The Rhode Island Retirement Security Act (RIRSA) was an important step toward providing retirement security for our public employees and putting our state on a path to prosperity, while significantly improving the funding status of our state pension system and saving taxpayers approximately $4 billion over the next two decades.
The state pension crisis presented a difficult set of choices and required tough decisions, but bold changes were necessary to secure Rhode Island’s future and ensure pension benefits are there for our valued public employees. The General Assembly membership courageously voted overwhelmingly to pass RIRSA.
Another pension crisis looms, however, in the 36 locally-administered pension plans that are independent of the state system. Swiftly placing these plans on a healthy path is critical to the future prosperity of our state.
Collectively, the locally-administered plans have a reported unfunded liability of approximately $2.1 billion, and funding level of only 40 percent. These figures are unacceptable to the retirees and employees who rely on their pensions, and to local taxpayers who face escalating costs.
Unlike the state-administered system, which is governed by statute, most of these local plans are determined by collectively-bargained contracts. The local plans each have unique situations, varying widely in their design, funding status and membership.
RIRSA addressed municipalities in two important ways. First, the reforms to the state-administered system will save cities and towns about $1 billion over the next two decades as well as about $100 million during fiscal year 2013.
Second, RIRSA set out a path with requirements for cities and towns to follow as they work through reforming their own plans.
As treasurer, I have no specific authority over these plans, but I am fully committed to addressing the challenges associated with the locally-administered pension plans and to serving as a resource to cities and towns as they develop comprehensive solutions.
Since January, I have been working with municipal leaders to share guidance on best practices and discuss how they can structure their process and use their actuaries. Treasury launched an online toolkit, based on the RIRSA process, which municipalities can utilize as they assess their situation and craft their solutions. We also hosted two working sessions to help guide their work. Treasury’s door remains open.
RIRSA appears to be working. Municipal leaders are meeting the deadlines, analyzing their plans and in some cases already taking action. The April 1 deadline for experience studies and revised actuarial assumptions was met by almost all locally-administered plans. Municipalities with plans in “critical status” are notifying all recipients that they are members in an underfunded plan, and the work of developing comprehensive remediation plans is underway.
As municipal leaders concentrate on replicating the efforts and process that led to RIRSA for their own struggling pension plans, your representatives and senators in the General Assembly should be commended for providing municipal relief under RIRSA and laying out a process for communities to create fair and balanced retirement systems that provide affordability, sustainability and security to retirees, employees and taxpayers. Also commend your local government leaders for taking action and continue to encourage them through this challenging process.