Projo Politics Blog

On Tuesday, House spokesman Larry Berman acknowledged publicly for the first time that Murphy has the actuary's report. "I know that it is in his hands,'' he said.
But when asked why he has been unwilling to make it public in response to repeated requests, Berman said: "He has the request.''

Unstated is the degree to which "pension reform'' has once again become a critical element of the legislature's behind-the-scenes effort to hammer out a budget deal for the year that begins July 1 that averts a massive deficit, without raising taxes or cutting too deeply into state government operations.

"There are few areas left you can go [to] at the state level," Governor Carcieri said recently, after the magnitude of the state's projected deficit for next year swelled by another $130 million to a potential $590 million.

"A big chunk of that can be the pension reform - I think as much as two-thirds can be the pension reform," Carcieri said. "The balance is going to wind up having to come from local aid. This is it."

But organized labor is battling any rollback in pension benefits, and their lobbyists succeeded to the extent that state lawmakers did not include any of the proposed "pension reforms'' the panel or Carcieri recommended in the current year deficit-avoidance plan they approved earlier in this legislative session.

Within that emergency budget-repair bill was language signaling their intent to revisit the issue, however.

It said "The Assembly finds that changes to public employee pension systems of the magnitude the Governor recommended should not be made without significant due diligence that would include procurement and review of actuarial analyses of options, testimony from taxpayers as well as affected employees, estimates of the impact on current and future workforces including selection, recruitment and retention of high quality public employees, and the impact said changes might have on the long-term fiscal condition of the State.

"The General Assembly shall perform such due diligence and shall amend [the Fiscal Year 2010 Budget Bill] to include necessary amendments to make changes to the public employee retirement systems designed to be fair and equitable to current employees, and reduce the future unfunded liability of the systems through benefit changes. Those changes will produce significant savings for FY 2009.''

On Tuesday, Carcieri spokeswoman Amy Kempe said the urgency for action has increased. If the lawmakers limit the pension benefit cuts to the budget year that begins July 1, they place the state in jeopardy of losing $54 million in federal stimulus dollars, targeted for schools, that would not be available if the state cut its 2009-10 school spending below what it is spending this year.

The dormant pension study commission proposal goes several steps further than the cost-saving plan that Republican Carcieri proposed. Carcieri sought to institute age 59 as the minimum retirement age to start drawing a state pension and to eliminate the promise of 3 percent compounded annual COLAs for all new retirees, except those already eligible to retire. All but the newest state workers and teachers can retire today at any age after 28 years; newer workers must work 29 years and be at least 59 to draw a pension.

His aim: to save $47.4 million in the next year alone.

In addition to embracing age 65 as the new must for a state pension, the Murphy-appointed panel voted to continue paying an annual cost-of-living increase, but would tie it to the yearly cost-of-living index, pay it as a straight percent of the retiree's original pension, and begin paying it on the first anniversary of a retiree's departure though no one would receive this annual bump before reaching age 66. In the future, a pension would also be paid on an employee's five-year salary average, instead of the three-year average currently used.

For new employees, the proposal endorsed by the panel would go further.
It would put anyone hired after July 1 in a hybrid plan that includes a much-reduced version of the defined-benefit plan that currently pays state retirees up to 80 percent of their earnings at retirement, and a 401(k)-style plan in which contributions are fixed but the size of the benefit hinges - as it does for most workers in the private sector - on how much those contributions gain or lose, over time, in the investment market.

While the panel rebuffed a bid to limit the benefit cutbacks to employees not yet vested in the system, it did exempt those already eligible to retire - but still working as of July 1 - from the proposed cutbacks: an estimated 1,628 state employees and 1,433 teachers.