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Gina Raimondo, Rhode Island’s treasurer, listens to Ernest Gibbons, a retired employee of the University of Rhode Island, after a meeting on pension reform in Newport, R.I.. (STEW MILNE/NYT)
Gina Raimondo, Rhode Island’s treasurer, listens to Ernest Gibbons, a retired employee of the University of Rhode Island, after a meeting on pension reform in Newport, R.I.. (STEW MILNE/NYT)

Book Excerpt

How the Rhode Island treasurer slayed her state pension dragon Add to ...

Raimondo had three things going for her in the uphill pension battle. Under Rhode Island law, state pension benefits are approved by the legislature. They are not part of a collective bargaining process, which means the government could argue, if legally challenged, that cutting pension benefits did not violate labour contracts. Another advantage was a tactical legal move by the state to restrict potentially unruly local governments from damaging Rhode Island’s credit rating. In July 2011, Rhode Island’s legislature passed a unique new law retroactively guaranteeing that all investors in state or municipal bonds would be fully repaid first in the event of a government bankruptcy. While some municipalities complained the state was putting Wall Street ahead of Main Street, the move ensured that Rhode Island and other local governments could continue raising badly needed funds by selling bonds. If one municipality declared bankruptcy, it would not be able to dig out of the hole by reneging on bond payments.

Although most of her colleagues in the Democratic Party were confident that they had enough support to pass the reforms, Raimondo wasn’t taking anything for granted. It was a good bet that some representatives would seek to mollify angry labour groups with last-minute amendments. These reforms would be watered down if state politicians, seeking to mollify labour groups, passed amendments that rolled back some of the pension cuts. The state was on the eve of such an historic pension overhaul that reporters from national television and print outlets, including Time Magazine, The New York Times, and The Wall Street Journal, had flown in to witness the vote. All of them wanted to interview Raimondo. She had to be prepared if the vote went the wrong way.

A lot had happened in the 10 months since Raimondo was sworn into office in January. Her Truth in Numbers report and local town hall meetings had touched a chord with the state’s weary taxpayers. Voters had run out of patience with high local taxes and deteriorating government services. The town of Central Falls had been forced into bankruptcy under the burden of a $40-million pension obligation, and some retirees saw their pensions cut by as much as 50 per cent. This was no longer a Tea Party or Republican issue; Democrats were facing a backlash if they continued to avoid fixing a broken retirement system.

Just as Raimondo had predicted, Rhode Island’s House of Representatives was busy with floor amendments when the new pension legislation was tabled shortly after 2:30 p.m., Nov. 17, 2011. During the next several hours, more than 30 amendments were introduced, many of them attempts to shield various pension members from the changes. Watching the political theatre from a second-floor gallery were more than 200 spectators, most of them union officials. As the procession of amendments were voted down, a chorus of jeers and catcalls from the gallery grew so loud that the House speaker warned them to be silent.

House Majority Leader Nicholas Mattiello stood to soothe the crowd: “Nobody woke up one morning and said, ‘We’re going to take something from folks.’ Most of the folks up in the gallery are our friends.” He was drowned out by booing. Near the end of the session he stood again. “We have a $7.3-billion pension liability. ... Whether you are sitting in this room or voting, you are one of the employees who is going to be impacted. It has to be done. We had no choice.” At 7:40 p.m., more than five hours after the legislation was introduced, the vote was called. It was a landslide: 57 representatives voted in favour and 15 opposed. A few minutes later, the Senate delivered a bigger sweep, with 32 in favour and two opposed.

Raimondo, who had been tensely watching the debate from her office television, was suddenly the most sought-after politician in the United States. Reporters lined up outside her suite of offices to interview the political novice who had accomplished the seemingly impossible in a discouraging era of American political gridlock. She had convinced politicians to risk their political careers to secure a financially sound, long-term future for the state and its retirees.

“Government worked tonight,” she told reporters. “On one of the toughest, most financially complicated, politically charged issues we face, we did something right.”

This book excerpt has been condensed and edited.

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