WELL, THE Rhode Island budget for 2008-09 is passed. Some are rejoicing that there are no broad-based tax hikes. Others shrug and say, “It’s the best they can do.” For myself, I see another budget that fails to fix the structural problems that have faced Rhode Island for far too long.

While there are some good things in the budget, that it is balanced on over $100 million in savings from Medicaid and personnel that are unlikely to be attained means that elected officials continue to manage the decline of this great state. With a poor economy and a frighteningly high unemployment rate, Rhode Island has yet to turn the fiscal corner with this budget.

To turn the corner we need to reinvent Rhode Island. We need real structural change to lift us from the bottom rung of states and transform Rhode Island into a place where our kids can stay and prosper, and where new businesses can locate and thrive. If our state legislators had the courage to solve just one of our major structural problems this year we would be on our way to being a state that could start to compete.

Let me give you an example: solving our state pension disaster. The problem: Rhode Island ranks 49th out of 50 states in funding its state pensions. We have an unfunded liability of over $4.3 billion and are scheduled to spend $397 million this year alone on state pension benefits. One out of every eight dollars we are taxed is going to the pension system!

Now, the legislature could fix this problem. Under state law, without any negotiations with the unions, it can change the pension system. In 2005 there were much-heralded “reforms” to the system. However, the changes only affected younger workers. Thus, a large majority of the workers were not affected at all. These “reforms” only got the legislators through the 2006 election cycle.

So this year House Speaker William Murphy organized a committee known as the Special House Commission to Study All Aspects of the State Pension or Retirement System. Its name is longer than its list of accomplishments. This is not surprising since it was fatally flawed from the beginning. Many of the members are conflicted, because they are in the state pension system themselves.

Let’s be realistic. Do you think any real reform will ever come from a committee dominated by the executive director of the National Education Association Rhode Island, the secretary-treasurer of the AFL-CIO, or the politicians supported by these people? I don’t.

After 14 meetings, the commission conveniently decided to do nothing until at least July 31. That is in the middle of the summer, when people are away on vacation, the budget has passed and the deadline to run for office has come and gone. Their attitude is simply “delay, delay and hope the people go away.”

However, the pension problem is not going away. While costs are not going up dramatically in 2008-09, be prepared for another steep increase in the near future as actuaries make adjustments for poor markets, the massive outflow of state workers by October, and the costs of replacing many of those retirees.

If you want structural change and real reform, you must go to the heart of any problem. And the heart of the pension problem is this: The vast majority of politicians will promise more than they can deliver on pensions because they generally will not be around in the future.

So here’s what we need to do. First, disband this transparently self-serving commission at once. Second, realize that the real structural change that needs to be made is to convert defined-benefit plans to defined-contribution plans (401[k]s and IRAs). This must be done for everybody, not just new state employees. The question of what to do with the years of service vested employees have accumulated is a negotiable one but the major point is this: no one accrues into the defined benefit system anymore.

In this scenario there are many winners:

1. State workers and teachers win. They would know they will actually get what is in their future 401(k) and at least get fair compensation for the years they have been in the current pension system. Also, the large payroll deduction that they make now to the current pension system would be reduced. Furthermore, they would gain mobility as they can take a job in the private sector and move their pensions with them. Increased mobility enhances economic growth. (How often have we had a conversation with a state worker who says, “I have to work for the state for x more years until I can leave”?)

2. We the taxpayers win! We take one huge step to having benefits in the public sector reflect what is going on in the private sector. This will ease future tension between public sector and private sector workers, between neighbors and friends. And it will free up an enormous amount of money in future years to help us start to cut taxes. That’s right, cut taxes.

3. Cities and towns will have lower pension costs since teachers will be affected by this reform.

4. Businesses outside Rhode Island will start to look at Rhode Island in a whole new way, one on the cutting edge of reform, and begin to consider us as a place to expand and employ.

Real structural change must happen for Rhode Islanders to prosper. For without real structural change on multiple issues, your state legislature will inevitably have to dig deeper into your pockets, maybe sooner than you think.

Maybe this November — after the election, of course.

Stephen Laffey is the former mayor of Cranston.