Making changes that renege on pension promises could be legally perilous, Rhode Island officials said, although they are heartened that judges have upheld the benefit cuts implemented in Colorado and Minnesota. And they think the growing intensity of the crisis might make unions more willing to compromise.
Last month, Central Falls, R.I, a city of 19,000, filed for bankruptcy, in part because its pension costs were unsustainable. The move has led to the retirement checks of 141 former police officers and firefighters being slashed by more than half. At the same time, the retirees — who are enrolled in a locally run pension plan — have been hit with hefty bills for their health-care coverage.
“For years, people have been saying that pensions are underfunded and benefits may have to be cut,” said Raimondo, who is leading the pension reform effort. “But it is no longer a theoretical possibility. It is happening. Now everyone realizes this is really a crisis.”
In Rhode Island, the crisis is more urgent than in most of the United States. The state’s pension system is only 48 percent funded. Meanwhile, Rhode Island has fewer employees paying into the system than retirees collecting retirement benefits.
And, although the average state pension is about $25,900 a year and retired teachers get an average of $41,700 a year, some former workers get more. In some cases, retirees earn close to or more than current workers in similar jobs. Some started collecting after 28 years on the job, regardless of age, even though the retirement age is 62.
In Cranston, the average pension collected by 182 retired firefighters in a locally administered fund is $56,500 — $200 a year more than the average pay earned by the city’s 123 active firefighters, according to Fung’s office. The 172 retired police officers earn an average of $50,400 a year in pensions, $5,000 a year less than the $55,100 average salary earned by the city’s 109 active patrol officers.
“If we don’t put together a workable reform, you are going to see more cities and towns headed toward bankruptcy,” Fung said.
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