Rhode Island Cuts Benefits to Current, Future State Retirees
With anywhere between $2 and $4 trillion in unfunded municipal pension liabilities nationwide, states have been looking for ways to close the gap, Gina Raimondo, Rhode Island’s General Treasurer, told CNBC’s “Squawk on the Street.”
To address what was arguably one of the worst underfunded pension liabilities in the U.S.— Rhode Island has set aside only 48% of what it owes current and future retirees—the state passed the Retirement Security Act. The new law aims to save $4 billion over the next two decades and keep costs steady and predictable for taxpayers, Raimondo said. Slated to be implemented July 1, the law changed the investment assumptions for the pension plan and raised the retirement age.
Rhode Island’s reforms cuts benefits for both existing and future workers. But Raimondo believes it comes down to fairness. “There is an intergenerational fairness issue here,” she said. “I think it is unfair to fix the problem on the backs of only the young workers.”
Labor unions claimstate officials violated employment contracts and did not first try less severe fixes. They are suing the state, potentially delaying implementation.
“This is about reality, we decided it was time to just face the facts, make tough choices and move forward,” Raimondo said.
--By CNBC.com’s Justin Menza.