ALEC Praises Rhode Island’s 2011 Pension Cuts

While Rhode Island debates if ALEC has its hand in our local politics, a new report indicates the right wing group is at least happy with the results.

In its 2012 annual “Rich State, Poor State report,” the American Legislative Exchange Council praises Rhode Island for its efforts to pare back public sector pension benefits last year.

“Perhaps the biggest pension reform success last year came from Rhode Island,” reads the report, authored by right-wing economists Arthur Laffer, Stephen Moore and Jonathan Williams, in a subsection titled “Blue State Rhode Island Passes Bipartisan Pension Reform.”

The authors, two of whom (Laffer and Moore) are charter members of the far-right wing Club for Growth, anticipated further reform on the municipal level in this year’s legislative session.

“The initial draft of [the bill] set out not only to reform state pension plans, but municipal ones as well,” says the ALEC report. “As it went through the legislature, the municipal aspect of pension reform was removed. This is unfortunate, as other cities in Rhode Island are seriously underfunded and on the verge of delinquency. We anticipate seeing more good reforms from the Ocean State this year and hope they can tackle their pension burden once and for all.”

Conservative Woonsocket Rep. Jon Brien, a member of ALEC’s board of directors also pushed hard for the municipal pension efforts this year.

In fact, the ALEC report cites an article Brien wrote with report co-author Williams for the Rhode Island Center for Freedom and Prosperity, a local right wing organization that advocates for political objectives similar to ALEC: lower taxes and smaller government. Its website identifies Williams as “a member of the RI Center for Freedom’s special pension task force, is a co-author of ‘Rich States, Poor States’ and serves as Director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council, a non-partisan membership association of state legislators.”

The Center also runs the new website the Ocean State Current, which took issue with the New York Times column yesterday making a link between Brien’s ALEC ties and his position against increasing taxes in Woonsocket to avoid receivership.

Rhode Island is one of two states singled out in the report for making “the tough choice to reform programs and benefits.” The other was Wisconsin, which did so through the controversial Act 10, pushed by Gov. Scott Walker, that led to a recall campaign against him.

The PDF was too big too upload, but you can download it for yourself here. And here’s the entire section on Rhode Island:

Blue State Rhode Island Passes Bipartisan Pension Reform

Perhaps the biggest pension reform success last year came from Rhode Island. This tiny liberal state had a big problem: An estimated unfunded liability ranging from $6.8 billion to more than $15 billion (depending on your actuarial assumptions). Assuming an unfunded pension liability of roughly $15 billion, which is from the estimate that uses generally accepted accounting principles (GAAP) from the private sector, every man, woman and child in Rhode Island owed $14,256. Realizing that the system was un- sustainable, Gov. Lincoln Chafee and State Treasurer Gina Raimondo proposed and successfully pushed for the Rhode Island Retirement Security Act of 2011 (RIRSA), which the legislature passed on a bipartisan basis.
While initially many Rhode Islanders didn’t take the need for reform seriously, they began to see reality when one city in the state, Central Falls, declared bankruptcy and cut public pension plans by nearly 50 percent.22 Passing RIRSA wasn’t easy and took a lot of input and analysis from employees, retirees, residents, and other groups throughout the state. The plan provides that:

•     Reforms well as new workers.
•     Both employees and taxpayers will  share the burden of investment risks.
•     Workers  are subject to cost-of-living adjustments that take into consideration the pension fund’s over or under performance.
•     Cost-of-living adjustments are frozen for current retirees in the defined-benefit plan.23

Not only does RIRSA save Rhode Island taxpayers billions of dollars, it also provides public workers with the security that their money will be there when they retire. Rhode Island has proved that the choice is not between Republican or Democrat, Left or Right. Though RIRSA was monumental, Rhode Island still has some work to do. The initial draft of RIRSA set out not only to reform state pension plans, but munici- pal ones as well. As it went through the legislature, the municipal aspect of pension reform was removed. This is unfortunate, as other cities in Rhode Island are seriously underfunded and on the verge of delinquency. We anticipate seeing more good reforms from the Ocean State this year and hope they can tackle their pension burden once and for all. Reflecting on the success of pension reform in the Ocean State, Gov. Chafee remarked, “With the passage of the Rhode Island Retirement Security Act, Rhode Island has demonstrated to the rest of the country that we are committed to getting our fiscal house in order. While this is an important step toward comprehensive pension reform, it is not complete. Our job is not done.”

1. Gina, Chafee Also at Odds on Muni Pension Bills
2. Dem. Lawmakers Distance Themselves from ALEC