PROVIDENCE, R.I. (WPRI) - Retirees are living longer. Investments aren't earning as much as forecast. Inflation is coming in below expectations.
Those and other reasons led Rhode Island's State Retirement Board on Wednesday to approve new, more conservative estimates of the state's pension liabilities that could result in a sharp increase in how much taxpayers and workers are required to contribute to the fund.
The vote was 9-6 in favor of the new estimates. Treasurer Gina Raimondo and two members of Gov. Lincoln Chafee's administration voted to accept the estimates, while representatives of current retirees were among those who voted against.
"It was a very difficult vote," Raimondo said after the meeting, adding that she was "very proud" of the Retirement Board's efforts.
The new assumptions raise the state's unfunded liability for pensions to $6.8 billion, up from $4.9 billion the last time the actuaries reported - an increase of nearly $2 billion, or 39 percent.
Those numbers in turn will drive up the amount taxpayers and workers have to contribute to the pension fund each year, because that amount is based on the size of the unfunded liability. That will put further pressure on state and local budgets.
For example, the amount state taxpayers are supposed to contribute to the fund will increase from $233 million in 2011-12 to $397 million in 2012-13 - a 70 percent increase in one year - according to the figures released Wednesday.
One alternative to that would be to reduce the value of pension benefits for current and future retirees, something both Chafee and Raimondo have suggested may be necessary .
Raimondo declined to address that possibility on Wednesday. "I don't know and that's not my job," she said. "That's the General Assembly."
Chafee said Monday he would not rule out reducing benefits for current retirees and employees already vested in the system if that’s what Raimondo decides is necessary to get it on sounder footing. "We have to fix it," he said.
Raimondo said she will issue a report sometime in the next few weeks outlining the scale of the pension fund problem, and will follow that up with a second report presenting possible solutions for the General Assembly to consider.
Chafee has proposed raising the amount of state workers' paychecks diverted into the pension fund from 8.75 percent to 11.75 percent starting July 1. Unions leaders have opposed that idea, saying it is unfair considering the cuts in benefits already made in recent years.
Ted Nesi ( firstname.lastname@example.org ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog . Follow him on Twitter: @tednesi