To the Editor,

An open letter to Speaker Shekarchi,

In November of 2011, the General Assembly enacted the Rhode Island Retirement Security Act of 2011 (RIRSA). According to the Economic Policy Institute, the new legislation represented the worst of both worlds for state workers. RIRSA actually lowered benefits for state employees and teachers and introduced more risk.

At the time, it was claimed that the redesign of the state pension system (ERSRI), would save taxpayers at least $4 billion over the next 25 years. However, in its first four years then General Treasurer Raimondo’s flawed investment strategy cost the pension system approximately $1.4 billion in foreseeable losses. (Forbes July 2015)

In other words, during the former Treasurer’s tenure, gambling in alternative investments cost ERSRI stakeholders almost $1 million a day. Total preventable underperformance losses identified amounted to nearly $2 billion. (Forbes July 2015)

After 12 years without any substantive Cost of Living Adjustment (COLA) RI retirees were mobilized to act by a small retiree group, Advocates for COLA Restoration and Pension Reform.

It should be noted that during the period since RIRSA was enacted, inflation increased over 36% while their pensions had remained relatively stagnant. Many retirees in the ERSRI do not have Social Security, hence they were especially hard hit.

In December of 2023, in Testimony before the Pension Advisory Working Group (PAWG), Rep Pat Serpa noted that "This is the year to help the retirees. This is their turn. It's not hyperbole, but I've heard of some retired teachers, some who've never paid into Social Security, some who don't have the benefit of a husband's pension or Social Security who are borderline homeless."

"A couple of teachers I've heard from are eligible for food stamps. That's sinful," she said, making a case for taking an initial $30 million out of the $11-billion Pension Fund to provide retirees with COLAs just to keep pace with inflation.

As result of testimony before the PAWG as well as posts on social media, advocates launched an active campaign to educate the General Assembly as to what was happening to elderly retirees in the ERSRI! They fired off emails and letters to state legislators to remind them of what they lost in 2011 in the name of "pension reform," and what was needed now. Many detailed their personal stories and current hardships.

Rep Serpa arranged a meeting of five leaders of advocates with House Speaker K. Joseph Shekarchi, his legal counsel and the House policy adviser to explain the dynamics behind the COLA request and provide data regarding the disinformation / misinformation regarding the pension fund that seemed prevalent at the State House.

Although the Speaker made no promises, he "was very engaged. He knew the subject intimately. ... He asked questions." What was originally scheduled to be a 20-minute meeting lasted almost an hour and 20 minutes as advocates, despite the fact that he had others waiting to see him and by all accounts was the turning point in the effort to restore COLAs. Not only did the Speaker listen to the advocates' leadership team, he heard them!

Retirees faced opposition in this effort, as did the Speaker himself from both General Treasure Diossa as well as the "unions" that were intent on impeding any forward movement for retirees whose average age is in the mid-70s. For example, the 80% funding threshold that the Speaker changed to 75% only has a 54% chance of reaching that level by 2031!

Many Retirees believed that they faced an impossible task as little had changed since 2011 and they had given up hope... Suffice it to say, Speaker Shekarchi, went out on a limb for these Elderly Rhode Islanders.

One member of the advocates leadership team recently noted, "For six people with absolutely zero money, we accomplished something positive for these retirees!" Something many of the “unions” and their retiree “affiliates” with their funding and lobbyists had been unable to do over the past 12 years.

After the unanimous passage of Art 12, Restoration of COLAs for Pre-RIRSA Retirees, Jim Hummel noted "Congratulations... You moved the Needle!”

After the House Vote, many Representatives rose in support of Art 12 and commented that this was only the first step.

The following was sent to Speaker Shekarchi on 8 June following the unanimous vote in the House to restore COLAs to approximately 19,000 retirees who had not seen any substantial change to their pension in over 12 years!

Speaker Shekarchi, just a brief note to express our gratitude for your efforts on behalf of elderly ERSRI retirees and active members this legislative session.

Your guidance and comments were instrumental in mobilizing advocates to join in our effort to educate members of the General Assembly and move them to act on behalf of this group!

As advocates pointed out, the pension advisory working group’s “report” did NOT really comply with the tasking of the enabling legislation and left too many questions unanswered.

As PAWG Committee member Edinaldo Tebaldi pointed out in an Op-Ed in the Boston Globe, “Rhode Island's 2011 pension overhaul is a stark reminder of the need for time-consistent policies, financial sustainability, and empathy.

The 2011 reforms were necessary… however, the reforms inflicted hardship on many retirees. It is imperative that policies are not only responsive to immediate fiscal challenges, but also flexible enough to adapt to evolving economic conditions and demographic shifts over the long term.

The pension crisis resulted from poor policymaking and neglect of demographic and financial realities by those who managed the system…”

The above excerpt is included here as I believe you and many members of the House understand what has occurred over time to those elderly retirees, struggling to survive in the current economic environment, especially those who are without the support of Social Security! (two-thirds of RI school districts!)

From my perspective, you not only listened to us, but you heard what they were telling you in their emails. Thank you on behalf of ALL of them….

Like me and the other members of the Advocates’ Leadership Team, you are probably experiencing negative feedback from Post 2011 retirees. That being said, you listened when we stated that they were the ERSRI members most in need. As many members of the House stated, this is only the first step!

In my opinion, your actions were in line with what I often call the “reasonable man” concept, i.e. what would a “reasonable man” do under similar circumstances given limited resources. I understand attorneys refer to it as the “prudent person” doctrine.

From my perspective, you demonstrated the “Wisdom of King Solomon” and over 4,800 advocates recognize this. Your empathy, as Prof Tebaldi calls it, for these elderly, is recognized and deeply appreciated. Your efforts will hopefully restore COLAs to approximately 19,000 ERSRI Retirees.

I’ll end with an additional excerpt from Prof Tebaldi’s Op-Ed that you might want to reference in the future’

“Financial sustainability, the keystone of any public policy, is paramount in retirement systems. The financial challenges faced by the Employee Retirement System of Rhode Island in the late 2010s underscore the delicate balance inherent in reconciling fiscal prudence with the well-being of retirees. While the success of policy interventions in achieving financial goals is commendable, the personal costs borne by retirees signal the need for an approach that both aligns with economic principles and is socially fair. Public policies must avoid over-promising and under-delivering, which can inflict lasting pain on current and future generations.

It is imperative that policymakers cultivate empathy in understanding the costs of policy changes in individuals' lives. The impact of reforms, including adjustments to pension benefits, must not be underestimated. Policies should be meticulously crafted with a profound understanding of the people relying on the retirement system, recognizing the commitments made and the expectations held. Transparency in communication, fairness in implementation, and a proactive approach to addressing challenges are essential to empathetic policymaking”

As we say in the Navy, “Bravo Zulu”!

Aldo Palazzo, CDR USN (Ret)
West Warwick