Labor, AARP, firms battle over pensions

PROVIDENCE, R.I. (WPRI) - Union leaders came out swinging against the Raimondo-Chafee pension bill on Wednesday as hundreds of retirees descended on the Statehouse for a marathon hearing about the bill.

"This is the most radical solution that's ever been offered to the pension problem that exists in many states," said Steve Kreisberg, director of collective bargaining for the national American Federation of State County and Municipal Employees union. "We can't simply cancel obligations. It's immoral."

The pension issue has "been characterized by Treasurer [Gina] Raimondo and others as a math problem," said Frank Flynn of the American Federation of Teachers' state chapter. "But right now it's becoming a civil and human rights problem."

• Pensions 101: Your Guide to RI's Crisis

The labor leaders who spoke blasted the bill's suspension of cost-of-living adjustments for as long as 19 years, its proposed increase in the retirement age to 67, and its alleged failure to deal with gender disparities and the lack of Social Security for some workers.

"I think this bill has failed miserably," said Philip Keefe, who leads the Service Employees International Union. "I can't ethically or morally support pension changes" that don't place the same burden on judges as it does on lower-paid workers, he said.

As an alternative, the state should raise its recently reduced investment forecast from 7.5% to 7.75%, lower how long it expects retirees to live and extend the schedule for paying off the pension shortfall to 30 years, said Robert Walsh of the NEA Rhode Island teachers union. The state should also slap a surtax on contractors, said James Parisi of the American Federation of Teachers.

Union leaders also said they are now open to increasing current workers' paycheck contributions to the pension fund if it avoids some of the cuts proposed by Raimondo and Gov. Lincoln Chafee. They had opposed an increase in contributions last spring when Chafee included it in his budget proposal, and lawmakers removed it.

Others spoke up in favor of the bill. Moderate Party founder Ken Block, who ran for governor last year, argued Rhode Island needed to approve a plan to resolve the pension funding problem once and for all. Representatives from the lobbying group Engage Rhode Island said they hoped to see the bill pass largely as presented to lawmakers.

"if we don't fix this, the wet blanket that sits on top of Rhode Island's economy will never be lifted off," Block said. "We need to fix this mess. We have to stop passing this problem down generationally."

The hearing, which kicked off at 11 a.m., is expected to last into the evening. Dozens of people on both sides of the issue - but mostly opponents - were already signed up before noon to testify for and against the bill at Wednesday's joint finance committee hearing.

Experts and union leaders were set to speak first, with public testimony from dozens of people to follow in the afternoon, including Bank Rhode Island CEO Merrill Sherman and other business leaders, as well as many rank-and-file workers and retirees.

Sen. Edward O'Neill said members of the General Assembly have been "bombarded" with telephone calls from their constituents about the pension bill in recent weeks. Separately, Chafee postponed a planned trade mission to Israel that had been scheduled for next month in order to stay in Rhode Island for the pension debate.

William "Flick" Fornia, an independent pension actuary hired by the unions, argued that the proposed reductions in benefits are "Draconian" and that the more pessimistic assumptions Raimondo got the Retirement Board to approve in April weren't in the interest of taxpayers.

The state's actuaries are projecting that mortality will continue to improve down the line, which is not a common practice, Fornia said. "Maybe it's time to sharpen your pencils and think through some of these things more," he told the lawmakers, suggesting they drop many of the treasurer's core ideas.

The numbers brought forth by Raimondo and the actuaries are "making it harder to fix your problem," Fornia said. The state could save more than $150 million just by stretching out its schedule for paying off the unfunded pension liability from 19 years to 30 years, he said, a proposal opposed by fiscal conservatives in the General Assembly.

Block of the Moderate Party later called Fornia's testimony "outrageous" because of his suggestion that future taxpayers can be left to deal with the consequences of potential increases in retirees' lifespans. "It's that kind of pass-the-buck attitude that got us into this problem in the first place," he said.

The bill calls for a redesigned COLA only in years when the pension fund grows by more than 5.5% rather than the rate of inflation in the economy. That means "even a moderate rate of inflation could reduce the purchasing power of a pension of a retiree by 30% or more," said George Mackenzie, AARP's senior policy advisor on pensions.

In response, House Finance Committee Chairman Helio Melo said he'd received a phone call Wednesday morning from a retired woman who said she hoped the pension bill would pass because it would hold down property taxes and help her family keep her home.

Mackenzie acknowledged taxes might need to rise if the current pension system is retained, but said: "It's not our desire to take a burden from one vulnerable group of people and stick it on the backs of others." He also questioned whether Rhode Island should scrap full pensions just because the private sector has.

"Because this has happened in the private sector, which I think is very unfortunate, should it happen in the public sector as well?" he asked lawmakers. "Is it somehow undeserving of public-sector employees to continue benefitting from what is a very, very valuable form of security in retirement?"

Other lawmakers questioned whether AARP's Rhode Island chapter was really representing the interests of all retirees, as opposed to only those who receive a state pension, which Senate Finance Committee Chairman Dan DaPonte noted "is not an overwhelming majority of the retiree population."

Rep. Joy Hearn asked Kathleen Connell, AARP Rhode Island's executive director, whether she would be comfortable with her members having to pay higher property taxes to put more money into the pension fund. But Connell said that is an "apples and oranges" comparison.

Walsh of NEARI warned lawmakers that passing the Raimondo-Chafee proposal would not mean this is the last time they will deal with pensions. "If you pass this bill intact ... our colleagues are going to be here every single year to address the damage that was done," he said.

Gary Gentile, a lawyer for the International Brotherhood of Police Officers, said the proposed changes will be struck down by the courts as an illegal violation of a contract, noting that a Rhode Island Superior Court judge already ruled in the unions' favor just last month.

One retired educator, James Bedell, pointed out that those who've already finished their careers cannot take back the work they did even though the pension bill would change the terms of their compensation retroactively.

Colleen Pigott, a 27-year-old teacher at Deering Middle School in West Warwick, said the bill would reduce her pension for the fourth time in the six years since she started teaching and would reduce by half the original benefit she was offered.

"The clear inequality of the proposed bill is infuriating," Pigott said, adding that pensions are "a large part of the reason" many young people go into teaching and that teaching is a "physically and mentally demandng" job that would be difficult if not impossible to do up to age 67.

The proposed bill would still allow workers to retire up to five years before the age when they can collect a full Social Security benefit, which is 67 for those born in 1960 or later, but their benefit would be reduced by roughly 6% for each year away from Social Security eligibility they are.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi