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Now the Hard Part

Now that Treasurer Gina Raimondo has laid out some options for substantial pension reform, the hard part: getting meaningful legislation passed.

Last year, the Pew Center on the States released a report titled "The trillion dollar gap" that took a nationwide look at the pension challenge (see pages 7-11, in the executive summary, for an overview of reform efforts across the country). On one page of the report, titled "Unions and Reform" (see p. 32), the report singled out two acts of union resistance around the country - one an impending lawsuit (since filed) by Rhode Island public employees, challenging an initial round of reform.

Then, Pew turned to heavily unionized Nevada to suggest how reform can actually get done:

For about 15 years, unions had blocked attempts by business leaders to persuade the legislature to trim retirement and health benefits for new hires, but the state’s $3 billion budget gap for the 2009–2011 biennium helped set the stage for change.

In Fall 2008, Clark County Commission Chairman Rory Reid (D) convened a meeting of top union officials in Las Vegas to tell them current labor costs were unsustainable. At the same time, the 7,000-member Las Vegas Chamber of Commerce, the state’s largest business group, mobilized to persuade lawmakers to overhaul the pension system...

The path to reform was eased as different sides of the political spectrum gave ground. The Chamber of Commerce dropped its longstanding support of a defined contribution plan for public sector employees and endorsed a broad tax increase package to help balance the state budget. Republican lawmakers said they would support a tax increase but only if Democrats agreed to tighten the pension system for new hires. The budget passed...

This deal was possible because concerns related to retirement security of workers were addressed along with the need to control costs. Union officials say that other states often fail to ask hard questions about how the systems are managed or what led to the unfunded liabilities before they turn to unions for givebacks or major alterations. The real test, said Gerri Madrid Davis, director of the National Public Pension Coalition, is whether states are willing to look for solutions that address both employees’ needs and pension funds’ sustainability.

There are, doubtless, some lessons to be learned here. But the differences between Nevada and the Ocean State are quite clear. In Nevada there was: a stronger business lobby, a business lobby open to a tax hike (the recent resistance to Governor Chafee's proposed sales tax expansion here suggests no such openness), and a solid Republican Party as counterweight to the Democrats.

As Treasurer Raimondo and others join the battle in the General Assembly, they'll face a far different landscape.

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