Like state governments across the country, Rhode Island is struggling to meet the soaring cost of public-employee-pension liabilities while continuing to provide high-quality public services. Rhode Island has never topped lists of America’s most efficient state governments, yet it does have strong and influential public-employee unions that have been tenacious in defending the interests of their members in securing generous pensions and benefits.
But in recent years, the collapse of several local pension systems made the issue an urgent priority for Rhode Island taxpayers. Gina Raimondo, the Democratic state treasurer, spearheaded a sweeping effort to shift from defined-benefit pensions to more modest hybrid plans and to temporarily suspend cost-of-living adjustments. Raimondo’s reforms proved successful in large part because she devoted months to making the case in cities and towns across the state, convincing voters and even some public workers that containing pension liabilities was essential to protecting or expanding core public services. As Raimondo told Allysia Finley of the Wall Street Journal, her reply to social workers who asked her why they ought to care about pensions was that “if you don’t, your whatever it is, homeless shelter, is going to lose X thousand of dollars of funding.”
By all accounts, Raimondo is keen to run for the Democratic gubernatorial nomination in 2014, a prospect that has been welcomed by reform-minded Democrats across the country. The danger for Raimondo is that, having attracted praise for pension-reform efforts from the Wall Street Journal, she is seen by many public workers in the state as a menace and a traitor. This has redounded to the benefit of Angel Taveras, the mayor of Providence.
Like most Rhode Island municipalities, Providence faces staggering public-employee pension liabilities, and Chapter 9 bankruptcy looked almost inevitable as recently as a year ago. Now, however, Taveras has reached an agreement, approved by a Superior Court judge earlier this month, that will achieve sizable pension savings. Ted Nesi of WPRI describes the settlement in detail, and he warns that, while the savings are significant, pension contributions are still expected to rise robustly with each passing year. Taveras’s settlement caps total pension payouts, but a number of current retirees will continue to receive extremely generous pensions. One could argue that Providence might have been better off going bankrupt, as it would allow the city to sharply reduce these pensions, creating more breathing room in the city budget. Taveras’s approach represents a kind of middle way, in which retirees accepted a modest measure of sacrifice to prevent the much bigger sacrifice that would have likely followed bankruptcy. This has won him the enthusiastic support of public workers in Providence and across Rhode Island.
So, as Josh Kraushaar observes in National Journal, Rhode Island Democrats will have an intriguing choice in next year’s gubernatorial primary: On the one hand, there is the centrist Raimondo, a champion of public-sector efficiency and spending discipline; on the other there is the more vocally progressive Taveras, who commands the allegiance of Latinos and union members. Interestingly, Raimondo and Taveras are both Harvard alumni from working-class backgrounds, yet Kraushaar suggests that Taveras is seen as the “downscale” candidate while Raimondo is seen as the “upscale” candidate. One assumes that the two Democrats will clash on a range of issues, perhaps including charter schools and tenure reform. This will be a very fun race to watch.