Long road ahead for pension deal
State and union officials have unveiled the parameters of a settlement that would resolve court challenges to Rhode Island’s landmark pension overhaul legislation, although the plan faces several hurdles – and some strong opposition – before being enacted.
“This is going to be a long process … [but] today is a very, very good day,” said Gov. Lincoln Chafee during a Valentine’s Day press conference.
“We believe this proposal is fair for our public employees, retirees, taxpayers and cities and towns,” reads a joint statement from Chafee, General Treasurer Gina Raimondo and attorneys for the unions and retirees involved in the litigation.
The deal would keep in place much of what was included in the 2011 pension overhaul championed by Raimondo and approved by the General Assembly. An outline provided by the parties involved in the negotiations states the settlement “retains structural elements” and “preserves 95 percent of the savings” from that law, known as the Rhode Island Retirement Security Act, or RIRSA.
The primary changes in the proposal involve cost-of-living adjustment, or COLA, and retirement age calculations. Full details regarding the settlement are available online at www.ripensioninfo.org.
State Director of Administration Richard Licht said the deal would leave the total unfunded pension liability at approximately $5 billion, up from the approximately $4.8 billion at which it stood under the RIRSA. Before the 2011 law, he said, the unfunded liability was approximately $8.9 billion.
The settlement would result in an approximately $232 million increase in the unfunded liability. Figures provided by the parties involved indicate the state’s share of that liability would be roughly $123 million, while the share for municipalities would be approximately $109 million.
The settlement would not impact planning for the coming fiscal year, but for fiscal year 2016, which begins in July 2015, the deal would result in a combined estimated increase of $24 million in pension liability for the state and municipalities.
The proposed deal would in fact settle a total of six lawsuits, which challenged 2009, 2010 and 2011 changes to Rhode Island’s pension laws.
Both sides in the matter said they continue to have faith in their respective legal cases but framed the agreement as providing certainty in the face of a legal process that would likely prove lengthy and costly.
Raimondo said the proposed settlement represents a “practical solution” that “will allow us to move forward with certainty.”
“It’s math, not politics,” she said, echoing a common refrain from the original push for the pension overhaul.
While some public employees and retirees have criticized the proposed settlement as not going far enough in rolling back the provisions of the 2011 law, Lynette Labinger, lead counsel for the plaintiffs, said the deal “provides certainty, and it’s [provided] now.”
“That’s what the settlement is about ... [unions are] guaranteed something that is of value,” she said.
Licht echoed that sentiment from the state’s perspective.
“This isn’t about caving, this is about reaching an agreement … We have $4 billion at stake, and this is affordable, final and predictable,” he said, suggesting the case would ultimately end up in the U.S. Supreme Court if litigation were to continue.
Others, however, assert the proposed deal is unacceptable for the state’s cites, towns and taxpayers.
“What are we going to do, re-mortgage the house again?” said Cranston Mayor Allan Fung in a statement released almost immediately after the start of Friday’s press conference. “The taxpayers of our local cities and towns cannot afford any increase into the public-pension system. The only way to raise this additional revenue is on the backs of the taxpayers of Rhode Island.”
Friday’s announcement came at the end of a week in which much uncertainty – and criticism – surrounded the settlement talks, which began last year through a court order and took place behind closed doors under the direction of federal mediators. A Feb. 12 press conference had initially been scheduled but was canceled without explanation. It was also announced that Judge Sarah Taft-Carter has set a Sept. 15 trial date in the matter, although it is unclear if the proposed settlement will impact that timeframe.
Officials involved in the talks discussed the deal Friday after a 6-1 vote of the Rhode Island Retirement Board in favor of the pact. The sole vote against the settlement came from Dan Beardsley, executive director of the Rhode Island League of Cities and Towns.
Under the approval structure put in place, six separate blocks of union members – teachers, state employees, municipal employees, firefighters, police and retirees – would need to approve the settlement terms. The deal would fail, and litigation would continue, if more than 50 percent of any block opposes the agreement.
Labinger stressed that the voting will not be done on a “local by local” basis, with the various community-level union chapters, instead voting collectively with their respective block. The settlement will be presented to those blocks for approval within 60 days.
The court’s involvement would then be needed, with the first step being the amendment of the complaints to designate the plaintiffs as a class. The blocks would then vote again within a 45-day window, with the same criteria for passage in place. If the settlement were again supported, it would go back before the court for a fairness hearing and judicial approval.
Lawmakers would also need to back the settlement, without amendment, for it to take effect.
“We have a long way to go, but we have a defined process,” said Labinger.
As part of the settlement agreement, all of the parties involved have agreed to support the plan throughout the approval process.
Fung, in his statement, said he will personally lobby lawmakers to reject the settlement, and called on other Rhode Islanders to do the same. He also accused Raimondo of engaging in “political games with our pension fund.”
“I urge every resident in the state of Rhode Island to call their representative and senator and tell them to reject any new legislation that will add additional costs, whether it be next year or further in the future, to the taxpayers of Rhode Island,” he said.
The group Rhode Island Taxpayers has also come out strongly against the settlement.
“This is a bad deal for taxpayers. But pragmatically speaking, it’s also a bad deal for legislators who would have to figure out how to fund it from a sea of red ink,” said Monique Chartier, a spokesperson for the group. “And what about the added burden for cities and towns? Some municipalities can’t even make their current pension contributions!”
It was additionally announced Friday that Cranston’s police and fire unions have opted out of the settlement.
Cranston Firefighters Local 1363 of the International Association of Fire Fighters, in a statement, said it “congratulates those parties that have reached a settlement, and will continue to work with state and local officials to reach an acceptable resolution for Cranston, which may include withdrawing from MERS and establishing a private pension.”
Paul Valletta Jr., president of the Cranston firefighters union, in the statement outlined the rationale for electing not to participate:
“There are three reasons we decided to pursue the lawsuit on behalf of our members. First, Cranston firefighters renegotiated certain pension benefits in 1995, and these benefits were
codified in our collective bargaining agreement and state law. Second, our members pay one of the highest contributions (by percentage of salary) into the Municipal Employees Retirement System (MERS), including an extra payment for COLA, so we shouldn’t have to base the COLA on future funding and risky investment returns. Third, we believe we continue to have strong contractual language that protects our pension.”
Cranston recently finalized changes to its private pension system for fire and police personnel, which serves those hired before 1995. The reform was widely supported but was challenged legally by some personnel and retirees. Officials have said the changes resulted in $6 million in immediate savings for the city, and will allow for controlled costs going forward.
“We’d appreciate the same opportunity to sit down and negotiate a fair pension for our MERS members while keeping in mind there must be an overall savings to the city,” said Valletta. “I’m optimistic of a fair resolution for all involved.”
Cranston’s police union, International Brotherhood of Police Officers Local 301, declined to comment on the settlement issue.