Good news in politics is rare these days, but an event that qualifies is the liberal state of Rhode Island's recent landmark pension reform. Gina Raimondo, the state treasurer who led the effort, visited the Manhattan Institute yesterday to explain the miracle, and it turns out she didn't need heavenly powers, only political nerve and good judgment.You'll want to read the whole editorial.
The plan enacted in November cuts $3 billion of the state's $7 billion unfunded liability by raising the retirement age, suspending cost-of-living increases until the pension system is 80% funded, and even moving workers into a hybrid plan that has a smaller guaranteed annuity along with a 401(k)-style defined-contribution plan.
"We decided we owe each other a bright future," said Ms. Raimondo, who said she and fellow Democrats (as well as Independent Governor Lincoln Chafee) came to the conclusion they could no longer afford the lavish promises made to state workers without destroying economic opportunity for everyone.
More government revenue wasn't an option because Rhode Island already suffers from the nation's 5th highest state and local tax burden—a full 10.7% of per capita income, according to the Tax Foundation. Everyone in the pension system had to give something, from new employees to retirees. But a key to reform, Ms. Raimondo said, was to avoid blaming these beneficiaries for the mistakes of the past. "No finger pointing" was her mantra, along with a corollary: "Math, not politics."
Thursday, January 05, 2012
The Wall Street Journal reports:
Posted by Steve Bartin at 8:26 PM