Ten Questions from Rhode Island Pension Reform Deal
Monday, April 06, 2015
impact of last week's announcement that an agreement to settle the state's ongoing pension lawsuit was reached?
There might be more questions than answers at this stage.
SLIDES: See 10 Questions from the Rhode Island Pension Settlement BELOW
Former Rhode Island Supreme Court Judge Frank Williams, who is the court appointed Special Master in the case, announced that most parties had voted to approve the deal in a simple majority vote. Two police and fire unions, which represented 800 workers, did not approve of the settlement. (See Williams’ report to Judge Sarah Taft-Carter HERE).
While lauded by Raimondo and legislative leaders, a number of groups opposed the process -- and current outcome.
"This proposed settlement is an important step toward providing certainty for our public employees and our cities and towns, and I believe it is in the best interest of all Rhode Islanders," said Rhode Island Governor Gina Raimondo. "The proposal keeps our state on a path toward financial stability. While the state has a strong case, the uncertainty of a trial threatened to reverse that progress. I am grateful the parties were able to come to an agreement. I look forward to working with the General Treasurer, the General Assembly, and all stakeholders to pass this legislation and then build on this progress by passing a balanced budget focused on creating jobs."
Some, including Monique Chartier with RI Taxpayers, were not happy with the deal, however.
"[This] was a bad process that produced a bad result for taxpayers," said Chartier. "For this reason, we strongly urge Governor Raimondo and the entire General Assembly to reject this pension reform settlement."
See some of the biggest burning questions BELOW.
Related Slideshow: 10 Questions from Rhode Island Pension Reform Settlement
Gag order impact?
While a revised gag order has been put in place by Judge Taft-Carter following the revelation of the pension reform settlement, opponents to the secrecy of the process have continued to rail against the deal having taken place with little information having been made available to the general public.
"Secret negotiations are where state government does its worst work," said RI Taxpayers Larry Fitzmorris. "The judge's gag order has kept the decision process secret from those who will have to pay the bill. Union members and retirees were given information by their leadership but taxpayers were kept completely in the dark about this deal."
With the requirement of confidentiality required until the termination of all the litigation in the case, when will Rhode Islanders get the full information regarding negotiations -- and will they be satisfied with such revelations after the fact?
The deal presented by Special Master Frank Williams to Judge Taft-Carter will soon be subject to approval (or not) by the General Assembly. While the April 20 trial date was vacated by lieu of the settlement, a 45 day "implementation" period was put in place for action on the terms of the agreement by the parties in the suit. So when will the General Assembly ultimately take it up? Speaker Mattiello and Senate President Paiva-Weed both expressed their preliminary support of the deal -- and indicated that the General Assembly will be reviewing the settlement -- including taking public testimony - in the coming weeks. How much input will the public have, and how much information will be provided to the public concerning its impact and when?
What about the unions who didn't approve it? Last time a deal was presented to the unions and retirees in 2014, one union dismantled that previous effort by just 254 votes. This time it was the unions representing municipal police, along with Cranston police and Cranston fire, that didn't agree to the terms - but their lawsuits are continuing and are slated to be addressed by the court after the settlement is implemented. What will be the ramifications of those unions' protracted legal battles?
The 2011 pension reform that was intended to save the state $3 billion in the ensuing decade by enrolling public employees in a 401K-style hybrid plan, freezing cost-of-living-adjustments (COLAs) and raising the retirement age for many union workers has been abated - but by just how much?
After one failed attempt at a negotiated settlement, the potential impact of the second deal reached will soon be made more clear (the changes from the original law, to the first settlement, to the second, can be found here).
"Remember that this is a second, enhanced settlement," said Monique Chartier with RI Taxpayers. "So we are now two steps removed from the original pension reform at a cost of an additional $232 million for state taxpayers alone."
If the pension deal goes through, and Rhode Island cities and towns are faced with major budgetary implications -- what would re-amortization -- i.e. stretching out the debt over time -- look like? How will cash-strapped municipalities, already facing harsh fiscal realities, factor in the new obligations -- and how long will future generations be paying for them? While the settlement is expected to maintain most of the savings achieved by the 2011 reform, the concessions will have significant impact. Just how will the state and the cities and towns will have to address it, and over what duration?
Following the announcement of a deal, a number of individuals -- and groups -- came forward to oppose the agreement, including advocacy group RI Taxpayers.
"These secret pension reform negotiations have amounted to an unconstitutional, alternative law-making process unaccountable to the people," states R.I.Taxpayers' Chair Larry Fitzmorris. "Further, under a settlement, the critical matter of whether the pensions represented an implied contract would remain unresolved and might even jeopardize the state's legal position if this matter comes up again down the road."
"Far from being an awesome achievement, as the Special Master describes it, this settlement is a bad deal for taxpayers," said R.I. Taxpayers' spokesperson Monique Chartier.
Senate President Paiva Weed indicated that public testimony will be part of General Assembly consideration -- how vocal will the opposition be?
While the pension reform deal addresses a number of points of contention, the precedent for any future reforms is being called into question by some in Rhode Island. Following the announcement, the Center for Freedom and Prosperity questioned the leeway lawmakers now have in light of the decision.
"Regardless of the details of the negotiated settlement of the state's 2011 pension-cutting law, Rhode Island lawmakers and taxpayers will be left in limbo as to whether or not future pension reforms at the state and local level can be legally conducted," said the Center in a release.
"We don't need a backward looking pension deal, we need a forward looking pension ruling on its constitutionality," commented Mike Stenhouse, CEO for the Center. "We all know that the 2011 law was just a band-aid and that massive reforms are still required at the state level, and especially in municipalities."
The landmark pension reform legislation of 2011 was a defining moment for then-General Treasurer Gina Raimondo, heralded by supporters for addressing the state's burgeoning pensions costs, and blasted by detractors for cutting what appeared to be iron-clad agreements.
Whether Raimondo seeks a second term as Governor (or a higher office), the legacy of now supporting a settlement to avoid trial will be lauded by some for its fiscal prudence of avoiding costly litigation with an uncertain outcome, but for the union members who had hoped to undo the reform in its entirety is another matter of local -- and possibly national -- implications. How will history, and voters, view this chapter of Raimondo's career?
Outspoken Raimondo critic Edward Siedle, the former SEC-lawyer turned forensic pension investigator and Forbes' contributor who took a scathing look into Raimondo's 2011 pension reform back in 2013, is toeing the waters to see about conducting a second follow-up investigation in Rhode Island. Siedle was highly critical of Raimondo's hedge fund strategy -- and since his initial report, the state has pulled out of a number of beleaguered hedge fund investments -- and Raimondo's Point Judith fee structure has since been disclosed, among other developments. Would a second look by Siedle uncover new information that could have an impact on past and present oversight of the state's pension fund?
Will the settlement have an impact on the Rhode Island's bond ratings? Following a year that saw ratings agencies threaten to downgrade Rhode Island's general obligation bonds if the state defaulted on the 38 Studios Bonds, Raimondo seems to think that this pension deal will have a favorable outcome for the state. "We anticipate that removing the uncertainty will have a favorable impact," said Raimondo Press Secretary Marie Aberger. While the announcement of the settlement is the first step in the process, will any developments on the ratings front be forthcoming following General Assembly action?
- Lawmakers Rake in $120k Since Voting Against Pension Reform
- Majority of Anti-Pension Reform Lawmakers Returning to Smith Hill
- Does Rhode Island’s Pension Reform Law have Any Hope of Survival?
- State Report: Rhode Island Pension Reform & Falling Off the Fiscal Cliff
- NEW: Providence Retirees Approve Pension Reform
- NEW: Judge Won’t Halt Pension Reform Law
- Donna Perry: Don’t Ruin the RI Pension Reform Law
- Providence Would be Devastated if Courts Block Pension Reform
- Council at Odds: Members Call for Changes to Pension Reform
- Donna Perry: Time for Heavy Lifting on Disability Pension Reforms
- NEW: Mediation Ordered in State Pension Reform Lawsuit
- Will the State & Organized Labor Reach a Deal on Pension Reform?
- Experts React to Rhode Island Pension Reform Agreement
- Who Won this Round of the Pension Reform Battle?
- PODCAST: Rhode Island Pension Reform Showdown - Who Will Prevail?
- Rhode Island Pension Reform Showdown - Who Will Prevail?
- Deal Reached on Rhode Island Pension Reform Lawsuit
- Pension Reform Lawsuit Decision: The Timeline
- Tea Party Lines Up Behind Treasurer Raimondo on Pension Reform
- NEW: Raimondo Featured In Institutional Investor on Pension Reform
- NEW: Former Union Head Day Blasts City Council on Pension Reform
- REPORT: RI Public Pension Reform - Wall Street’s License to Steal
- NEW: Siedle Blasts Raimondo for Withholding Hedge Fund Info
- MINDSETTER™ Ted Siedle: News from the State Pension is All Good
- Ted Siedle: Hedge Fund Industry Loves RI Pension—For Good Reason
- State Pension System to be Investigated by Siedle
- In Case You Missed It: Siedle Report on RI Pension Investments
- NEW: Forbes’ Siedle Launches Crowdfunding Site to Investigate Pensions
- NEW: Forbes’ Siedle to Conduct New Investigation into RI Pension Fund
- Ted Siedle and Matt Taibbi: 13 Who Made a Difference in RI in 2013
- NEW: RI Pension Investigation Kickstarter Campaign by Forbes’ Siedle Goes Live
- Winners and Losers in Raimondo Budget Proposal
- Raimondo Budget Proposal Draws Praise - and Criticism
- New: Raimondo, State Leaders React to Pension Settlement
- Pam Gencarella: Where Does Raimondo’s Vision Put Us in Five Years?
- Russell Moore: Don’t Gut Pension Reform
- Raimondo Warns of Projected $500 Million Budget Deficit by FY19