The Future Could Bring Higher Property Taxes for the State

About a week and a half ago I was able to attend an event held by the Rhode Island Association of Realtors.  Some of the day was to learn about the changes in the real estate field and other parts of the day were very specific to the state’s economy.   We had the pleasure of listening to Gina Raimondo the General Treasurer speak about pension reform. Whether you are for or against the reform she did do a great job explaining what they are hoping to accomplish and what needs to be done.

I personally feel like everyone keeps talking about the reform in a political way, but most importantly we all want to know how it affects us, the little people.

Her presentation touched on some of the proposed items of the reform. (These areas were driven by discussion and questions).

1. Retirees are living longer and the state would like to raise the retirement age to 67. It is estimated that the unfunded liability would be reduced by approximately $700 million.
2.  Modifications of COLA (Cost of Living Adjustment). This is a significant cost driver and some changes are thought to be needed. One of the ideas is to freeze it for a time period.
3. Hybrid plans. The idea that employees would have an additional source for retirement savings.

By no means is this a comprehensive picture of the Treasurer’s plan but for me it was good to see some specific examples. She stated that unfunded liability is the lion’s share of the problem. If everything stays as is we all know it this just isn't sustainable. The taxpayer contribution in 2003 was $139 million to the pension system and it has grown to $303 million in 2010. It will continue to grow and it is projected in 2013 the amount will double to approximately $615 million.

Of course this affects different members of the community in different ways based on where you work etc etc. One of the biggest impacts, if this doesn’t pass, was that  the entire state’s property taxes could go up to help pay for pensions.  In this economy it seems like a tough pill to swallow especially with the unemployment in our state so high. Now I am no budget expert or political analyst so I am not sure what we should do. There are cases for both.

Should we pass pension reform or not? What do you think?