WASHINGTON – According to the Pew Center report - “The Widening Gap Update” – Rhode Island’s management of its long-term liabilities for pensions and retiree health care were cause for “serious concern.”
Although the state consistently paid its full annual pension contribution between 2005 and 2010, in 2010 the system was 49 percent funded and faced a $7 billion funding gap.
“Most experts agree that a fiscally sustainable system should be at least 80 percent funded,” said the Pew report.
According to the Pew Center study, Rhode Island is among four states that don’t have even 55 percent of the money needed to pay out public employee pensions set aside. Connecticut, Illinois and Kentucky’s pensions were 53 percent, 45 percent and 54 percent funded, respectively.
“States continue to feel the impact of the Great Recession, and have lost more ground in their efforts to cover the long-term costs of their employees’ pensions and retiree health care,” David Draine, senior researcher, Pew Center on the States, said in prepared remarks. “While the economy and state revenues are improving, states are still struggling to manage the bill coming due for promised benefits.”
In 2010 – the most recent year data was available – the state had a $775 million bill for retiree health care costs, none of which was funded. The state’s 0 percent coverage is well below the national 8 percent average.
The Pew report commended recent pension reforms by Rhode Island lawmakers, which are not included in the analysis since they happened in 2011. These reforms are estimated to reduce the state’s unfunded liability by $3 billion.
With these reforms, Rhode Island became the first state to change core benefits for current workers, and became one of only 10 states to limit an annual cost-of-living increase since 2010.