PROVIDENCE, Rhode Island (Reuters) - A major overhaul of Rhode Island’s pension system for public sector employees passed in both houses of the state’s Democratic-controlled General Assembly on Thursday in a special session.
Although the legislation passed overwhelmingly -- 57-15 in the House and 34-2 in the Senate -- lawmakers expressed distaste even as they voted for the measure, aimed at addressing rising pension costs.
“It may be necessary, but it’s certainly not fair,” said House Deputy Minority Leader John Savage, a Republican.
The legislation, called the Rhode Island Retirement Security Act, would suspend cost-of-living adjustments for those collecting state pensions and raise the retirement age for most employees.
It would also set up a hybrid system for state employees and teachers, mixing a traditional pension with a retirement account similar to a 401k. The bill is unusual in that it affects current employees and retirees as well as new hires.
Governor Lincoln Chafee and General Treasurer Gina Raimondo wrote the bill to address skyrocketing pension costs.
Without changes, Raimondo’s office expected taxpayer costs for pension plans would double to $600 million next year before ballooning to more than $1 billion a year in just over 10 years. Raimondo’s office also worried that pension obligations could lead to downgrades for state and municipal bond ratings.
Many states are wrestling with rising pension costs, but Rhode Island’s situation is among the worst in the nation. According to research from the Pew Center on the States, Rhode Island is one of only two states to have less than 50 percent of the funding needed to cover benefits that public sector employees have already accrued.
Opponents of the bill cited worries that raising retirement age for public safety workers would increase on-the-job injury, or that suspending cost-of-living adjustments for already strapped retirees would drive them to take advantage of state social services, creating financial strain elsewhere.
The bill that passed did not address an area that Chafee, an independent, considered a key concern. There are 24 towns and cities in Rhode Island that administer pension plans independent of the state, and many of those are less funded than state plans.
Editing by Cynthia Johnston and Peter Cooney