November 28, 2014
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Return to first principles
The past haunts RI’s pension reform
Steve Frias

Overcoming the influence of special interest groups in order to protect taxpayers is always a difficult task. Prevailing over the legacy of history makes this task almost impossible. Pension reform was enacted in Rhode Island because economic reality had finally trumped over a liberal political ideology. Now, pension reform is in peril because of the legacy of history, as reflected by two key public officials in this ongoing melodrama, namely, Governor Lincoln Chafee and Superior Court Justice Sarah Taft-Carter.

In 2011, Rhode Island lawmakers enacted pension reform legislation. It was the third consecutive year Rhode Island had reformed its pension system for state employees and teachers by reducing pension benefits. A key component of the 2011 pension reform legislation was the suspension of cost-of-living adjustments (COLAs) for current retirees. As a result, public employee unions brought suit against the state of Rhode Island, claiming their constitutional contract rights had been violated. In this past month, Governor Lincoln Chafee, who had signed the 2011 pension reform legislation, has met with public employee union leaders and argued for negotiation over the pension reform legislation enacted in 2011 by the General Assembly. Not long afterward, Superior Court Judge Sarah Taft-Carter ordered the unions and the state officials to federal mediation over this lawsuit.

Governor Lincoln Chafee’s call for negotiation over pension reform is consistent with Chafee’s predilection for fickle political maneuvering regarding unions over the course of two decades. Many recall that before signing pension reform legislation in 2011, Governor Lincoln Chafee was supported by public employee unions when he ran for Governor in 2010. What few may recall is that in 1992, when he was running for mayor of Warwick, during a time when Warwick teachers were striking, candidate Chafee spoke of the possibility of "a voucher system or privatization” for education because teachers were “going to price themselves out of the business." He even lobbied state legislators against approving binding arbitration for teachers because the “unions own the arbitrators.” After he was elected mayor by a very small margin in a three-way race, Mayor Lincoln Chafee changed his approach regarding the teacher unions. He circumvented the Warwick School Committee to give Warwick teachers a 19.4 percent pay raise with no health insurance premium co-share. A former Warwick School Committee chairperson was quoted at the time as saying, “the city taxpayers could not have done any worse” and that “even a monkey can manage to give everything away.”

Lincoln Chafee may have first learned to take inconsistent positions for political purposes from his father, Governor John Chafee. Most memorably, John Chafee was elected governor in 1962 and was re-elected in 1964 and 1966 on a pledge to oppose a state income tax. In 1968, after not vetoing any state budget submitted to him by the General Assembly in five years, he proposed a state income tax. In regards to public employee unions and pension legislation, Governor John Chafee had quite a fickle policy. In 1963, John Chafee expressed “mixed emotions” about a bill that granted police officers collective bargaining rights but allowed it to become law without his signature and noted that police unions did not include binding arbitration. A few years later in 1968, Governor John Chafee signed legislation that gave police and firefighter unions binding arbitration, over the near unanimous objections of municipal officials, while his spokesman suggested that binding arbitration should be “given a try.” In 1966, Governor John Chafee vetoed legislation giving state employees collective bargaining rights, but in that same year, he signed legislation that gave teachers collective bargaining rights because it was a “step forward” to “achieve quality education in the state.” Also, in 1966, Governor John Chafee vetoed legislation that eliminated a minimum age requirement for state employees to receive a pension, but three years earlier, in 1963, he had signed nearly identical legislation that eliminated a minimum age requirement for teachers to receive a pension. Rather than demonstrating a steadfast commitment to pension reform, Governor Lincoln Chafee is engaging in inconsistent political maneuvering like his father.

As for Judge Taft-Carter’s order for mediation, some have noted that Judge Taft-Carter’s mother would be affected by the pension reform legislation and that her son is currently in the state pension system. However, Judge Taft-Carter’s order for mediation reflects a flawed legal view regarding the pensions of teachers and state employees. In 2011, Judge Taft-Carter found that state employees and teachers with more than 10 years of employment had “contract rights.” In that decision, she seemed to put little weight on federal court and Rhode Island Supreme Court precedent, which determined that a statute creates a contractual right only when the language unmistakably shows a clear indication by the legislature to create a contractual right. The pension benefits of state employees and teachers were never included in collective bargaining agreements. In fact, state law enacted since 1979 prevents pension benefits governed by the state pension system from being negotiated in collective bargaining. Furthermore, in 2005, the Rhode Island House of Representatives rejected, by a vote of 56 to 15, a budget amendment to define vested pension benefits as a contractual right and to prohibit any reduction of presently existing pension benefits.

Interestingly, in her 2011 decision on the 2009 and 2010 pension reform legislation, Judge Taft-Carter stated that pension benefits enacted by statute, such as COLA increases, is a “clear indication” of a “bargained-for-exchange.” Sadly, Judge Taft-Carter ignored the history of how COLAs began for state employees and teachers. Some state employees and teachers received COLAs for which they never contributed a dime of their pay. In fact, some were not even working for the government when COLA legislation was in effect. In 1968, state employees who were already retired began receiving a 1.5 percent COLA each year. Also, their pensions were increased by 1.5 percent for each year they had already been retired. In 1970, teachers who were already retired also had their pensions increased by 1.5 percent for each year that they had already been retired. When, in 1970, legislation was enacted granting all retired state employees and teachers 3 percent annual COLAs, state employees and teachers did not see a commensurate increase in their pension contributions. There was a bargain here, a great bargain for public employees at no cost to them. The circumstances surrounding the adoption of COLAs for state employees and teachers do not meet the standards of a contractual right, but seem to suggest more of a gift, a mere gratuity.

In an ironic twist, the state legislator who was the main sponsor of the legislation to give retired state employees COLAs in 1968 was then State Senator James Taft Jr., the father of Judge Taft-Carter. He introduced the legislation at the request of the administration of then Governor John Chafee, the father of current Governor Lincoln Chafee. State Senator Taft went on to become mayor of Cranston where he engaged in various budgetary gimmicks, rejected a consultant’s recommendation to fully fund the Cranston police and firefighters pension system and, in fact, defeated a law suit brought by the Cranston police union to require the city fully fund the pension system.

All of this trouble over pensions could have been avoided, or at least minimized, if public officials had simply followed the principle that public sector retirement benefits should be no higher than private sector retirement benefits. Governor John Chafee knew this back in 1966 when he vetoed pension legislation for state employees by calling the state pension system “very generous” while noting how the pension legislation was inconsistent with what was offered in “private industry” or “with our attempts to maintain economy in government.” Senator Taft probably knew this as well when he voted to sustain Chafee’s veto. Unfortunately, they and other public officials never consistently followed this fiscally sound principle. One can only hope that Governor Lincoln Chafee, and Judge Taft-Carter, and others finally will.


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