Tiny Rhode Island has huge pension problem

Associated Press

PROVIDENCE, R.I.

Rhode Island is the nation’s smallest state. But its pension problem may well be the largest in the land.

The state is on the hook for billions of dollars’ worth of pension benefits owed to police officers, firefighters, teachers, judges and state workers. But the money’s not there. Projected investment gains never happened. State actuarial projections failed to keep up with public workers who are retiring earlier and living longer.

Estimates put Rhode Island’s unfunded liability for public workers’ pensions at $7 billion, slightly less than the entire state budget for one year. To make good on promises to public workers, the state must pour more and more into the pension system every year, from $319 million in 2011 to $765 million in 2015 and $1.3 billion in 2028.

Several states including Ohio, Illinois and California face even larger unfunded pension costs, but when Rhode Island’s cost is divided among its 1 million residents, it becomes clear that it has one of the weakest pension systems in the nation.

“We kind of go back and forth with Illinois as to who is last,” said Treasurer Gina Raimondo, who took office in January and has made the pension problem her top priority. Raimondo and Gov. Lincoln Chafee are working on a pension- overhaul bill they hope to submit to lawmakers soon.

The General Assembly plans a special session next month aimed at revamping the retirement system. Public workers will watch closely as lawmakers tinker with retirement benefits that many say they’ve been counting on for years.

Nearly every state has grappled with its own pension predicaments as they face ever more expensive retirement benefits, huge investment losses and recession-induced budget deficits. The Pew Center on the States released a report earlier this year that found states face a collective gap of $1.26 trillion between what they’ve promised public workers and what they have set aside to meet those promises.