After more than five hours of debate, the House of Representatives approved the bill, which Chafee and General Treasurer Gina Raimondo supported, by a 57-15 vote. The Senate approved the House version 32 to 2.
The bill creates a hybrid plan that merges conventional public defined-benefit pension plans with 401(k)-style plans. While some other states have implemented hybrid plans, Rhode Island’s would be the first to affect current employees, according to the Pew Center on the States.
It also includes a suspension of cost-of-living adjustment increases for retirees and raises the retirement age for employees not yet eligible for retirement.
“Tonight’s vote marks a turning point,” Chafee said after the vote. “We are committed to getting our fiscal house in order.”
The state’s pension plan in only 58.7% funded, according to Bloomberg data. On Aug. 1, 19,000-population Central Falls filed for Chapter 9 bankruptcy protection, citing an $80 million unfunded pension liability. Other municipalities and conduit issuers in the Ocean State have sustained bond rating downgrades in the aftermath of the filing.
“No one really wants to be dealing with it, but we had to,” Raimondo said.
Fitch Ratings and Standard & Poor’s rate the state’s general obligation bonds at double-A, while Moody’s Investors Service rates them Aa2.
While providing financial relief for the state, the changes “may set a precedent for other U.S. states,” Fitch Ratings senior director Marcy Block said Friday.