Assembly approves pension reform

Measure to save taxpayers $4 billion over next 24 years

STATE HOUSE – The General Assembly today approved legislation aimed at stabilizing the state’s pension fund to preserve its solvency and protect against enormous increases in taxpayer contribution otherwise expected in the coming years.

The Rhode Island Retirement Security Act passed the House on a vote of 57 to 15 and the Senate with a 35 to 2 vote at a special session called to address the state’s pension crisis. The legislation reduces the state’s unfunded liability of nearly $7.3 billion to $4.3 billion – representing a $3 billion reduction. The act results in improving the funded ratios of the state and teacher pension funds to 60 percent funded, up from 48 percent if no action had been taken. In addition, the legislation reduces total FY 2013 state and local employer contributions from $689 million to $414 million, saving nearly $275 million in FY 2013.

The legislation (
2011-H 6319A as amended, 2011-S 1111 A as amended), was introduced by Speaker of the House Gordon D. Fox and President of the Senate M. Teresa Paiva Weed, and was the subject of more than 29 hours of public testimony during seven joint hearings of the House and Senate finance committees over more than two months, as well as two special sessions of the General Assembly. Drafted in conjunction with General Treasurer Gina M. Raimondo and Gov. Lincoln D. Chafee, the legislation now heads to the governor’s desk. The changes would be effective July 1, 2012.

“The reforms we enacted today simply cannot wait any longer. The unfunded liability of our pension system has spiraled to new depths in recent years, and without these changes, would grow even more dramatically in the very immediate future. These are not simple fixes, they are long-term plans intended to right the ship,” said Speaker Fox. “Addressing this very complex issue involved sacrifice at many levels as well as courage, patience, thoughtfulness and fortitude from our members, the treasurer, the governor, local leaders and those representing the employees this affects, as well as the members of the House and Senate finance committees, who conducted 29 hours of public testimony and made amendments to help craft legislation that is fair, balances the costs and risks between employees and the state and protects the fiscal integrity of the retirement system, the state and municipalities.”

Senate President Paiva Weed said, “Passage of this critical piece of legislation ensures that resources will be available to invest in education, infrastructure and our human services safety net, while protecting the pensions of the future. I believe that we have achieved reforms that are fair to employees, affordable to taxpayers, legally defensible and sustainable over the long-term. I want to thank Chairman Da Ponte and the members of the Senate Finance Committee, who worked tirelessly to develop this legislation, as well as all the members of the Senate and our partners in this process, the House of Representatives, Treasurer Raimondo and Governor Chafee.”

The legislation introduces a hybrid pension structure for all except public safety employees and judges where the intent is to shift risk to the employee through combining the attributes of both the defined benefit and defined contribution plans. Teachers, state employees and the state-administered municipal plans (MERS) would all participate in this new structure.

The act also institutes a proportional retirement eligibility structure for most employees between ages 59 and 67, depending in part on the employee’s current years of service. Those already eligible to retire as of June 30, 2012, would not have their eligibility to do so change. The act ensures that retirees do not lose any COLAs (cost of living adjustments) granted prior to July 1, 2012, but suspends future annual COLAs until the aggregate funded ratio of the Employees’ Retirement System of Rhode Island, the Judicial Retirement Benefits Trust and the State Police Retirement Benefits Trust exceeds 80 percent.

The act establishes a limited, risk-based COLA that is only granted when the pension system is well-funded. The COLA would be equal to the difference between the five-year smoothed investment return and 5.5 percent, calculated to equal no more than 4 percent and not less than zero. The proposed COLA would be applied to the member’s first $25,000 of pension income

An interim COLA would be paid at five year intervals from enactment until the aggregate funded ratio of the Employees’ Retirement System of Rhode Island, the Judicial Retirement Benefits Trust and the State Police Retirement Benefits Trust exceeds 80 percent. In other words, members participating in any of these pension systems would have the COLA return at the same time. The COLA provision was changed from the original proposal given it would have taken 19 years to return.

Said House Finance Committee Chairman Helio Melo, “Addressing the pension liability will do more than stave off an enormous financial burden in the coming years for state and local taxpayers. It will also translate to other savings because it will have a favorable effect on bond ratings as a state and for cities and towns. And, very significantly, it will stabilize and modernize the retirement system so it remains in place for those who will rely on it.”

Senate Finance Committee Chairman Daniel Da Ponte said, “Today’s vote was not easy and should not be celebrated, but it is a vote out of necessity. Today’s vote had to be made to protect the system for current and future retirees, to protect the state’s taxpayers, and most importantly, to protect the state’s economy for future Rhode Island generations. This was not a vote I enjoyed making, but it was necessary in improve Rhode Island’s fiscal health.”

Under the bill, state employees’ overall contribution to their retirement will remain at 8.75 percent of their salary and teachers’ contributions will be reduced to that amount from the current 9.5 percent. Their contributions will be split between the two parts of the new hybrid retirement plan; 3.75 percent of their pay will go towards a defined-benefit pension, and 5 percent will go toward their individual defined contribution retirement account. The state will contribute an additional 1 percent of each employee’s salary to the defined contribution plan. The legislation also reduces the length of time employees must work before they are vested in the pension from 10 years to five. The treasurer’s office has estimated that, under the new hybrid plan, retirees could receive more than 70 percent of their final average salary when they retire, a level that is similar to the retiree benefit under the existing system.

In addition to the reforms included in the legislation, the act amortizes the remaining unfunded liability over a 25-year period. In other words, instead of paying the remaining liability off over the 19 years as is currently scheduled, the act extends that to 25 years.

While the reforms in the act directly impact the plans included in the state-administered Municipal Employees Retirement System (MERS), the reforms do not extend to locally administered municipal pension plans. While many of these plans are also underfunded, their independence and the fact that they are affected by various separate collective bargaining agreements made it difficult to include in these reforms. However, the legislation sets the stage for future reforms to these local plans, requiring these plans to complete actuarial reviews by April 1, 2012. Plans that have funded ratios less than 60 percent would be considered in critical condition and would be required to develop and submit funding improvement plans to a new commission made up of state and local leaders to review and make recommendations.

Information about the bill, as well as video and presentations from the legislative hearings, are available on a special website dedicated to the Assembly’s retirement security effort,
www.pensionreformri.com. A link to the site is also available on the home page of the General Assembly’s Web site, www.rilin.state.ri.us.

House, Senate Finance Committees approve amended pension bill

STATE HOUSE – The House and Senate Finance Committees today approved an amended version of the pension reform bill submitted by Gov. Lincoln D. Chafee and Treasurer Gina Raimondo, allowing for the possibility of intermittent cost-of-living adjustments every five years until the plan is 80 percent funded, moving most employees to hybrid pension plans, increasing the retirement age for those not currently eligible to retire and beginning the effort to move municipal plans toward solvency. The House Finance Committee voted 13 to 2. The vote was 10 to 1 in the Senate Finance Committee.

The bill will now be forwarded to the full House and Senate, which are expected to return to session Thursday, Nov. 17, to debate the bill (
2011-H 6319A/2, 2011-S 1111A/2). The House is scheduled to begin at 2 p.m. and the Senate at 4 p.m.

Passage by the committees follows nearly 29 hours of testimony by fiscal advisors, municipal leaders, union representatives, retirees and citizens over the legislation that aims to stabilize the state pension system.

Finance committees to meet separately on pension bill

STATE HOUSE – The House and Senate finance committees will meet separately on Thursday, November 10, to consider an amended version of the pension reform legislation – The Rhode Island Retirement Security Act of 2011 (2011-H6319), (2011-S1111).

The House Committee on Finance will meet at 5 p.m. in Room 35.

The Senate Committee on Finance will meet at 5 p.m. in Room 313.

Technical amendments and other potential changes to the bill were to be presented to a joint meeting of the finance committees that was scheduled for 3 p.m. Wednesday, November 9, in Room 35 of the State House.

The committee hearings will be aired by Capitol TV (Channel 15 for Cox Communications and Full Channel, Channel 34 for Verizon).

Joint Finance Committee hearing scheduled for Nov. 9 on pension reform bill

STATE HOUSE – The House Committee on Finance and the Senate Committee on Finance will meet in joint session at 3 p.m. Wednesday, November 10, in Room 35 of the State House to receive a presentation from House and Senate fiscal staff, explaining proposed technical amendments and potential changes to the pension reform legislation (The Rhode Island Retirement Security Act of 2011 -- (2011-H6319) and (2011-S1111)).

The hearing will be broadcast live by Capitol TV (Channel 15 for Cox Communications and Full Channel, Channel 35 for Verizon).

Pension reform legislation introduced in Assembly

STATE HOUSE – Pension reform legislation, as proposed by Gov. Lincoln Chafee and General Treasurer Gina Raimondo, has been introduced in the House of Representatives and Senate and referred to the finance committees of the respective legislative chambers.

Introduced in the House by Speaker Gordon D. Fox (D-Dist. 4, Providence) was bill 2011-H 6319 and introduced in the Senate by President M. Teresa Paiva Weed (D-Dist. 13, Newport, Jamestown) was bill 2011-S 1111.

The House and Senate finance committees have scheduled several joint hearings on the bill.

The first hearing has been scheduled for Monday, October 24, at 3 p.m. in Room 35. This will be a fiscal staff presentation and analysis, and the staffs of both Governor Lincoln Chafee and General Treasurer Gina Raimondo are expected to participate. No public testimony will be taken.

Three public hearings before the joint committees have been scheduled for Wednesday, October 26; Thursday, October 27, and Tuesday, November 1, all in Room 35. All the hearings will begin at 11 a.m. The first hearing will focus on teachers, state employees and MERS general employees. The second hearing will focus on MERS public safety, correctional officers, State Police and judges. The third hearing will deal with independent (non-MERS) plans.

House, Senate Finance Committees schedule hearings to deliberate on pension reform legislation

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STATE HOUSE -- The Rhode Island House and Senate Finance Committees will hold joint hearings to begin the process of consideration of the pension reform legislation, introduced today in the respective chambers.

The first hearing has been scheduled for Monday, October 24, at 3 p.m. in Room 35. This will be a fiscal staff presentation and analysis, and the staffs of both Governor Lincoln Chafee and General Treasurer Gina Raimondo are expected to participate. No public testimony will be taken.

Three public hearings before the joint committees have been scheduled for Wednesday, October 26; Thursday, October 27, and Tuesday, November 1, all in Room 35. All the hearings will begin at 11 a.m. The first hearing will focus on teachers, state employees and MERS general employees. The second hearing will focus on MERS public safety, correctional officers, State Police and judges. The third hearing will deal with independent (non-MERS) plans.

Holding rooms will be set up in State House locations in order to accommodate all members of the public who wish to testify.

All the hearings will be broadcast live by Capitol Television, which can be seen on Channel 15 for Cox Communications and Full Channel cable subscribers and Channel 34 for Verizon viewers.

In addition, the General Assembly has established a website to provide the public with information pertaining to the legislation. The website,
www.PensionReformRI.com, contains the legislation, video recordings and PowerPoint presentations of briefings and Finance Committee hearings that have already occurred, and a place for the public to provide input to the General Assembly. The website will be updated to include the recordings of all future public hearings and other related information. A link to the site is provided on the General Assembly website, www.rilin.state.ri.us.

House, Senate to convene to introduce legislation on pension reform

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STATE HOUSE -- The Rhode Island House of Representatives and Senate will convene separate sessions on Tuesday, October 18, at 4 p.m., to introduce pension reform legislation presented by General Treasurer Gina Raimondo and Governor Lincoln Chafee. The bills will then be assigned to the respective House and Senate Finance Committees.

At the conclusion of the two sessions, the House and Senate will meet jointly in the House Chamber to receive addresses by both Governor Chafee and General Treasurer Raimondo.

The sessions will be broadcast by Capitol Television, which can be seen on Channel 15 for Cox Communications and Full Channel cable subscribers and Channel 34 for Verizon viewers.

House, Senate Finance Committees plan third joint pension hearing this week

STATE HOUSE -- The Finance Committees of the House of Representatives and Senate will hold their third joint meeting in as many weeks Wednesday, Sept. 28, for presentations on the state and municipal employee pension plans and related issues.

The hearing is scheduled at 3 p.m. in Room 35 on the basement level of the State House and will be televised live by Capitol TV (Channel 15 for Cox and Full Channel users, Channel 34 for Verizon customers).

The hearing will consist of staff presentations of the issues the state pension advisory group has been discussing. No public testimony will be taken at this time, but will be taken at a later date. It will be co-chaired by House Finance Committee Chair Helio Melo (D-Dist. 64, East Providence) and Senate Finance Committee Chair Daniel Da Ponte (D-Dist. 14, East Providence, Pawtucket).

The General Assembly is expecting to consider pension legislation to be offered by General Treasurer Gina Raimondo and Gov. Lincoln D. Chafee regarding significant funding problems facing the state’s public pension systems.

Treasurer Raimondo to address House

STATE HOUSE -- House Speaker Gordon D. Fox has scheduled an informational meeting for the House for a pension presentation by General Treasurer Gina M. Raimondo.

The meeting, which will be open to the media, will be held Wednesday, Sept. 21, at 2 p.m. in the House Lounge on the second floor of the State House.

The meeting will be followed by the second in a series of joint meetings of the House and Senate Finance Committees on state and municipal employee pension plans and related issues. The Sept. 21 meeting, which will be held at 4 p.m. in Room 313 on the third floor of the State House, will focus on municipal pension plans. The hearings will consist of staff presentations only, and while the public is invited to attend, no public testimony will be taken until later in the process. The hearings will be televised live by Capitol TV, which can be seen on Channel 15 for Cox and Full Channel users, Channel 34 for Verizon customers.

On Sept. 6, the members of the Senate and House of Representatives held a joint briefing on the pension issue, with presentations by Kil Huh, research director of the Pew Center on the States, and Diane Oakley, executive director of the National Institute on Retirement Security. The General Assembly is expected to hold a special session in October to address the pension issue.

House Speaker Fox and Senate President Paiva Weed issue joint statement on pension challenge

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The following is a joint statement from House Speaker Gordon D. Fox and Senate President M. Teresa Paiva Weed on today's court decision to allow a lawsuit challenging state pension reductions in 2009 and 2010 to move forward:

“Today’s ruling is an initial decision on one aspect of litigation relating to reforms enacted in 2009 and 2010. The ruling simply allows the employees to make their full argument to the Court in that matter.

“The Court’s decision to deny summary judgment has no effect on the pension reform discussions scheduled to take place before the Joint House and Senate Finance Committees over the next three weeks. Around the time of the conclusion of those hearings we anticipate receiving a proposal from the General Treasurer’s Office and the Governor that will be vetted by the full General Assembly in October.

“During the special session we anticipate taking whatever action is reasonable and necessary to address the pension crisis confronting the State of Rhode Island.”