Roach’s Radical Solution to the Pension Problem
Wednesday, April 20, 2011
Governor Chafee has a problem. The budget deficit is out of control and the “solutions” he’s offering are unacceptable to members on the Left and the Right. Chafee sought to be a uniter, but I doubt he pictured it like this. Nevertheless, here we are with Republicans and Democrats alike lambasting the Governor’s budget proposal and in unison deriding the sales tax plan.
And still Chafee complains that others aren’t offering solutions. Well, let me be one voice out there to offer a solution to the budget problem. First, let me state the problem: pensions.
Before many of you union members start rolling your eyes, it really isn’t your fault that you negotiated with the state and the state gave you what you wanted. For years, politicians have made deals with the unions and rewarded them with favorable contracts. Union members have benefited but now taxpayers are footing a bill we cannot afford.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAccording to Gabriel, Roeder, Smith & Co., Rhode Island’s unfunded liability stands at $6.8 billion. Six point eight billion dollars. According to the same report, you and I might be paying 33 percent more than we do today. When? 2020? 2030? Nope, 2013…in two short years.
Governor, is this complaining or just stating the facts?
In a video posted by the Governor’s office Monday, Governor Chafee states he’s going to take $19 million and put that towards assisting cities and towns in addressing their unfunded pension liabilities. Click here to view the video.
$19 million???? $19 million?
Last week on A Lively Experiment I likened Governor Chafee’s budget solutions to using folding chairs to plug the hole in the Titanic. I have no doubt Governor Chafee is honestly and earnestly trying to address the budget concerns. He says he’s not going to cut state aid to cities and towns. That’s great.
But who’s going to pay for the deficit and how are we going to bridge the ever widening gap? Governor Chafee’s answer is an expanded sales tax. Are you tired like me of having to pay for the giveaways and mismanagement of the General Assembly?
I am.
So let’s try something different. Instead of average Rhode Island taking on more of the tax burden, let’s start with the state’s pensions. Let’s start with increasing current pension contributions for new state employees by 50 percent. No questions asked. The state can’t afford the pensions so in order to offset costs of today and in the future, the pension contribution increases for ALL new state employees.
Second, reduce the pension pay out by 20 percent for all new employees. And finally, for current employees begin a five year plan to increase their contributions by 50 percent over the next five years as well as beginning in fiscal year 2013 reduce the pension payout by 20%. Essentially, whatever they had put in up until this point would be valued at whatever the negotiated rate, but subsequent contributions would be 20% of what they are today.
Is this a crazy idea? Yes.
Are there legal ramifications? Yes.
Is it as simple as a single paragraph? No.
But Governor, we need radical solutions to address this problem, not simply putting the burden on the backs of middle class Rhode Islanders who by and large have been taking on more and more of the state debt with nothing in return except worsening job prospects, lesser home values, and politicians more bent on pleasing their union buddies than addressing our budget deficits.
You’ve got a chance to do something different. The General Assembly has rejected your budget and its fundamental tenets. I’m offering an alternative to the largest problem facing the budget – pensions. It’s up to you to decide if you want to pass the buck to the taxpayers or finally give us a break and let someone else bear more responsibility.
That’s real budget reform and that’s what the state needs.
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