President-elect Joe Biden recently announced Rhode Island Gov. Gina Raimondo is his pick to serve as commerce secretary. Gov. Raimondo, a moderate Democrat and former venture capitalist, has been the governor of Rhode Island since 2015. Prior to being elected governor, in her role as Rhode Island’s state treasurer, Raimondo spearheaded important, comprehensive public pension reforms.
As treasurer, Raimondo was largely responsible for the 2011 Rhode Island Security Act (RIRSA), a pension reform law designed to improve Rhode Island’s pension funding levels, which were ranked 49th in the nation at the time of the bill signing. A report commissioned by Raimondo showed that, in 2011, the $14.8 billion pension system had more than $6.8 billion in unfunded liabilities. In addition, taxpayer contributions to the funds had more than doubled from $139 million in 2003 to $303 million by 2010.
The Raimondo-led pension reform efforts introduced numerous changes to the public pension plans, including raising the retirement age for employees, suspending cost-of-living adjustments, and moving employees from a poorly designed and unsustainable defined benefit plan to a hybrid plan.
“Fixing the pension system was one of the biggest problems Rhode Island faced,” Raimondo told Roll Call in 2016. “A big part of the reason we were not having enough money for public buses and playgrounds and libraries and after-school sports is because the pension liability was gobbling up an increasingly large percent of the budget.”
As Reason.com’s Eric Boehm recently pointed out, Raimondo’s leadership on this issue “started a years-long effort to reform the system, despite the opposition of public sector unions. Raimondo succeeded by building a political coalition and bringing the looming crisis to the public’s attention.”
Now, 10 years after the initial pension reforms were put in place, Rhode Island’s pension plans are on track to be sustainably funded.
If confirmed as commerce secretary, Gov. Raimondo would be the head of the federal government’s technology policy goals, oversee relations with the business community, and be responsible for promoting American industry. She would also be given one of the three seats on the federal government’s Pension Benefit Guaranty Corporation, which protects private-sector pensions. This is a positive development given her successes with public pension reform in her home state.
Gov. Raimondo’s efforts to enact meaningful pension reform for one of the most poorly funded pension systems in the nation demonstrates a good understanding that a well-funded public pension plan is of utmost importance to both public workers and taxpayers.
Even more importantly, during her time in office, Raimondo demonstrated that, contrary to the fears of many policymakers, addressing difficult public pension challenges could be a benefit and not a liability to one’s political career. She demonstrated you can build coalitions and make substantive changes to solve difficult problems. Other states and policymakers would be wise to learn from her example and follow Raimondo’s lead by addressing their own pension public pension challenges.
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