Murphy said the panel would be set up in January 2008 with a mandate to propose legislation changing the current public pension system to be considered in the 2008 legislative session, according to a Providence Journal news report.
The newspaper said the Ocean State legislative leader first indicated his desire for a defined contribution system during a Sunday morning interview and then later revealed the study commission plan.
“We’re on a collision course with some bad times,” Murphy said, according to the Journal. “It’s something we have to take a look at. Too often we’re just worried about year-to-year budget cycles. We have to start planning for Rhode Island’s future.”
Rhode Island taxpayers will pay $397 million next year — a $50-million increase over the current year — to fund the state system, which covers more than 45,000 working and retired state employees and public school teachers.
According to the Journal, teachers contribute 9.5% of their salaries and state employees 8.75%. Taxpayers’ portion has increased every year since 1999: from 9.95% to 25.03% for the teachers’ pensions alone.
Rhode Island is in the seventh year of a 30-year plan to pay off its unfunded liability, which has risen from $4.3 billion to $4.9 billion, according to data presented to the state retirement board, the newspaper said.
Officials say that the state’s unfunded liability is growing because most retirees are living longer and the fund continues to suffer from the lingering effects of poor stock market performance several years ago.
Alaska (See Labor Unions Protest Alaska’s New Pension System ), Michigan, West Virginia (See W. Virginia Treasurer to Use Match to Increase DC Plan Participation ) and the District of Columbia require state employees or public school teachers to enroll in a defined-contribution plan, according to the news report. Another six states make defined contribution plans optional.