PROVIDENCE, R.I. (WPRI) - Retired judges and state police officers' cost-of-living adjustments won't be suspended under the Raimondo-Chafee bill because most were never forced into the regular state pension system.
That was just one of many details about the legislation that emerged Monday when the House and Senate finance committees kicked off their joint hearings on the pension overhaul proposed by Gov. Lincoln Chafee and Treasurer Gina Raimondo, who testified at the hearing.
The legislation would reduce the state's pension shortfall from $7.3 billion to $4.1 billion, and 77 percent of that reduction comes from a proposed suspension of cost-of-living adjustments, or COLAs. Without changes, pension contributions would use up nearly 10 percent of state revenue by 2015-16.
The "comprehensive, one-time pension reform" proposed in the bill would share the sacrifice and steady the state's finances, Chafee told the assembled lawmakers. "I think we've done that," he said.
"I believe if you pass this bill it will be the last time you are here dealing with pensions," Raimondo said, adding that her office has run hundreds of stress tests to check its design.
Raimondo argues that retirees can handle the extended loss of their COLAs. "The majority of state employees and teachers are making more in retirement than they were when they were working," she said.
More than half of retired teachers and nearly half of state employees earn more from their pensions than the average salary they made in their final working years, her office said. That does not include Social Security benefits, which all state retirees and half of retired teachers receive.
The average age of a retired teacher getting a pension in Rhode Island is 63.7 years old, according to the House and Senate fiscal advisors. The average age for a retired state worker is much higher, at 71.7 years old.
"This reform is designed to provide relief and sustainability for taxpayers and young employees," who "bear all the burden" under the current system because of its huge liability for past workers, Raimondo said.
Under the legislation, COLAs would be suspended for state workers and teachers until their specific pension funds reach 80 percent funding, which is expected to take until 2032 and 2029, respectively. Those funds include all retirees and active workers.
But the troopers' and judges' pension funds that were created in 1987 and 1990, respectively, do not include anyone who worked in those jobs during the prior years.
That means the troopers' and judges' funds are in strong financial shape, because they aren't carrying an unfunded liability for past promises. They will be more than 80 percent funded immediately if the Raimondo-Chafee bill passes, which means COLAs won't be suspended for any judges or troopers.
However, the legislation also changes the COLA formula for all retirees - including state police and judges - so that increases are only granted in years when the pension fund grows by more than 5.5 percent. It's unclear if that threshold will be met - and therefore if a COLA would be granted - next year.
House Finance Committee Chairman Helio Melo asked Raimondo and her staff to gather additional data to determine the unfunded pension liability for the judges and state police hired before those years.
On Tuesday, a state police official told WPRI.com the treasurer's office was incorrect Monday in testifying that state police officers receive Social Security benefits.
Raimondo said passing the bill - or failing to do so - has "enormous implications for Rhode Island's economy." If the General Assembly does not pass a version of the legislation, the state's borrowing costs are likely to increase, she said. Passing it will help attract jobs and investment, she argued.
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Chafee said he's open to changes to the separate section of the bill dealing with locally run pension plans, which he described as a compromise. "I encourage you to look favorably" on amendments proposed by mayors and town managers, he said, but ensure that those plans are addressed in the final legislation.
"I do not want to see what happened in Central Falls, to those retirees, happen in any other community," Chafee said.
Part-time state employees would no longer be allowed to earn a pension if hired after June 30, 2012, under the bill; they must work full-time, which is defined as 35 hours a week. Teachers must work 180 days or more to be eligible for a pension if hired after June 30, 2012.
The bill would also create an 11-member study commission to look at ways of dealing with cities and towns' $3.6B liability for retiree health care .
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