R.I. Lawmakers Consider Adding ‘Stipends’ To Retired State, Local Employee Pensions
Providence Journal (RI)
May 01-- May 1--PROVIDENCE -- A push is on by a small group of lawmakers to give a pension boost to retired state and municipal employees and public school teachers in years when they do not get a cost-of-living increase.
When the dust settled on the legal fight over the 2011 pension overhaul championed by then-state Treasurer and current Gov. Gina Raimondo, guaranteed annual COLAs had been relegated to history. They were replaced by likely increases every four years that would vary in size depending on how well the state's pension investments had fared in the years leading up to that point.
In 2017, retirees received a small COLA that increased their base pensions by 0.74% on the first $31,318 in pension benefits, which equated to about $231. The next four-year COLA will be in 2021.
If projections hold out, annual COLAs will resume in 2031, when the state-run pension plans for state and local workers and teachers each have enough money in their portfolios to cover 80% of their obligations.
The state is not, however, any nearer now than it was in 2011 to full funding status. In 2011, the state employee and teacher funds, respectively, were 57.4% and 59.7% funded. After reducing the assumed rate of return, a second time, to a "more realistic" 7% in 2017, the state employees retirement fund is currently 53% funded and the teachers plan 55%, according to state Treasurer Seth Magaziner's office.
In legislation debated in a House Finance Committee hearing Tuesday night, Reps. Robert Craven, Michael Morin (a retired firefighter), Carol McEntee and Justine Caldwell propose that "an increasing stipend" be paid retired state employees, municipal employees and teachers or their beneficiaries in years when there is no scheduled cost-of-living adjustment.
Unlike a COLA, a stipend is a payment that does not increase the "base pension" on which future increases are calculated.
Starting in the year that begins Jan. 1, 2020, the legislation would have the state pay a 3% "stipend" on the first $15,000 in pension benefits, a boost of up to $450 initially, in each year in which there is no scheduled COLA payment.
In 2022, the stipend would increase to 3% of the first $20,000 in pension benefits, up to a maximum of $600 a year, and in 2026 it would increase again to 3% of the first $25,000 in benefits, up to a maximum of $750 per year.
Starting in 2030, the proposed increases would be tied to an annual index.
Craven, D-North Kingstown, said he introduced the bill at the request of retiree Roger Boudreau, who at one point led a group of like-minded retirees who did not believe they would ever again see the annual increases they believed they had been guaranteed when they left work.
Craven acknowledged he has not pushed for a cost estimate from the state's pension actuaries, via Magaziner's office -- and will not do so unless and until he gets a sense from fellow lawmakers there is interest in passing the bill.
Asked about the bill's prospects, House Speaker Nicholas Mattiello told The Journal on Tuesday: "It's probably a very big number, and probably a number that we won't be able to address in this particular budget cycle." But he commended Craven for "thinking of our [former] employees who ... have had their pensions cut. I think in some cases it is starting to have a negative impact on quality of life.")
Craven said he introduced the bill out of a belief "everybody should get an opportunity to say their piece ... [and] air their grievances." He said the retirees with whom he has spoken do not believe they will live to see the restoration of annual COLAs.
But there is another side to the debate that two-time candidate for governor Ken Block testified to at the hearing, and that is:
The state pension system right now has roughly the same "level of unfunded liabilities and ... funding level that forced everyone into the pension reform," he told The Journal before the hearing. "In the six years since the pension reform [kicked in], $2.7 billion has been contributed to the state pension system and the stock market has more than doubled, yet the state pension system only has half a billion dollars more in the bank now than it did.
"Two things are abundantly clear from the data: 1) Without the pension reform, the state pension system would be absolutely devastated right now, and 2) The state pension system is not fixed, and is still under substantial stress."
On an annual basis, taxpayers are already required "to substantially increase the size of their contributions to the pensions," he wrote The Journal. "Asking taxpayers to pay 3% stipends to state and teacher retirees is reckless and wrong given the current condition of the state pension system and the remarkable increase in cost to taxpayers to keep the system afloat. Retirees should be thankful that the system is as healthy as it is."
"The General Assembly should reject this bill as unworkable, unwise and unfair," Block argued.
Magaziner spokesman Evan England had this response to Block's comments about the condition of the pension funds:
"The pension system is stronger than it has been in years. One of the ways we ensure we stay on track is to make sure we are using honest and realistic assumptions when calculating the amount the state must contribute to the fund each year. In 2017, the Retirement Board lowered its assumed return from investments from 7.5% to 7%, which made the funded status appear lower, but actually helps keep us on track to reach healthy funding levels on time."
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