PROVIDENCE – All eyes in the public employee world of Rhode Island will be on the “final report” that emerges Monday from the pension advisory group launched by lawmakers last year to take a second look at the impact of the Raimondo-era pension overhaul.
Retirees want the legislature to reinstate the payment of annual cost-of-living adjustments − aka COLAs – no matter the cost, which could range from $53.3 million to $169.2 million a year on top of the $544.3 million in state and local dollars already required.
The retirees are hoping that Rhode Island’s as yet unknown share of a $350 million class-action settlement with Google in a data-privacy breach could smooth the way.
Anger from 2011 pension overhaul is still strong
In the meantime, the anger at what happened in 2011 – and continues to this day – persists among the state’s retired public employees.
“No money for a COLA? Way too expensive? Huge price tag? The governor found $132 million for a soccer stadium project,” wrote one retiree on the Facebook page of the coalition pushing for restoration of COLAs.
“If the pension fund wasn’t spending so much on investments fees, there would be enough to fund an annual cola, IMO,” she said of the fees, which totaled $126 million in Fiscal Year 2023, according to a state treasury report.
However, the retirees are competing with current-day employees for any available dollars.
What are retired public employees asking for?
Their advocates want the state to reinstate “longevity payments,” which equate to permanent – and not just one-time – increases in the paychecks of teachers and state employees as they hit milestones in their careers.
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Before these automatic pay bumps were eliminated, teachers got a 5% increase in theirbase salaries after 10 years, and 10% after 20 years, according to a summary from the treasurer’s office. State employee longevity pay ranged from 5% after five years to 20% after 25 years, with a series of salary bumps along the way.
The leaders of Rhode Island’s public employee unions also want the state to lower the age and work requirements for a pension to make state and local employment more attractive, which also would come at a cost.
Other options being weighed by state’s pension advisory group
The pension advisory group weighing the options was appointed by state General Treasurer James Diossa in response to the call, contained within the current-year budget, for a fresh look at the “unintended consequences” of the cost-cutting pension moves championed by then-treasurer – and current U.S. commerce secretary – Gina Raimondo, which the General Assembly approved in 2011.
Among the options currently on the table, according to a Jan. 17 memo from the treasurer’s office: a reduced “early retirement” penalty (annual cost: $12.1 million); an increase in employer, aka taxpayer, contributions to the state’s equivalent of a 401(k) retirement savings plan ($19.1 million); and the reinstatement of age 60 as the minimum retirement age ($12.1 million).
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A memo pieced together by Diossa’s office laid out some of the other options to reverse, or simply scale back, earlier cost-saving moves, all of which would require legislative approval. Among them:
- Amend the final average salary formula from the highest five years of pay to the highest three years of pay for teachers and state and municipal employees.
- Increase the value of each year of work toward a pension from the current 1% of pay to 1.5%, as an example, or something closer to the staggered rate that got bigger the closer a worker got to retirement, paying up to 80% of a worker’s three-year salary average after 35 years of work before the first round of cutbacks in 2005.
- Decrease the retirement age from the “Rule of 95” – wherein an employee’s combined age and years of service must equal at least 95 before they are eligible to retire – to the “Rule of 90,” allowing a 60 year old, for example, to retire after 30 years of work.
- Lower the age-work requirements at which a police officer or firefighter can retire with a pension, and eliminate the earlier-retirement penalty. The current thresholds: age 55 after at least 25 years on the job; any age after at least 27 years; Social Security retirement after at least five years of work.
- Require that all school districts and municipalities that are not currently contributing to Social Security for their employees to do so for all new employees. (The Social Security tax rate for employers and employees is 7.65% of employee payroll (6.2% for Social Security, 1.45% for Medicare).
Municipalities not contributing to Social Security now include:
Barrington (teachers); Bristol (teachers and police); Burrillville (teachers, Harrisville and Pascoag fire);Central Falls (teachers, police and fire); Coventry (teachers and fire); Cranston (teachers, police, and fire);Cumberland (teachers and fire); East Greenwich (teachers and fire); East Providence (teachers); Foster-Glocester (teachers); Hopkinton (Hope Valley, Wyoming fire, Hopkinton police); Johnston (teachers).
Lincoln (teachers, Lime Rock fire); Little Compton (teachers); Middletown (teachers); Newport (teachers, police); North Smithfield (teachers, Union fire); Portsmouth (teachers); Scituate (teachers); Smithfield teachers); Tiverton (teachers); Warren (teachers); Westerly (teachers); West Greenwich (Hopkins Hill fire);Woonsocket (police and fire).