GENERAL TREASURER Gina Raimondo told an audience at the Greater Providence Chamber of Commerce-sponsored RIBX 2011 luncheon that the state’s pension issues must be solved now if it is to have a chance for future economic prosperity.
PROVIDENCE – Gina M. Raimondo, state general treasurer, warned during an economic outlook luncheon Tuesday that solutions to the state’s underfunded pension system probably will affect both current retirees and future workers.
Speaking to 430 people gathered at the Greater Providence Chamber of Commerce-sponsored RIBX 2011 luncheon at the R.I. Convention Center, Raimondo said the system carries an unfunded liability of approximately $6.8 billion, according to a recent actuary report, so it is too late for “tweaks” or minor revisions.
“Solutions that only impact new employees or recent hires will not affect the unfunded liability,” Raimondo said. “We need comprehensive reform where everything is on the table.”
She is the first state official, or at least one of the few in positions of power, to so bluntly warn that current retirees could face diminished benefits in the years ahead. Some 60,000 people are members of the pension system, she said.
“They did what they were told to do,” she said of state workers, teachers and retirees, “and it is not their fault [that the system is underfunded]. We cannot blame the workers.” The problem lies with the system itself and decisions made over the years to avoid funding it during tight economic times.
In 2002, Raimondo said, 5 cents of every tax dollar went to the state pension system; today, 12 cents goes for pensions and, in seven years, 20 cents of every tax dollar will be committed to paying benefits to retired state workers and teachers.
Raimondo, who took office in January, called for a “new and practical approach” that will leave finger-pointing behind and avoid overblown rhetoric to “honestly deal with all the sectors” involved in the pension system. Her office is currently conducting an internal study to probe various solutions; after the event, a spokeswoman for the treasurer declined to say when the study would be completed.
Only if pension problems are resolved will the state to be able to move forward and grow its economy, Raimondo told the state’s business leaders.
The state retirement debt is “an anchor holding the state back,” she said. “We cannot build a strong economy on a cracked foundation.” Rhode Island is not alone in this problem, but if the Ocean State can move ahead efficiently and quickly to resolve it, Raimondo predicted investors would take notice. “It will be a signal to business and entrepreneurs that we are prepared to invest in our future,” she said, “and make the tough decisions.”
Raimondo, the keynote speaker at the business expo, prefaced her remarks by speaking about how “extremely sympathetic” she is to state employees, retirees and teachers, mentioning in particular the wonderful work done by her daughter’s elementary school teacher in the Providence public school system. Raimondo said she so admires the work of this teacher, in her 30s, that it hurts her to think someday there may not be a pension for her when she retires in the decades ahead.
“They did what they were told to do,” she said of state workers, teachers and retirees, “and it is not their fault [that the system is underfunded]. We cannot blame the workers.”
The problem lies with the system itself and decisions made over the years to avoid funding it during tight economic times, she said.