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The court case foreshadows likely battles elsewhere as states grapple with their own pension problems. In the past two years, 10 states suspended or cut retiree pension increases; 13 states now offer hybrid retirement plants that combine pensions with 401(k)-like plans.
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$1.4 Trillion in State Pension Fights
Foreshadowed in Rhode Island

AP/FOX News
Retired social worker Jim Gillis was told his $36,000 Rhode Island state pension would increase by $1,100 next year to keep up with inflation. But lawmakers suspended annual increases, leaving Gillis wondering how he'll pay medical bills and whether he'd been betrayed by his former employer...

He and other retirees are challenging the pension changes in a court battle that's likely to have national implications as other states follow Rhode Island's lead.

Cities and states around the country are shoring up battered retirement plans by reducing promised benefits to public workers and retirees. All told, states need $1.4 trillion to fulfill their pension obligations. It's a yawning chasm that threatens to wreck government budgets and prompt tax hikes or deep cuts to education and other programs.

The political and legal fights challenge the clout of public-sector unions and test the venerable idea that while state jobs pay less than private-sector employment, they come with the guarantee of early retirement and generous benefits.

The actions taken by states vary. California limited its annual pension payouts, while Kentucky raised retirement ages and suspended pension increases. Illinois reduced benefits for new employees and cut back on automatic pension increases. New Jersey last year increased employee retirement.

Nowhere have the changes been as sweeping as in Rhode Island, where public sector unions are suing to block an overhaul passed last year. The law raised retirement ages, suspended pension increases for years and created a new benefit plan that combines traditional pensions with something like a 401(k) account.

"This saved $4 billion for the people of Rhode Island over 20 years," said state Treasurer Gina Raimondo, a Democrat who crafted the overhaul. "Rhode Island is leading the way. I expect others to follow, frankly because they have to."

Public employee unions say Rhode Island is reneging on promises to workers.

"What they did was illegal," said Bob Walsh, executive director of the National Education Association Rhode Island. "We're deep into a real assault on labor. It worries me that people who purport themselves as Democrats do this."

The court case foreshadows likely battles elsewhere as states grapple with their own pension problems. In the past two years, 10 states suspended or cut retiree pension increases; 13 states now offer hybrid retirement plants that combine pensions with 401(k)-like plans.

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Editor's Note: It has become too easy for politicians in government to take funds from dedicated revenue sources and spend them on things unrelated to a fiscal mandate that protects the funding. Case in point: When the State of Illinois passed legislation creating the Illinois Lottery, the money gleaned from the enterprise was supposed to be dedicated solely for education in the state and nothing else. But how did the greedy political opportunists in Illinois' legislature game the system (no pun intended)? They made sure the dedicated funds were put into the General Fund instead of a dedicated and untouchable fund for education only. They then depleted the General Fund and, with it, the profits meant for education from the lottery. Imagine how much of a surplus the Illinois education system would have if they had all of the annual lottery profits for the schools? They would need take no money from the Federal Government and, therefore, would not be beholden to any of the social engineering unfunded mandates levied by the federal government. But then, the politicians are so freaking brilliant...right?...Right?!...


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The New Media Journal and BasicsProject.org are not funded by outside sources. We exist exclusively on donations from our readers and contributors.
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