Rhode Island's proposed settlement to pension overhaul lawsuits is a credit positive because it "removes a lingering source of fiscal uncertainty," said Moody's Investors Service.
The settlement, announced by Gov. Lincoln Chafee, General Treasurer Gina Raimondo and public sector unions on Feb. 14, scales back some provisions of Rhode Island Retirement Security Act, a 2011 law that reduced benefits for active employees by shifting them to a hybrid system combining defined-benefit and defined-contribution plans, and limiting cost of living adjustments for retirees, among other changes.
Public-sector unions, state lawmakers and Rhode Island Superior Court Judge Sarah Taft-Carter must sign off on the deal.
The settlement, if it materializes, would require state and local governments to pay more into the pension system than the original pension overhaul bill.
But Moody's said the additional costs - in 2016, $13 million to the state government and $11 million to local governments, are a small fraction of the estimated $400 million in 2016 annual savings and less than 1% of the state and local governments' annual revenues.
Moody's rates Rhode Island's general obligation bonds Aa2. Standard & Poor's and Fitch Ratings rate them AA.
Fitch last week also called the proposed deal a credit positive.