Friday, October 28, 2011

RI General Treasurer's pension plan will devastate businesses

It's curious why General Treasurer, Gina Raimondo would propose her pension reform act before the RI Supreme Court rules on the constitutionality. To date, she has lost in the courts. After seeing her jubilant waves to the "Engage Rhode Island" rally and her refusal to speak to the retiree rally on October 26, 2011, it became clear to me that she only cares about her political future. She should have been saddened by having to be the instrument of broken promises. The jubilation was a shameful act.

The Providence Journal’s pension reform chart (COLA Wars, October 27, 2011) tells an interesting story. Raimondo’s plan is the largest business killing legislation that anyone could dream of. How can the Rhode Island business community and the Governor wave the flag?

The average state retiree will have a cumulative income loss of between $185,500 and $139,386 and the average public school retiree will experience a cumulative income loss of between $227,406 and $146,464 over the next 19 years. With over 50,000 retirees in the system at any one time, the loss to Rhode Island’s economy will be close to $10 billion during the next 19 years. Now let’s assume a subset of retirees is pissed off enough to move out of state. If 20,000 people with their spouses move to states without a state income tax and the family income is $60,000, the state’s economy will be losing an additional $1.2 billion each year. Over the 19 years the total loss to the state’s economy could be well over $30 billion. Make a COLA adjustment but don’t eviscerate retirees and businesses.

I’m glad I don’t own a small business in Rhode Island. If I did I would be fighting this legislation. Be careful what you wish for.


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