Rhode Island General Treasurer Gina Raimondo is opposing an attempt by Gov. Lincoln Chafee to reduce a $2.6 million taxpayer obligation to the pension fund.
Chafee’s proposed budget for fiscal 2012-13 includes a provision to nullify a law passed in 2005 that requires 20% of taxpayer savings be appropriated to the pension system in any year when the state continuation decreases.
Raimondo — who last year shepherded landmark legislation that overhauled the pension system for public employees — said her office promised that provision would stay intact when the pension bill was under negotiation.
“As a matter of principle, we should keep that provision. We were quite explicit about that when we were crafting the pension reform legislation,” Raimondo said during a recent visit to The Bond Buyer’s Manhattan office. “When I talked to state employees and teachers last year, I said this is the last time we’ll do it. I said, 'We’ll do it once, and I know this is hard.’ ”
Raimondo also voiced her objections in a letter to Helio Melo, D-Providence, chairman of the House Committee on Finance. Chafee’s measure, she said, “offers only modest budgetary savings while delaying our efforts to return the pension system to a healthy funding level.”
She added: “Last fall, there was a consensus that meaningful reform would not only address the pension funding issues, but also set a strong precedent for responsible policymaking with regard to this issue.”
Rhode Island’s pension overhaul bill, which will take effect July 1, will create a hybrid plan for state employees that merges conventional public defined-benefit pension plans with 401(k)-style plans, among other changes. TIAA-Cref will administer the plan.
Chafee two weeks ago introduced parallel legislation to enable the state’s distressed cities and towns to seek pension relief. Public-sector unions are expected to challenge those measures in court.
Capital city Providence on Monday received its second rating downgrade in 13 days, when Moody’s Investors Service lowered its general obligation bond rating to Baa1 from A3. On March 14, Fitch Ratings dropped Providence three notches to BBB from A. Both agencies have assign negative outlooks.
Officials expect the state to shrink its unfunded pension liability to $4.3 billion, a 41% reduction, and raise the funding level for its defined benefit plan to 59.8% from 48.4%.
The Pew Center for the States considers 80% a suitable benchmark for pension funding. Rhode Island’s plans are expected to achieve 80% funding in fiscal 2032 for state employees and fiscal 2030 for teachers.