Special Session 2011: Business Leaders Demand Pension Reform
Thursday, September 08, 2011
As state lawmakers delve in to a special fall session designed to reform the pension system, top business leaders are expressing concern over the national perception of Rhode Island and saying it’s now or never when it comes to changing minds.
A Washington Post article this week put the state and its nearly $7 billion unfunded pension liability on full display for the rest of the country, a damning sign that suggests even as many states struggle meet pension obligations, Rhode Island’s problems may be more severe.
Back home, top union officials argue that the state’s pension system was funded at a healthy level a decade ago and that its problems coincide directly with the state slashing benefits and failing to make full contributions to the pension system.
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But the time for pointing fingers is over according to many business leaders, who say getting the state’s financial house in order is essential to repair its national reputation.
Keith Stokes, Executive Director of the Rhode Island Economic Development Corporation, said addressing the pension system will lower the cost of doing business in the state. He said state officials are leading the effort to tackle the problems.
“Sustainable pension reform will allow Rhode Island to make needed investments in education, transportation/infrastructure, and lowering the overall cost of doing business,” Stokes said. “These priorities are key to Rhode Island’s economic recovery and future prosperity. When looking to expand or relocate, businesses evaluate factors such as cost structure, access to a skilled, educated workforce, and infrastructure needs. Governor Chafee, General Treasurer Gina Raimondo, and the General Assembly are collaborating and leading the effort to comprehensively address the state’s unfunded pension liability and will convene a special legislative session in the fall to tackle this problem.”
An Opportunity For Rhode Island
Others say the state’s inability to address its financial problems is already affecting businesses. According to (add)ventures CEO Stephen Rosa, potential clients view Rhode Island as a rogue place to do business.
“Rhode Island is (add)ventures' home state but we work with clients across the country,” Rosa said. “The perception that Rhode Island is a rogue state with questionable finances definitely hurts businesses like mine doing work nationally. The pension mess does not reflect positively on the business acumen of Rhode Islanders which means we have to work that much harder to prove our talent and character.”
But where others see doom and gloom, Rosa says Rhode Island has the leadership in place to show the rest of the country that it can survive its pension crisis.
“I believe pension reform is an opportunity for us to show the nation that Rhode Island is ready to lead now, Rosa said. “We have leaders in place, namely Governor Chafee, Treasurer Raimondo and others, who have the courage to start solving problems today instead of pushing them out onto future generations as has been standard practice in the past. All eyes are on us. Will we shine or retreat into the shadows of spineless governance? We don't we have the luxury to choose anymore. Time has run out. I have faith in the Governor, Treasurer and legislative leaders to be as fair as possible to all, while safeguarding Rhode Island's future.”
We Need To Make Rhode Island Competitive
Still, municipal leaders remain skeptical. Warwick Mayor Scott Avedisian said cities and towns are already struggling with a negative national reputation after Central Falls filed for bankruptcy. He said not addressing the pension system from a state level would be another blow to Rhode Island’s image.
“I am concerned that the bankruptcy proceedings in Central Falls, coupled with the pension issues that have been ongoing for decades will adversely affect the outlook that people have about the future of the State of Rhode Island, “ Avedisian said. “It is going to be more difficult for cities and towns to float bonds after the events in Central Falls. Should the state not deal with pension reform, I think it will send a clear message. We need to make Rhode Island competitive to do business in, and pension reform is going to be an important piece of the future of Rhode Island.”
Cranston Mayor Allan Fung, who currently serves on the pension advisory board created by Chafee and Raimondo, agreed with Avedisian. He said it’s time to make Rhode Island a more business-friendly place and getting the state’s financial house in order is one of the first steps to making that happen.
“Any article like the one in Washington Post can send an alarm to the business world,” Fung said. “In the private sector, they’re asking [If Rhode Island] is going to be the next Central Falls and ‘do I really want to be in a situation where I’m going to be overtaxed?’”
Can’t Prolong Tough Decisions
The state’s top commercial real estate leaders say the perception that Rhode Island is struggling financially will undoubtedly make businesses more apprehensive when it comes to moving to the state. Tom Sweeney, Principal at Sweeney Real Estate & Appraisal, said it will be difficult to attract outsiders.
“I think the state is struggling with similar issues to other states in the region and any perception that we have financial issues is not good for attraction of new business from outside the state,” he said.
Alden Anderson, Senior Vice President/Partner at CB Richard Ellis/New England said tough decisions need to be made to help the business community.
“Any issue that leads to a lack of predictability for business planning and decision-making purposes will be a negative for the State when trying to attract outside businesses or expand existing businesses,” Anderson said. “Regarding a solution for the pension problem, there absolutely is a solution but it is going to require some very tough decisions. We cannot afford to prolong theses tough decisions.”
Crunch Time
Saul Kaplan, Founder and Chief Catalyst of the Business Innovation Factory, noted that Rhode Island isn’t the only state dealing with pension problems, but said now is the time for the state’s political leaders to come up with answers.
“Everyone is waiting for the real crunch time when we get to a solution,” Kaplan said. “We all know that there is a lot of pain that has to be shared, but we have to have a solution. It’s just not sustainable. I think everyone realizes that.”
When it comes to finding the solution, however, Kaplan the real debate is just getting started.
“I don’t see a rabbit being pulled out of a hat,” he said. “But something needs to be done.”
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