The Wrath of the Neoliberals: Robbed in Little Rhodie

by HOWARD LISNOFF

This past fall, both my wife and I were beaten up in Rhode Island! We weren’t physically harmed, but part of the pensions we had worked a combined 58 years for were stolen from us by a law passed by the General Assembly. The law had been championed and proposed by the general treasurer of the state and signed into law by the governor.

Since we no longer live in Rhode Island, and I seldom follow news there, I learned of the proposed pension cuts while parking my car at the community college where I teach in upstate New York. A security guard whom I greeted every morning in the garage communicated the news to me, having heard a report in the national media on the pension system in Rhode Island.

I knew that the labor movement had been active in places like Wisconsin and Ohio over the past several months trying to stem the tide of attacks against collective bargaining rights and the pensions of current and former workers in those states. The anti-union and anti-worker movement is not new, with so-called right-to-work laws having been passed in states across the US with the intention of limiting the rights of workers won during and since Roosevelt’s New Deal.

Rhode Island is a strange place politically. Nepotism is an accepted way of doing business in the state and the political environment reflects that reality. Contrasted against the stilted political apparatus is the state’s stunning natural beauty at its seashore and the significance of the state’s colonial history.

Both the state’s general treasurer, Gina Raimondo, and its governor, Lincoln Chafee, represent the 1 percent in America. Raimondo representing high finance (by way of past employment before becoming general treasurer), while the governor represents “old” Rhode Island money and a storied political family. The cry of possible state bankruptcy would become the hallmark of the battle to strip pension benefits from those least able to defend themselves against the power of the state and often living hundreds or thousands of miles away. The whole episode would play out as a shoddy experiment in social Darwinism!

As the fall of 2011 matured, I received mailings from the Employee’s Retirement System of Rhode Island, of which Raimondo, as the state’s general treasurer, is also chairperson. Even with the seriousness of what was at stake in terms of pensions for about 66,000 current and retired state and municipal workers in the state, I had to laugh out loud when the communications from the state began with congenial greetings. Raimondo had successfully campaigned on the platform of pension “reform,” and she was about to deliver on that promise.

I began writing furiously and often in opposition to proposed pension cuts in the bill before the General Assembly and voiced my opposition to the bill on the website that the University of Rhode Island’s School of Business had created to deal with comments on the bill. Not a single letter I wrote was published in the Providence Journal and I was never contacted about my critical comments about the bill on the university’s website.

More and more upset, I contacted the presidents of the American Federation of Teachers, the National Education Association, and the American Federation of State, County and Municipal Employees in Rhode Island. Each president of his respective organization was supportive and already had spent years dealing with pension issues in the state. A previous pension law had taken away pension benefits to current workers in the state by increasing worker contributions to the pension system and increasing the number of years a worker would have to labor for a pension. After the current pension bill was passed in Rhode Island, these organizations could not represent retired workers in any legal battle to win back their lost pension funds. In Rhode Island, the bill eliminated (to take effect in 14 months) what’s known alternatively as the cost-of-living allowance or the cost-of-living adjustment (COLA). The latter amounted to an annual 3 percent adjustment to my pension to help meet inflationary pressures in the economy. It was now gone with a simple signature. The state, under the new pension law, has the option of paying out a COLA in several years if the state’s investment portfolio performs well.

As the fall wore on, I was forced to miss (because of the demands of my teaching schedule) a demonstration at the Rhode Island State House attended by thousands of those protesting the proposed pension bill. Local protestors associated with the Occupy Wall Street movement attended the protest as well.

How much of a mess the retirement fund in Rhode Island was in prior to the current pension law’s passage is debatable. At the end of the decade of the 1980s, an early retirement incentive was passed that allowed workers within the pension system to use all sorts of questionable past employment experiences to qualify for pension credit. A summer of work as a lifeguard could be applied to the system for early retirement. Debacles like the latter, coupled with Rhode Island’s penchant for nepotism in official matters, lent itself to the slow deterioration of the system. The Great Recession of 2007-to the present may have done the rest. An acquaintance calls the pension system there a giant Ponzi scheme. General Treasurer Gina Raimondo claims that the state will save $3 billion because of the pension law. I know I will receive a smaller retirement benefit, as will many retired workers across the nation as their pension funds crack and crumble under the strain of The Great Recession and unbridled greed of the wealthy.

Nationally, the Social Security Administration published the study in 2009 “The Disappearing Defined Benefit Pension and Its Potential Impact on the Retirement Incomes of Baby Boomers.” The study compared traditional defined benefit (DB) plans with defined contribution (DC) plans from 1980 through 2008. DB plans pay a lifetime annuity, while DC plans establish an investment account owned and controlled by employees (often with employer contributions). DC plans are generally more risky than DB plans, but the recession and attacks against workers may change the nature of that debate. The study combined an analysis of both public and private pension plans in both categories of pensions. The study found that through the years of the study DB plans fell from 38 percent to 20 percent, while DC plans rose from 8 percent to 31 percent among private pension holders. The study concluded that pension changes by employers would create losers among baby boomers born from 1961 to 1965 (“last-wave” boomers) and hurt “first-wave” boomers (those born between 1946 to 1950) generally less. The study also found that “last-wave” boomers would lose more in retirement income than “first-wave” boomers, much of the loss accelerated by membership in demographic groups whose lifetime earnings are generally less than “first-wave” boomers. Those groups that would be hurt most would be high school dropouts, minority groups, and those who are unmarried. The most startling conclusion of the research states: “Finally, as policymakers consider proposals to improve the solvency of the Social Security System, they must recognize that the shift from DB to DC pensions means that Social Security will increasingly become the only source of guaranteed lifetime benefits of which most retirees can rely.” Indeed, with the drop in once guaranteed benefits from Rhode Island’s pension system, I will need to tap into those potentially threatened Social Security funds!

The Social Security Administration’s study does not consider, however, the collapse of pension funds due to businesses’ wrongdoing or the effects of The Great Recession on retirees.

Nationally, as The Great Recession continues for millions of people, the federal Pension Benefit Guaranty Corporation (PBGC) paid out $5.6 billion to stakeholders because of 147 failed pension plans across the nation during fiscal year 2010. PBGC’s deficit rose by 45 percent during that period to $23 billion. Astonishingly, PBGC has $102.5 in obligations with only $79.5 in assets. If the track record of The Great Recession on Wall Street is an indicator, that deficit will be foisted on the heads of the working class and middle class!

When I think of my years of teaching service in Rhode Island, I recall the innumerable students I helped while serving in several capacities within the educational system. I remember winter mornings driving with white knuckles resulting from my grip on a car’s steering wheel while attempting to negotiate ice and snow-laden roads. When I retired, I signed an agreement that I thought was a legal document that guaranteed benefits for the years I had worked, but law, as it turns out, is politics by just another name.

I also remember my years as a political activist, years that gave an entirely different flavor to the decades that I lived in the state. There were years protesting against wars and injustice. There were winter days standing with others out in front of the federal building in Providence and marches through the streets of that city that dated back to the antiwar movement during the Vietnam War. There was the chilling hate-filled remark of a neighbor commenting on my attendance at, and writing about, the latter: “Hitler should have killed all of the Jews!” But in spite of all of this, somehow I thought that all of this counted for something. That, however, would not be the case. The US has long been the world’s only superpower and the engine of the economic system of globalization. Rhode Island is but one small cog in that system, but it’s where many changes took place in my life. And it’s where I wrongly thought equity and economic justice might prevail in some small way!

*Little Rhody is the nickname for Rhode Island.

Howard Lisnoff is a freelance writer. He blogs at howielisnoff.wordpress.com.