Lawmaker Wants Budget Surplus to Cover Pension Lawsuits

Saturday, January 28, 2012


With the pension reform bill almost certainly heading to court, State Rep. Scott Guthrie is urging lawmakers to remember that the state needs to put aside fund to pay for lawsuits just in case a judge rules in favor of the unions.

That’s why he has introduced legislation that would require the state to establish a special escrow pension lawsuit satisfaction fund to be used to pay any financial court judgments. The money for that escrow fund, he said, should come from “all state fiscal year-end budget surplus revenues.”

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“I have heard talk that a court challenge of that law – regardless of the final outcome – could cost the state many, many thousands of dollars in legal expenses, alone” Guthrie said.

The General Assembly overwhelmingly approved a sweeping overhaul to the state’s pension system in November. Teachers, state employees and the state-administered municipal plans (MERS) will all be enrolled in a 401k-style hybrid plan shift that shifts the risk to the employee through combining the attributes of both the defined benefit and defined contribution plans. Public safety employees and judges will not be a part of the system.

The changes are expected to cut the state’s unfunded pension liability by $3 billion and will save taxpayers nearly $300 million by 2013, according to General Treasurer Gina Raimondo.

Don’t Gamble With What Might Happen

State lawmakers are now expected to take on local pension plans, but Raimondo has urged local officials to do their due diligence before implementing new plans. According to a study released last fall, 24 local pension plans are considered at-risk. Governor Lincoln Chafee has called for changes to be made during this legislative session.

But Guthrie’s focus is on the current law, which Chafee approved in November. Rather than waiting until the final ruling, he said the state should do a little advance planning, and set aside some money to cover those costs and the possibility that the new law will be struck down by the court.

“We might be able to control gaming in Rhode Island, but we should not gamble with what might happen in court, and we should not gamble with the retirement years of our state employees,” he said. “If the newly-enacted law is struck down, we are going to be looking at another hole in the budget that will need to be plugged, and I think it would be a wise thing to do to have some money set aside.”

It was reported recently that the state finished the budget year that ended last June with an approximately $64 million surplus. Representative Guthrie said that before that money is committed to something else, he’d at least like the General Assembly to consider putting some of it aside “for what is surely coming in the way of a court challenge.” He did not suggest an amount, opting to leave that decision to the General Assembly through the committee hearing process.


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