I have long chronicled the sad financial condition of my home State of Rhode Island and Providence Plantations, particularly the problem of public sector pensions.
Simply put, high pensions, and the taxes needed to feed the pension system, are killing the state. And that’s not me talking, that’s The New York Times.
I would not be so kind in my own assessment. It’s not just the pensions, but the long history in Rhode Island of pension abuses, in which public sector employees were permitted a variety of devices to ramp up pensions far beyond their normal salaries and to “retire” at ages when private sector employees anticipated a decade or more of work.
While public sector union employees may have been the single greatest factor, because of their numbers, pension problems are not limited to unionized employees. Judges, for example, routinely retire after 20 years of service on $100,000+ salary.
As bad as we knew the situation to be, it actually is worse according to a new study released by a pension consulting firm, as reported in The Providence Journal:
By the time July 1, 2012, rolls around, state and local taxpayers may be paying a whopping $621 million — nearly double what they are currently paying — to keep the retirement promises made to state employees and public school teachers, according to the state’s pension consultants.
Simply put: the state has been relying on overly optimistic returns from the stock market, and understated assumptions about the cost of the pensions it has promised to more than 50,000 current and future retirees. As a result, the gap between promises made and money available to pay for them is at least $1.4 billion bigger than previously believed.
These are among the key findings the consultants will present to the state’s 15-member Retirement Board, chaired by new Treasurer Gina Raimondo, on Wednesday morning.
Things are going to get worse before they get better. If they get better.
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