NewsHour economics correspondent Paul Solman reported from Rhode Island about the ongoing battle between states and unions over pensions. While the biggest national fights in Wisconsin and Ohio continues over new bills to limit or end collective bargaining, in the small New England state of Rhode Island, a battle is brewing over demands to change employee pensions which are largely responsible for a $300 million deficit.
In Rhode Island, as elsewhere, the root cause is plain and simple: Governments gave workers benefits instead of raises without a specific plan to pay for the extra benefits. With the retirement age being raised and benefits being reduced many state workers are concerned that their pension plans are being drastically reduced.
Without dramatic changes to the pension system, Rhode Islanders are facing higher taxes and over cuts in government services. With limited resources public services such schools, buses, parks, libraries and higher education are in jeopardy of losing critical funding.
"Today, Rhode Island has a $5 billion unfunded liability, which is the highest unfunded liability per capita of any state in the country." Gina Raimondo, Rhode Island General Treasurer
"And a lot of people don't realize that we pay into it, that we have paid since I have gone to work every pay period -- and I have never skipped, because it gets taken out -- 8.75 percent of my salary." Mary Riley, Rhode Island state clerk.
1. What is a budget deficit?
2. What is a pension plan?
3. Discuss types of employee benefits.
1. If you were the Rhode Island General Treasure, how would you balance their budget deficit?
2. What do you think are some of causes of the current financial crises facing state governments?
3. What are unions and do you think collective bargaining is beneficial? Why or why not?