Panel curbs pension costs

11:37 AM EDT on Wednesday, June 22, 2005

BY SCOTT MAYEROWITZ KATHERINE GREGG and LIZ ANDERSON
Journal State House Bureau

PROVIDENCE -- Just before the stroke of midnight, a key House committee approved a new state budget that includes major cuts in public-employee pensions.

Journal photo / Connie Grosch

House Speaker William J. Murphy, seated, takes a break from budget negotiations in the corridor outside his office while a hearing takes place before the House Finance Committee. At right is House Majority Whip Peter F. Kilmartin.

The move is expected to save the state and local communities $44 million in the coming year.

The much-vaunted pension reform was the cornerstone of the proposed new $6.3-billion state and federally financed budget for the year that begins July 1. At 11:54 p.m., the House Finance Committee gave its unanimous support of the measure, sending it on to the full House for a vote as early as Monday.

The pension package reinstates, for the first time in nearly two decades, a minimum retirement age.

To get a full pension, new state workers and public-school teachers -- and people in either group without the 10 years needed to be vested -- would have to be at least 59 years old and have worked for 29 years. That group includes about 4,350 state workers and 7,000 teachers.

The proposal also limits the maximum pension benefit to 75 percent of salary for workers with 38 years of service, and ties annual cost-of-living increases to inflation, with a cap at 3 percent.

"We're trying to do real reform and balance the equities and unfortunately it's going to land on the backs of some," said House Majority Leader Gordon D. Fox, D-Providence. But, "even what we've come out with, with the worst-case scenario, it's still a very good pension for a life's work."

The pension changes closely mirror what Governor Carcieri recommended in January, with minor tweaks around the age of retirement.

"I'm happy that the House Finance Committee seems to have accepted much of my plan for reforming the state pension system," the Republican governor said in a statement last night.

The Assembly also adopted Carcieri's suggestion of allowing workers to retire at age 65 with 10 years of service. The lawmakers' plan would allow earlier retirement for workers age 55 with 20 years service, but with a reduced pension.

The House and Senate plan to study changes to the pensions of other state employees not included here, such as state police, judges and employees at quasipublic state agencies.

Overall, the budget adds $95 million to the one proposed by Carcieri in January and is 6.5 percent larger than the spending plan for the current year.

Making good on promises to provide some form of property tax relief, the lawmakers channeled millions more into non-school aid. They voted to reduce local car taxes. And they spread enough money around state government to avert some of the cutbacks and higher copays that Carcieri sought in several family assistance programs, including state-subsidized childcare.

They also put $33 million aside to cover the cost of 4-percent across-the-board raises for most state workers next year; another $10 million is booked elsewhere for retroactive raises this year.

How much tax relief Rhode Islanders will actually see this year is unclear. All but 3 of the state's 39 communities have already passed their budgets for the coming year; some have even mailed tax bills -- which would have to either reprint their bills or make adjustments in later quarters.

Still, Dan Beardsley, executive director of the Rhode Island League of Cities and Towns, was delighted that lawmakers restored money the governor had proposed cutting from municipal aid programs, adding $4.3 million to payments-in-lieu of taxes to communities with tax-exempt institutions and $11.9 million in revenue sharing for all cities and towns.

Lawmakers also rewrote the rules for which communities qualify for extra aid as "distressed communities." The new formula gives North Providence -- the hometown of Senate President Joseph A. Montalbano -- an extra $509,000.

Gary S. Sasse, executive director of the Rhode Island Public Expenditure Council, however said there's no guarantee the increased aid will translate into relief since historically it has been used for more spending.

Lawmakers were not so generous when it came to local school aid, keeping it basically at the same $666-million level the governor proposed -- a $19.3-million boost for all districts.

Rep. Paul W. Crowley, D-Newport, said lawmakers were no longer convinced that the money invested in education aid results in direct property tax relief.

Tim Duffy, executive director of the Rhode Island Association of School Committees, said most of the additional school dollars went to state-run schools in Central Falls and the MET School in Providence. Local districts, he said, are getting a little more than a 2-percent bump. He said the money used to reduce car taxes should have gone to education.

"The benefit of a $500 reduction in motor vehicle . . . [tax] equates to $38 in the City of Providence," Duffy said. "That's less than the price of a night out at the movies for a family of four."

College students should lookout for significant tuition increases. Lawmakers stuck to the governor's budget, which estimated increases of 8.9 percent at the University of Rhode Island, 8.5 percent at Rhode Island College and 8.8 percent at the Community College of Rhode Island.

Judges asked for money to give themselves raises of up to 38 percent next year. But Costantino said the proposed budget only counts on them receiving the same 4-percent raises projected for other state employees.

Some workers, however, will get special pay increases.

For example, lawmakers added $112,500 to bump up, by two pay steps, the salaries paid the 44 capitol police officers who patrol courts, the state Capitol complex and various state department offices. The base pay for an officer at the top step of the ladder would go from $33,486 to $35,667.

The beneficiaries would include the 32-year-old son of House Finance Committee member William San Bento Jr., D-Pawtucket. The elder San Bento said he didn't lobby for the raises but considered them well-deserved.

The 90 or so people in the public defender's office will also split $80,000 in raises. And the budget includes a 2.2-percent increase in payments to the 156 private organizations that provide an array of services for the state including adult daycare, substance abuse treatment and mental health services.

Assembly leaders went along with two of Carcieri's proposed cuts in state-subsidized childcare.

The first raises the threshold for when childcare providers qualify for state health insurance for themselves and their children. The second would delay a 2-percent rate increase due to 1,200 or so childcare providers from July 1, 2005, to January 2006.

But lawmakers did overturn a proposal from Carcieri to have 4,600 families in the state's subsidized childcare program begin paying a higher share of the cost.

Henry Shelton, of the George Wiley Center's Campaign to Eliminate Childhood Poverty, hailed lawmakers' decision to increase the funds for a property-tax rebate program that is distributed first to seniors and the disabled, with low-income residents splitting whatever little is left.

But Shelton was less happy that lawmakers reduced the time span for when a family would be cut off from welfare benefits for failing to comply with an employment program. Last year, lawmakers adopted a 24-month penalty; this year they scaled it back to 18 months.

"They're stepping backward on welfare, punishing women," he said.

Advocates for the poor did get $100,000 to enroll people in the federal food stamps program. Lawmakers also doubled the state's earned-income tax credit to 10 percent of the federal credit.

But they balked at a proposal allowing people in the state's welfare-to-work program to count education and job training as part of the 30 hours a week they are required to work.

"If they went with the stricter [welfare] sanction, we hoped they would allow more flexibility and allow parents to combine education and training to fulfill their requirements," said Kate Brewster, executive director of Rhode Island College's Poverty Institute.

The budget raises the annual appropriation for affordable-housing construction, from $5 million to $7.5 million, and includes $300,000 to help people who are homeless make the transition into housing and jobs.

On the revenue front, lawmakers sided with Carcieri in striking the exemption that spares the Beacon Mutual Insurance Co., the state's dominant workers compensation insurer, from paying upward of $3 million in annual taxes.

And they expect millions more through the imposition of a drastically higher processing fee -- equal to 1.25 percent of project cost -- on the scores of developers expecting to take advantage of historic-preservation tax credits.

The budget would also raise the fines on the roughly 84,500 speeding tickets issued each year in Rhode Island by $10 apiece, increase the tax on cigars and smokeless tobacco for the first time in four years, and allow camping at the Scarborough and Misquamicut state beaches for the first time.

National Guard members would be reimbursed for buying up to $250,000 in life insurance. The attorney general will get $225,000 for three new staff members to pursue elder-abuse complaints and monitor troubled nursing homes and the Rhode Island Public Transit Authority will get an extra $4.5 million to help offset a deficit.

The General Assembly would gain nine staff members, at a cost of $816,000, to help committees scrutinize the operations of state government. Another $150,000 is earmarked to hire education funding advisers.

The budget also allows the state to issue $90.5 million in bonds to buy the Dunkin' Donuts Center from Providence and do extensive renovations.