Pension settlement dead; both sides prepare for trial

Daniel Kittredge
Posted 4/11/14

A proposed settlement has been scrapped, mediation has ended and the legal battle is set to go to trial, it was announced Friday.

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Pension settlement dead; both sides prepare for trial

Posted

The effort to resolve multiple lawsuits challenging state pension reform is back at square one.

A proposed settlement has been scrapped, mediation has ended and the legal battle is set to go to trial, it was announced Friday.

“Due to a small group of union members the settlement agreement has failed and the mediation process has ended. We find this disappointing and frustrating,” reads a joint statement from Gov. Lincoln Chafee and General Treasurer Gina Riamondo. “While we are disappointed this settlement was not ultimately able to come to fruition, we continue to believe that the pension changes enacted by our General Assembly are constitutional, the state has strong legal arguments to support its positions and will begin to prepare for litigation.”

“The plaintiffs abided by the judge’s order to explore a path to a new settlement agreement, but the state decided it would rather pursue costly and drawn out litigation rather than reach a reasonable agreement to guarantee stability and predictability to the pension system,” reads a statement from Ray Sullivan, a spokesperson for the plaintiffs. “We are now prepared to take the necessary steps in proceeding to trial.”

The closed-doors federal mediation process, ordered by Superior Court Judge Sarah Taft-Carter, had sought to resolve six legal challenges to pension changes made in 2009, 2010 and 2011. On Valentine’s Day this year, Chafee, Raimondo and attorneys representing unions and retirees had unveiled a proposed settlement and a multi-tier approval process.

On Monday, it was announced that one of six blocks of public employees and retirees – police – had rejected the settlement in the initial voting process. Under the approval process outlined in February, the settlement would fail if more than 50 percent of any of the six blocks rejected the deal.

At that point, it was announced that the parties had been ordered to return to mediation, with a follow-up appearance before Taft-Carter scheduled for April 14.

The other blocks included teachers, retirees, state workers, municipal workers and fire personnel. The approval process would have required a fairness hearing and judicial review, the granting of new class action status to the plaintiffs, an additional vote by public union members and retirees and the backing of the General Assembly.

The trail date before Taft-Carter has been set for Sept. 15.

The pension issue has been contentious, and its financial implications for the state enormous. State Director of Administration Richard Licht in February said the deal would have left the state’s total unfunded pension liability at approximately $5 billion, up from the roughly $4.8 billion at which it stood under the 2011 Rhode Island Retirement Security Act. Before that law, he said, the unfunded liability was approximately $8.9 billion.

The settlement would have result in an approximately $232 million increase in the unfunded liability, and figures provided by the parties involved indicate the state’s share would have been roughly $123 million, while the share for municipalities would have totaled approximately $109 million.

The settlement would not have impacted planning for the coming fiscal year, but for fiscal year 2016, which begins in July 2015, the deal would have resulted in a combined estimated increase of $24 million in pension liability for the state and municipalities.

Those projected increases drew sharp criticism from some, including Republican gubernatorial candidate and Cranston Mayor Allan Fung, who on the day of its announcement urged lawmakers to reject the deal.

“If the governor and general treasurer believe the state would be successful in litigation, then why settle for an additional quarter of billion dollars in new unfunded liabilities and $24 million in increased operating costs to the taxpayers? Why not fight for the taxpayers and the cities and towns? This is simply outrageous,” Fung said after Monday’s announcement of the police block’s rejection of the deal.

Others, including union members and their supporters, had also criticized the terms of the deal, arguing that it left too much of the 2011 law intact.

Chafee, Raimondo and other backers of the settlement had argued the settlement preserved the vast majority of the 2011 law, and that action was needed to stave off financial ruin for the state, preserve pensions for state workers and avoid a costly and unpredictable legal process.

Chafee and Raimondo in their Friday statement reiterated their stance.

“The proposal announced on February 14 retained the structural elements of the Rhode Island Retirement Security Act of 2011, and maintained 95 percent of the necessary savings for taxpayers. It also offered immediate benefits, certainty and predictability for our public employees and retirees. We believe this proposal was fair for our public employees, retirees, taxpayers and cities and towns. It was also well received by the various rating agencies,” the statement reads.

“We would like to commend and thank the plaintiff union leaders that worked closely with us over the last year to reach this settlement. And we would like to thank the large majority of their members who were willing to go forward with us to avoid lengthy and costly litigation.”

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  • LORAXT10

    The "vote" report is bogus. The process was a joke. 70% of the effected groups did NOT vote "yes". Nearly 100% of those who bothered to send in a ballot voted "no". Pretending that everyone who didn't/couldn't send in a ballot was a "yes" vote does not make it true. The spin being put on this by the state and "Gina" is a flat out lie and everyone who understands what is being done to public employees knows it.

    Friday, April 11, 2014 Report this

  • rtwhit55

    Should have reps from Afghanistan oversee the vote. They did a better job in their recent election.

    Friday, April 11, 2014 Report this