A fight over public pensions in Rhode Island is about to come to a head in the Legislature, with lawmakers scheduled to vote Thursday on a landmark overhaul that has angered public-sector workers in this tiny and economically troubled state.
And public employee unions have vowed that if they don't get their way, they are determined to make sure the courts have the last word.
The results could have big implications for other states grappling with their own runaway public retirement costs. Supporters and opponents of Rhode Island's proposed remedy say it's as far-reaching as any attempt launched around the country.
With its 10.5 percent unemployment rate, Rhode Island simply cannot afford the generous pension plans promised to public workers years ago, according to the proposal's chief architect, Treasurer Gina Raimondo.
"Rhode Island is small, with a shrinking economy and relatively poor," said Raimondo, a Democrat. "Pension reform is hard. It's brutally hard. But if it doesn't happen? Calamity."
The bill is designed to save taxpayers billions of dollars in future years by suspending automatic annual cost-of-living pension increases for public retirees, adjusting retirement ages and giving most current employees a new retirement plan that mixes a traditional pension with a 401(k)-like account.
Public-sector unions in this traditionally labor-friendly, Democratic bastion feel betrayed and vow to sue the state if the legislation is adopted. Union members spent the final days before Thursday's vote encouraging lawmakers to revise the bill.
Unions have been pressing lawmakers to scale back the proposed retirement age increase and retain some level of annual cost-of-living pension increases for retirees.
Bob Walsh, executive director of the 12,000-member National Education Association Rhode Island, isn't optimistic.
"Maybe there's a reason this hasn't been done in other states," he said. "Maybe it's because it's illegal. I don't know of any other state that has done these things to retirees, to public workers. At least not any other state run by Democrats."
Estimates put Rhode Island's unfunded liability for public workers' pensions at $7 billion, slightly less than the entire state budget for one year. To make good on promises to public workers, the state must pour more and more into the pension system annually, from $319 million in 2011 to $765 million in 2015 and $1.3 billion in 2028.
Nearly every state is confronting the same problem, caused by escalating pension costs, huge investment losses and recession-induced budget deficits. The Pew Center on the States released a report earlier this year that found states face a collective gap of $1.26 trillion between what they've promised public workers and what they have set aside to meet those promises.
This year, more than a dozen states increased the amount public workers contribute toward their retirement, according to a survey by the National Conference of State Legislatures. Fourteen states voted to raise retirement ages or increase the time an employee must work before being eligible for benefits.
Several states, including Ohio, Illinois and California, face even larger unfunded pension liabilities, but when Rhode Island's cost is divided among its 1 million residents, it becomes clear that it has one of the weakest pension systems in the nation.
If nothing is done, Raimondo warns that local and state governments will have to raise taxes and slash funding for services like education to keep up. And there may be no money for pensions when many of today's public workers retire, she said.
The pension system covers 66,000 active and retired public teachers, state employees, judges and police and firefighters. Fifty-eight percent of retired teachers and 48 percent of retired state workers receive more money in their pensions than they did in their final years of work.
Lawmakers preparing for Thursday's vote said they hold in their hands the retirement plans of public-sector retirees _ and the state's fiscal health.
"This will be one of the most important votes we ever take," said Rep. Jon Brien, D-Woonsocket. "It's not a perfect piece of legislation, but this needs to be done. We no longer have the choice of ignoring this problem."