Rhode Island’s pension overhaul legislation, signed recently by Gov. Lincoln Chafee, is a credit positive, according to Moody’s Investors Service.

“It reduces unfunded pension liabilities that are among the most burdensome in the U.S., alters the structure of retirement benefits for current employees, and breaks new ground in efforts to rein in public pension costs,” the rating agency said.

The legislation reduces Rhode Island’s share of the pension system’s unfunded liability to $2.7 billion from $4.4 billion, according to the General Assembly.

It cuts the state’s fiscal 2013 general fund contribution to $177 million from $305 million, which represented about 10% of the budget.

Unions, however, are expected to challenge the new law in court.

Moody’s rates the state’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s assign an equivalent AA.

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