Politics can still work: Rhode Island's treasurer forged bipartisan pension reform
September 11, 2012 4:00 AM
Rhode Island Department of the Treasury
Rhode Island Treasurer Gina Raimondo
By Fred Hiatt
At the Democratic convention in Charlotte last week, a delegate from Rhode Island walked up to Gina Raimondo and said, "You cost me $300,000."
Ms. Raimondo, the state treasurer who had quarterbacked a major pension reform, steeled herself for abuse. Instead, the delegate, a retired schoolteacher and wife of another retired schoolteacher, thanked Ms. Raimondo and gave her a big hug.
"This system was going to blow up," she said. "Thank God you fixed it."
These days it sometimes seems that the only alternative to the paralysis that blocks entitlement reform in Washington is the kind of all-out war waged by Republican Gov. Scott Walker of Wisconsin. If you find both extremes depressing, the story of Gina Raimondo may cheer you -- to a point.
Ms. Raimondo, 41, a Rhode Island native and Yale Law School graduate, was running a venture capital firm in her home state when a newspaper article she read in fall 2009 -- about the local public bus authority curtailing weekend and nighttime service -- pushed her into a political career. A year after her 2010 election, she had persuaded a Democratic legislature and a Republican-turned-independent governor to enact pension reform that cut the state's unfunded liability in half.
Given that states and municipalities have promised as much as $3 trillion more in pensions than they've set aside, this is a big deal.
How did Ms. Raimondo do it?
In her election campaign, she didn't detail her intentions -- she says she didn't know the extent of the problem, nor the right solution -- but she also didn't disguise her goal. That was enough to lose her the teachers union endorsement, though Ms. Raimondo was the only Democrat in the race.
"They asked me to promise I would not touch their pension," she said. "I promised, 'I will be honest, and I will talk to you all along the way.' "
By the time she took office, a number of towns and cities were close to bankruptcy, with pension costs a major cause. The share of state revenue going to pensions was at 10 percent heading for 20. Ms. Raimondo dived into the books, while conducting a statewide education campaign. "I spent all last summer in union halls," she recalled.
She stressed her respect for public service workers -- and that the problem was not their fault. What they had been promised was unsustainable. Their pensions were at risk and so were other state services.
"That was my mantra the whole time: Progressives care about public services," Ms. Raimondo told me. "A coalition of supporters developed, and it wasn't just the chamber of commerce. It was younger teachers, police, heads of social service agencies. ... Advocates for the disabled really came out."
The eventual reform delayed retirement and suspended cost-of-living increases. It changed a traditional system, in which the state bore all the risk, to a hybrid in which the state guarantees part of each pension ("important to me as a Democrat, because retirement is about security") and a 401(k)-style plan makes up the rest.
Unlike Gov. Walker's reforms, which spared police officers and fire fighters, it affected all state employees equally, from judges down. Unlike most plans, including for instance Gov. Jerry Brown's in California, it applied to existing employees as well as new hires; anything else, Ms. Raimondo says, would be unfair to the young.
Social Security has an unfunded liability of $8.9 trillion over the next 75 years, according to its trustees. The recipe for putting it on sound footing isn't complicated. Yet Washington politicians, divided between Democrats who resist any reform and Republicans who periodically champion privatization, do nothing, preferring to use the issue as a club to beat each other with -- and making the problem harder to solve year by year.
The Rhode Island approach -- face the facts; get everyone to the table; look to solve the problem, not demonize -- would seem to offer some obvious lessons. But when I tried to draw an analogy, Ms. Raimondo wasn't entirely encouraging.
"Rhode Island's pension system was in crisis today -- you would have seen other cities going bankrupt, devastating cuts to social services," she said. "I do think that that enabled what we did here."
The all-too-real effects of crisis generated support for reform.
"People don't really want to hear about the $3 trillion," Ms. Raimondo said. "They want to hear, your property taxes are going up, the bus you take to work is going to be cut, your kid's school is going to be underfunded. That got people calling the State House."
Today Ms. Raimondo is a defendant in five lawsuits, all brought by public employee unions. She's also the most popular politician in Rhode Island, a possible gubernatorial candidate in 2014.
"The next big thing we have to focus on is growth," she told me. "It's great we did the pensions, but when you have 11.5 percent unemployment, you gotta grow."