As states face as much as $3 trillion in unfunded pension liabilities, they are beginning to consider the once-unthinkable move of cutting pension benefits for those already retired. Until recently, most states have addressed pension shortfalls by cutting benefits for new employees, The Washington Post
For example, Rhode Island is $6.8 billion short for pensions for retired teachers, police officers, and other public employees, so plans are being considered that would lower retirement payments, replace some of the guaranteed pensions with 401(k)-type accounts, and reduce cost-of-living benefits.
“If it isn’t illegal, it certainly wouldn’t sit right morally,” said J. Michael Downey, a plumber and president of Rhode Island Council 94 of the American Federation of State, County and Municipal Employees.
“They are going to fix this for Rhode Island on the backs of people who have worked their entire lives,” Downey told the Post.
In the past two years, Colorado, Maine, Minnesota, New Jersey, and South Dakota went after cost-of-living increases for retirees in their public pension systems. The moves were met with court challenges.
In Rhode Island, the amount of tax dollars going to state pensions more than doubled between 2003 and 2010. The state has cut aid to public schools, local government and higher education, the Post reported.
In Cranston, R.I., the pension plan for firefighters and police is underfunded by $245 million, a number close to the city’s annual budget. The average pension collected by 182 retired firefighters in the town is $56,500, a figure that the Post reported is $200 a year more than the average pay earned by the city’s 123 active firefighters.
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