduced the state’s pension shortfall by $3.86 billion, about 94% of the $4.09 billion the law saved.

“As I have said numerous times, I supported the settlement agreement,” Raimondo told WPRI.com in a statement. “I would like to see that back on the table and enacted to put the lawsuits behind us. I am open to making that happen.”

But Raimondo added: “What I am not interested in is going backwards from what was agreed upon in the settlement.” The state is already projecting a budget deficit of nearly $200 million next year; it would be more than twice as high if the old pension system were still in place.

She isn’t the only Rhode Island lawmaker eager to settle and put the legal challenge behind them. From WPRI:

Seth Magaziner – the Democrat newly elected to succeed Raimondo as treasurer, who will therefore become a lead defendant in the pension suit – has long backed seeking a deal.

“I continue to be supportive of renewing settlement talks, and am hopeful that a resolution can be reached that will keep the retirement system on a secure footing and avoid lengthy and expensive litigation,” Magaziner told WPRI.com in a statement Monday.

Legislative leaders are also open to the possibility.

House Speaker Nicholas Mattiello and Senate President M. Teresa Paiva Weed have both signaled in recent days they want to reduce or eliminate taxes on retirement income, such as Social Security and pension benefits – a new perk for older residents that could help smooth the way for settling the pension suit.

“The speaker will work with all parties to help facilitate a settlement of the pension lawsuit that is in the best interests of the citizens of our state,” Larry Berman, a spokesman for Mattiello, told WPRI.com in an email Monday.

Paiva Weed spokesman Greg Pare sounded a similar note. “The Senate worked closely with Treasurer Raimondo to develop the Rhode Island Retirement Security Act, and will continue to work with her as governor,” Pare told WPRI.com in an email Monday.

The pension reform law froze COLAs and moved most employees into a hybrid system with 401(k) qualities. An actuarial analysis stated the reforms improved the funding level of the state’s pension system from 42 percent to 56 percent.

Pensions Make For Interesting Politics In Rhode Island Gubernatorial Race As Unions Pick Sides

In Rhode Island’s gubernatorial race, pensions have muddied the waters of union politics. Gina Raimondo (D) is the one wielding union endorsements. But her opponent, Allan Fung (R), might have union voters on his side regardless.

Almost two-dozen unions have publicly endorsed Raimondo even though she rubbed public workers the wrong way when she froze COLAs and made other changes to the pension system in 2011.

Her challenger, Allan Fung (R), has won no union endorsements. But he’s more popular among union voters. From the Wall Street Journal:

Anger over pension cuts for state employees is driving many union voters in Rhode Island to cross party lines and back a Republican for governor, one of several midterm races roiled by battles over public pensions.

Democrat Gina Raimondo, Rhode Island’s treasurer, spearheaded legislation in 2011 to rein in public-employee pension obligations. Rancor over the move was still strong among union voters in a poll earlier this month, in which they favored Republican candidate Allan Fung over Ms. Raimondo, 42% to 30%; among all those surveyed she led by six points. A poll out Tuesday by Brown University found the race essentially tied.

[…]

Ms. Raimondo in Rhode Island said she understands public employees have “hard feelings” over the 2011 pension changes, which halted annual cost-of-living raises for retirees and forced certain state workers and teachers to move a portion of their retirement savings into 401(k)-style accounts.

“We always knew there could be political consequences, but it was clearly the right thing to do,” she said in an interview. “The good news is the pension system is healthier than it’s ever been. For teachers and state employees, the pension will actually be there for them.”

Mr. Fung also pushed through pension changes as mayor of Cranston, R.I., though they were less aggressive. He said union members who back him aren’t doing so merely to oppose Ms. Raimondo. He has played down a prior comment that he supported right-to-work laws, which forbid labor contracts that require union membership by workers. “The unions are there, and under my administration they’ll always have a seat across the table,” Mr. Fung said in an interview.

Broad labor support for Mr. Fung is striking because he has won no endorsements from unions, while Ms. Raimondo has garnered about two dozen endorsements, mostly from private-sector unions not affected by the state pension changes.

A list of unions that have endorsed Raimondo, according to her campaign website:

Bricklayers’ and Allied Craftsmen Local 3

Ironworkers’ Local 37

Plumbers’ & Pipefitters’ Local 51

Plasterers’ and Cement Masons’ Local 40

Roofers’ and Waterproofers’ Local Union No. 33

Sprinkler Fitters Local 669

Operating Engineers’ Local 57

Sheet Metal Workers Local 17

United Steelworkers Local 12431

Elevator Constructors Local 39

United Food and Commercial Workers Local 328

SEIU 1199 NE

IUPAT District Council 11

IBEW Local 99

32BJ SEIU

UNITE HERE Local 217

Carpenters Local 94

UWUA Local 310

Amalgamated Transit Union, Local 618

Montreal Unions Will Fight “Unjust” Pension Reform Bill

A union coalition representing 65,000 workers has announced workers may strike for 24 hours in protest of the proposed pension reforms contained in Bill 3. Additionally, the union spokesman said a legal challenge could be in the works.

Bill 3 would increase pension contributions and eliminate COLAs for many workers.