Alternative to Raising Taxes: Reform versus ‘Tweaking’

ABSTRACT:  As Rhode Island’s treasurer Gina Raimondo states, A lot of "people say we've done pension reform when all they've done is tweaked something." Rhode Island’s pension reform law “shifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component. It also increases the retirement age to 67 from 62 for all workers and suspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.”  HIGHLIGHTS of THE WEEKEND INTERVIEW and link to the Interview are presented.

HIGHLIGHTS of THE WEEKEND INTERVIEW:

“...Unfortunately, public pensions all over the country are gobbling up more and more taxpayer money and producing nothing in return but huge deficits. It's not even certain whether employees in their 20s and 30s will retire with a pension, since many state and municipal pension systems are projected to run dry in the next two to three decades.”

“That included Rhode Island's system until last year, when Ms. Raimondo drove perhaps the boldest pension reform of the last decade through the state's Democratic-controlled General Assembly. The new law shifts all workers from defined-benefit pensions into hybrid plans, which include a modest annuity and a defined-contribution component. It also increases the retirement age to 67 from 62 for all workers and suspends cost-of-living adjustments for retirees until the pension system, which is only about 50% funded, reaches a more healthy state.”

“Several states have increased the retirement age or created a new tier of benefits for future workers, but reforms that only affect not-yet-hired employees don't save much money. A lot of "people say we've done pension reform when all they've done is tweaked something," Ms. Raimondo points out. "This problem will not go away, and I don't know what people are thinking. By the nature of the problem, it gets bigger and harder the longer you wait."”

THE WEEKEND INTERVIEW

Updated March 23, 2012, 7:37 p.m. ET

The Democrat Who Took on the Unions

Rhode Island's treasurer Gina Raimondo talks about how she persuaded the voting public, labor rank-and-file and a liberal legislature to pass the most far-reaching pension reform in decades.