A Democrat Bites Union Story
In Rhode Island, liberals take the lead on pension reform.

From The Wall Street Journal, Fri., Nov. 25, 2011

Rhode Island was founded by dissidents espousing freedom of conscience, so perhaps it's fitting that the state's Democrats have bucked their labor allies and passed the most significant pension reform of the last decade. They're saving taxpayers from decades of indentured servitude to pay for public worker retirements.

The Ocean State has been running a $7 billion unfunded pension liability, one of the largest per capita in the nation, and its annual pension bill was expected to double next year to $600 million. While public unions wanted to keep partying like it's 1995—when its pension liability was $1 billion—the state's left-leaning independent Governor Lincoln Chafee and Democratic treasurer Gina Raimondo took a more sober view.

Earlier this year they appointed a 12-member commission to recommend reforms that would reduce the pension bill and shore up retirement funds. Some panel members reported that the state would have to modify current worker and retiree benefits going forward to realize immediate savings. Merely tweaking benefits for new hires wouldn't save much money for another 20 to 30 years.

In contrast to President Obama's decision to ignore his own Bowles-Simpson deficit commission, the Rhode Island reformers then moved to implement these recommendations. What a concept. The reforms suspend annual 3% cost-of-living increases for retirees until the pension funds became solvent, raise the retirement age for most workers to 67 from 62, and shift all workers to a new hybrid pension plan that includes a modest annuity and defined-contribution component. They estimate their plan will lop $3 billion off the state's unfunded liability and cut its pension bill in half next year.

These reforms are far more comprehensive than those adopted or proposed in other states. Most have reduced future workers' benefits or required current workers to contribute more to their retirements. Only a handful have modified cost-of-living adjustments, which is where most immediate savings can be found.

A few have established mandatory hybrid or defined-contribution plans for new workers in which employees rather than taxpayers bear most of the risk. However, none have gone as far as Rhode Island and frozen benefits for current workers and shifted them to new plans. This is the most sustainable route, even if it may present legal challenges since some courts have ruled that pensions are contracts that cannot be changed. Modifying current benefits is also the hardest political sale.

Here's the stunner: Unions denounced the reforms as radical and threatened to file suit, but 77 of the state's 94 Democratic lawmakers still voted last week for the legislation with only minor amendments. Both Mr. Chafee and Ms. Raimondo deserve credit for explaining and defending the reforms to the public, which put pressure on lawmakers to go along.

Yes, America, there are courageous Democratic reformers.