The Trillion Dollar Gap: Rhode Island
Underfunded State Retirement Systems and the Roads to Reform
Rhode Island's management of its long-term pension liability is cause for serious concern and needs to improve how it handles its retiree health care and other benefit obligations. To its credit, the state has consistently met its actuarially required contribution. However, it has funded only 61 percent of its total pension bill—well below the 80 percent benchmark that the U.S. Government Accountability Office says is preferred by experts. Moreover, the total unfunded pension liability—$4.4 billion—is almost three times more than its annual payroll. Rhode Island passed legislation in 2009 that raises the retirement age, changes final salary calculations and limits cost-of-living adjustments; this bill is projected to save $50 million in fiscal year 2010. Finally, like 19 other states, Rhode Island has failed to set aside any assets to cover its long-term liability for retiree health care and other non-pension benefits. The total bill coming due is $788.2 million.