Last night, Rhode Island’s legislature passed a sweeping reform of its public-sector retirement system. It cuts retiree benefits, mostly by suspending cost of living adjustments, and institutes a cheaper hybrid plan with a 401(k)-like private account component, and it should save taxpayers billions of dollars in coming years.
Far-reaching as the bill is, however, this outcome is something of a failure, good only by comparison to the tragedy that would have ensued had lawmakers done nothing. Rhode Island waited until it was on the cusp of disaster to make desperately needed changes. By comparison, Utah’s reform, described in our recent series of case studies, came about because lawmakers were thinking years into the future about the risk pension shortfalls presented. They gathered support for changes to the retirement system to head off a crisis before it became inevitable.
The short-sightedness of the Ocean State shouldn’t be called “courageous” simply because Rhode Island changed course at the last possible moment to avert disaster. The state may provide a model for other profligate jurisdictions like Illinois, showing them that change is possible and following the old path over a cliff isn’t their only option. But the country should look to more proactive reform-minded states for an example of how best to structure teacher retirement systems for the 21st century.
