Raimondo: Pensions Dragging Down RI Economy
Wednesday, May 04, 2011
General Treasurer Gina Raimondo told local business leaders yesterday that the state’s unfunded pension liability is dragging down the state’s economy.
“Fixing this state’s pension plan is not an issue, it is the issue,” Raimondo said at the RI Business Expo, hosted by the Greater Providence Chamber of Commerce.
Currently, the state’s pension program is only 45 percent funded, and has an unfunded liability of roughly $7 billion.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRaimondo demonstrated the growing severity of the problem by pointing out that in 2002, 5 cents of every tax dollar went towards the pension, while today, that number is closer to 12 cents. Raimondo estimated that if left unaddressed, the pension would be consuming nearly 25 cents of every tax dollar by the year 2018. “The consequences of not coming together to solve this problem are enormous,” she said
Teachers and public employees aren’t the only ones who should be concerned by the state’s pension dilemma, asserted Raimondo. She said it could affect businesses worried about the tax load and be a deterrent to investors. “You cannot build a strong economy on a cracked foundation,” she said.
Proactive Reform—a Positive Signal To Business
Raimondo was quick to acknowledge that Rhode Island is not the only state plagued by unsustainable pension commitments—there is an estimated $2-3 trillion dollars in unfunded pension liabilities on the national level. In Raimondo’s eyes, however, this isn’t a cause for dismay, instead it presents Rhode Island with a unique opportunity: the chance to take the lead by enacting substantial and sweeping pension reform.
The Treasurer also stressed the need to act quickly by drawing on her own experiences in the business world. After the dot-com bubble burst, Raimondo recounted how it was the businesses which innovated and responded swiftly that emerged from the recession stronger.
“Those that clung to old business models,” she warned, “did not fare so well.”
“We know the facts, we can see the trends, we know what has to be done, now it is our choice,” she added.
Raimondo said a proactive approach to pension reform will send a powerful “signal” to entrepreneurs, showing them that Rhode Island is a stable and secure place for long-term investment.
‘Like a Rubiks Cube…’
The Treasurer was the first to admit that reform will not come easily.
In an attempt to illustrate the extreme complexity of the issue, Raimondo pulled a Rubiks cube from her pocket. “Pension reform is like solving a Rubiks Cube,” she began “with each twist and turn there is a new institution and stakeholder to consider.” Unlike a Rubiks Cube, however, pension reform is a highly emotional issue for many, making the task of significant reform all the more difficult.
Raimondo denounced the incessant finger-pointing that has been dominating discussion of the pension in recent months.
Using her daughter’s elementary school teacher as an example, Raimondo expressed her deep sympathy for the state employees and teachers who “did everything they were told,” and were now being labeled as culprits by some. If blame is to be placed anywhere, said Raimondo, then it should be placed on the shoulders of the politicians who for dozens of years raised pension benefits without considering the long-term implications of their actions.
No Silver Bullet
Despite the swarm of challenges confronting the state, Raimondo is optimistic. She acknowledged that while there is no “silver bullet,” capable of instantly solving all the state’s problems, there are a number of reasonable steps the state could take to begin addressing its issues. “All roads lead back to fundamentals,” said Raimondo, as she called for greater investment in infrastructure, housing, and education.
Raimondo said that while she wasn’t sure what comprehensive reform would look like at this point, she did know it would require more than just “tweaks,” to the current system, and that it could not only be targeted at future retirees.
“Commit yourselves to being part of the solution and engage in those solutions,” she said. “If you do that and if we work together we’re gonna solve this Rubiks Cube.”
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