Rhode Island § 45-65-3 - Retirement Security Act for Locally Administered Pension Funds

§ 45-65-3. Legislative findings.

It is the intention of the general assembly to begin the process of ensuring the sustainability of locally administered pension plans and to advance and maintain the long-term stability of such plans. The general assembly finds and declares that:

(1) Rhode Island law authorizes and empowers municipalities to administer their own municipal pension plans; currently, there are thirty-six (36) such plans administered by twenty-four (24) municipalities.

(2) According to a report by the Office of the Auditor General entitled Pension and OPEB Plans Administered by Rhode Island Municipalities (September 2011): “Many municipal pension plans are severely underfunded which presents the risk that sufficient funds will not be available to meet promised benefits to retirees. It also undermines the overall fiscal health of the plan’s sponsor.”

(3) It is in the best interests of individual employees, taxpayers, municipalities and the state itself to maintain viable and sustainable municipal public pension plans. These interests include:

Preserving a level of pension benefits that is, over the long term, reasonable for current and retired municipal employees and affordable for taxpayers;

Avoiding significant and unanticipated retirement benefit reductions, which could cause an increase in poverty among retired municipal employees and a resulting strain on state social services;

Maintaining investments in infrastructure and education on the state and local levels in lieu of diverting critical resources to satisfy pension obligations;

Preventing the financial downgrade of municipalities by rating agencies as a result of unfunded pension obligations, which would make it more difficult to access the capital markets and increase the costs of borrowing;

Encouraging rating agencies, in recognition of the state’s proactive approach toward financial discipline, to take positive credit actions on Rhode Island municipal bonds; and

Creating a more stable and well-managed environment in Rhode Island to attract new businesses and maintain and expand existing businesses, which will diminish the uncertainty and fiscal instability that accompany uncontrolled pension obligations.

(4) The first step in ensuring the viability and sustainability of local pension plans is to get an accurate analysis of the current condition and fiscal health of the individual plans.