PROVIDENCE — With Governor Carcieri at the helm signaling this may be a sign of things to come for other state workers, the Rhode Island Economic Development Corporation’s board of directors yesterday voted to eliminate the guarantee of 3-percent compounded annual increases for future EDC retirees.

The elimination of these annual cost-of-living adjustments — or COLAs — would only affect those who retire after March 1, 2009.

This was the response from Carcieri, who chairs the EDC board, when asked if he would recommend the wholesale elimination of COLAs for other state retirees: “I think the whole issue of pension costs needs to be revisited … and the COLA is a part of that.”

Last year alone, automatic COLA increases added $12.8 million to the annual pension tab for the retirees who are members of the state retirement system, including most state employees, public school teachers and municipal workers outside the big cities. The value of the state’s own pension portfolio has sunk.

“No private plan that I am aware of provides COLAs for retirees and I’ve said from the beginning that I didn’t think that this was something that was affordable by the taxpayer, nor did I think it was fair,” said Carcieri, avowing that his own pension as a retired top executive at Cookson America has no COLA.

While yesterday’s vote touched on a narrow issue — cutting EDC costs during a downturn that has eaten into its pension investment portfolio — the executive director of the independent state agency, Saul Kaplan, said he will unveil, within days, other pieces of a larger financial stimulus-recovery package for the state.

One proposal seeks to “capitalize” a direct-loan fund with a mix of federal and private-bank money. The other would create a “guarantee authority” to provide private banks the assurance of taxpayer backing for loans they might otherwise balk at making.

“It won’t work for all companies,” Kaplan said, “but there are companies that are kind of on the margin that banks are hesitating on … They either can’t get Small Business Administration [guarantees] or some have loan requests that are larger than what SBA can cover.”

On the pension front: the elimination of the 3-percent COLA for future EDC retirees is expected to reduce the agency’s 2009-10 pension expense from $1,217,175 to $817,175, spokeswoman Melissa Withers said. “These dollars come directly from the EDC $6-million operating budget, making increases to the pension fund is difficult to sustain as our operating budget continues to be cut,” Withers said.

The EDC no longer offers defined-benefit pensions to new employees. The 14 employees hired since Jan. 1, 2006 are enrolled in a government equivalent of a 401(k) plan for private-sector employees. The EDC contributes 4 percent of an employee’s pay to the plan, regardless of whether the employee contributes. It also matches dollar for dollar employee contributions of up to 3 percent of their own pay.

Of the 87 EDC employees, 73 are enrolled in the agency’s old defined-benefit-plan available only to those hired before Dec. 31, 2005. While five of those workers are represented by a union, the International Union of Operating Engineers, Local 877, Kaplan said their contract allows management to make “adjustments.”

kgregg@projo.com