Lessons from Rhode Island: Bold Changes to Its Pension Plans Have Caught the Attention of Other States

By Snell, Ron | State Legislatures, February 2012 | Go to article overview

Lessons from Rhode Island: Bold Changes to Its Pension Plans Have Caught the Attention of Other States


Snell, Ron, State Legislatures


Tough times in Rhode Island may end up helping other states, at least when it comes to pensions.

Lawmakers in the Ocean State, confronted with one of the worst-funded pension plans in the nation, have gone further than any other state in making significant changes and applying them to almost all current state and local employees.

"It would certainly be a lot easier to walk away from this reform," Senate President Teresa Paiva Weed said after the vote. "However, it is clear that doing nothing only puts our retirees' and our active members' benefits at greater risk. We owe it to them, as well as to all other taxpayers, to attack this challenge head on."

It's a move other legislatures are watching as they grapple with their own pension problems.

[ILLUSTRATION OMITTED]

Of the 41 states that have enacted major state pension reforms in 2010 and 2011, Rhode Island stands alone. No other state has set out to change its plan for state employees and teachers the way Rhode Island has. Legislation passed in November moved current members in the traditional defined benefit plan to what's called a "hybrid" model that supplements the traditional plan--at a reduced level of benefits and costs--with an individual account similar to the 401(k) plans common in the private sector.

Adopting the hybrid plan was significant but not unprecedented. Indiana has had a hybrid system for more than 60 years, and Michigan and Utah adopted such plans in 2010. The novelty of what Rhode Island lawmakers did lies in moving current members into the new plan.

There are constitutional and legal constraints on states' ability to change pension plan coverage for people who already are members. The constraints differ greatly from state to state, and few have been tested in courts. Legislatures and governors move cautiously toward these restraints, however, and, until Rhode Island took its action, have never applied major pension plan changes to current employees and retirees. Massachusetts, for example, enacted legislation in November that raises retirement ages and reduces eventual benefit packages. It will apply only to new members of the system.

Policymakers who have been bold in raising current employees' contribution requirements and changing post-retirement cost-of-living adjustments have encountered legal challenges as a result. States facing actual or threatened lawsuits include Arizona, Colorado, Florida, Minnesota, New Hampshire, New Jersey, New Mexico, South Dakota and Washington.

Big Trouble

Rhode Island lawmakers did not lightly or without good reason move into new territory. The state is awash in troubles. Some of them, like high unemployment and decay of its former manufacturing base, are shared with many other states. Others, however, are more peculiar to the state. Rhode Island's small population--l.05 million in 2010--is barely growing and is a little older than the U.S. average. Its pension plan, for the size of the state, has been among the worst-funded. Although the legislature has made many changes to shore up its pension plans, a sea of red ink has flooded the balance sheet.

A summary of the enacted legislation states Rhode Island "is struggling to emerge

from its most recent economic downturn, dealing with high unemployment, sluggish real estate markets, and structural deficits in its five-year forecast. Recent economic forecasts suggest the state is not likely to grow its way out of the problem." Much the same could be said for other states. In California, for example, Governor Jerry Brown has proposed pension reforms with some of the same provisions enacted in Rhode Island, including a hybrid plan.

Rhode Island lawmakers, like those in other states, were concerned about the rapidly growing unfunded pension liability. Before the legislation passed, the forecast for growth from FY 2012 to FY 2013 was from $4.7 billion to $6. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Lessons from Rhode Island: Bold Changes to Its Pension Plans Have Caught the Attention of Other States
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.