Public Pension Costs Continue to Rise

It seems like almost every other week now we get a report saying that the costs of the public pension system are higher than previously expected. Here is the latest one from The Providence Journal:

The Rhode Island public pension system may soon cost taxpayers far more than previously believed.

The consultant for state government’s $7-billion pension fund issued a report last week recommending that state officials revise overly aggressive investment assumptions that could be masking the true cost of the system. The change could cost state and local taxpayers as much as $63 million.

And that’s on top of the projected $218 million that state taxpayers are expected to contribute in the coming year.

“There is a widespread sense that the market meltdown in 2008, which has only partly been offset by subsequent gains, signaled that the financial world has changed in fundamental ways,” reads a draft report by Texas-based actuary Gabriel Roeder Smith, which recommends that state officials significantly revise the current assumption that the state pension fund will grow 8.25 percent each year in investments managed by the state treasurer’s office.

The report comes as the General Assembly wrestles with plans to trim costs from the pension system to help fill ballooning budget holes.

In addition to limiting cost-of-living adjustments for newly retired state workers, teachers and judges, the House of Representatives hopes to generate short-term savings by refinancing the retirement system’s $4.3-billion unfunded liability. Akin to refinancing a home mortgage, the move would produce short-term budget relief but cost taxpayers $2.2 billion over the next 25 years.

The actuary’s recommended change could wipe out much of the savings in the legislature’s plans.


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