Pension settlement leaves future benefits uncertain

By Patrick Anderson
PBN Staff Writer

The nation has watched Rhode Island’s long struggle to repair its public pension system as a possible prologue to retirement overhaul efforts across the country. More

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GOVERNMENT

Pension settlement leaves future benefits uncertain

By Patrick Anderson
PBN Staff Writer

Posted 2/24/14

The nation has watched Rhode Island’s long struggle to repair its public pension system as a possible prologue to retirement overhaul efforts across the country.

The resolution, however, may leave as many questions open as answered.

In a proposed settlement announced after months of closed-door negotiations, state and union leaders laid out a plan to avoid the high-stakes court fight over whether the government can take away benefits promised to current and retired workers.

By giving back 5 percent of the projected savings from the 2011 overhaul law, Gov. Lincoln D. Chafee and General Treasurer Gina M. Raimondo guaranteed the state would keep the vast majority of those savings, an estimated $3.9 billion. For their part, the unions extracted an additional $232 million in concessions for current and future retirees while preserving some legal leverage.

The settlement, which still needs approval from both workers and the General Assembly, would not require any additional state spending until the fiscal year starting July 2015.

But if the past is any indication, pensions are a long game in which small changes can have significant future impacts, and in most years one side or the other is usually looking to improve its position.

So if the pension settlement is approved, will it tilt the legal and political landscape toward future state leaders or workers?

“The impact of the settlement is much closer to leaving everything up in the air,” said Michael Yelnosky, professor and dean designate at Roger Williams University Law School. “The purpose of the settlement is to avoid adjudication in terms of what the law is in Rhode Island on the ability for a legislature to make changes to statutory benefits. If approved, it will be the same as it was the day before these cases were filed.”

With Rhode Island punting this legal question, national attention will turn to other states with pension changes and legal challenges now working their way through the courts.

That doesn’t mean however, that lawmakers being asked to approve the settlement aren’t wary of its future implications.

Setting the immediate financial implications for the pension fund aside, House Minority Leader Brian C. Newberry, R-North Smithfield, wants to see a number of legal questions about the settlement addressed.

Chief among them is whether the settlement would establish a legal contract binding the legislature, even after the lawsuit is closed, from making future benefit changes.

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