I woke up on Friday wondering if news of the passage of pension reform legislation was just a pleasant dream I had experienced in the wee hours of Rem sleep. But in the light of the new day, it was indeed true. Despite many doubts about its ability to muster the fortitude and courage to do so, the RI General Assembly did what it needed to do: pass comprehensive pension reform, and do so in the face of a concerted campaign by labor to turn it aside. It’s an historic achievement.
What it demonstrated was that labor’s usual power to influence the process didn’t have much clout when it came to the all-important pension system matter, and I suspect that most labor leaders knew this even as they rallied their troops for the final battle. After all, even labor-affiliated members of the legislature voted in favor of the Raimondo-Chafee bill. They too knew that we needed to have pension reform now, and that it could not be on the backs of the taxpayers. They did the right thing.
The legislation preserves the core defined benefit pension payment that active and retired state employees and teachers paid into while sacrificing the unaffordable COLA payments which have much to do with the system’s unfunded liability. Considering the fact that the very pension system itself was in danger of collapsing, the COLA trade-off is a fair and necessary compromise. Moving current employees (except those closer to retirement) into a hybrid formula that adds a 401k benefit is also a rational and equitable development that will help ensure retirement security for those still in the workforce. Raising retirement eligibility dates was also necessary, considering longevity and the yardstick used by Social Security. Let us not forget that many middle aged people working in the private sector are having their retirement dates pushed out beyond the age of 65 for the simple fact that they have to keep working.
Labor leaders say that they will mount a legal challenge, and that’s fair game. But they should not expect to find a win and a reversal of the law through the legal system, and that’s because the state will argue that it had a compelling, overriding need to take the actions that it did. When faced with the very real and certain prospect of financial collapse, the state can legally take away a benefit it had previously provided. A Rhode Island high court has already affirmed this right, in the case of East Providence versus its teachers’ union several years ago.
Individual legislators may be rightfully wary of an orchestrated backlash against them come the November election next year. But they may also have calculated that, should they have voted otherwise, their constituents’ response would have been worse. When faced with two unappealing and irreconcilable choices, in politics and elsewhere in life, the best choice comes down to the least threatening of the two.
Now the emphasis and work ahead needs to focus on rescuing municipalities who are drowning in pension obligations. They need state mandated COLA relief as soon as possible. That legislation, which didn’t make it into the law just passed as Governor Chafee and a number of mayors on the hot seat wanted, should be taken up as soon as January. Negotiations with local unions to relieve the COLA pressure won’t work for most cities and towns seeking such voluntary relief, as already evidenced by the Cranston police union’s statement that they will resist any demands against the continuance of their retirees’ COLAs. Again, state provided relief from local COLA payments will be legally challenged and may be more problematic than the state pension’s case because those COLA provisions have been negotiated in collective bargaining agreements, but relief is needed as soon as possible and only the General Assembly can provide that. However, as in the state’s case, the defendants’ arguments will be much the same: taking actions to survive financially under extraordinary pressures trumps a now unaffordable benefit provided to a selected few in better economic times.
For now, congratulations are in order for all elected officials who made comprehensive pension reform possible: from General Treasurer Gina Raimondo and Governor Chafee, to the House and Senate leadership teams, down to the individual legislators who courageously cast yea votes. An embattled state thanks you, for you have confirmed that there’s still hope for Rhode Island.