The latest challenge to Rhode Island’s recovery from the recession was news this week that Moody’s Investors Service downgraded the outlook on Rhode Island bonds to negative from stable because of “the potential impact of rapidly escalating pension costs on the state’s ability to increase its liquidity margins, diminish its reliance on one-time measures to balance its budget and reduce its debt burden.”
Rhode Island currently has an unfunded liability of $9.4 billion, which includes 155 plans run by state and municipal agencies. “The state’s pension costs are set to double in two years by an amount that roughly offsets its budget reserve account, raising the likelihood that it will continue to face significant budgetary pressures,” Moody’s said, adding that prior to the recession, it faced persistent revenue underperformance and spending challenges.
Last month, the state Retirement Board approved a $266-million increase in the amount taxpayers must pay to support state-run government employee pensions beginning in 2012, the Providence Journal reported.
“While it is disappointing to receive a negative outlook from Moody’s, it comes as little surprise given the challenges facing our pension system. However, it is heartening that Moody’s noted our state’s intentions to address our escalating pension costs,” Rhode Island General Treasurer Gina M. Raimondo said in a statement.
Meanwhile, an economic indicator released last month said Rhode Island’s economy expanded 1.9 percent in the first quarter of 2011, sustaining about the same rate as in the last two quarters of 2010. The quarterly Bryant University-RIPEC Rhode Island Current Economic Indicator projects the state’s economy will continue to expand at a rate of 1.8 percent over the next two quarters.
"These figures confirm that the state's economy has been expanding, but the labor market has yet to rebound," Bryant and RIPEC reported in their jointly-produced quarterly newsletter. "Economic expansion usually precedes job growth. Job creation will be quite slow in Rhode Island as the current and the short-term rates of economic growth are relatively small.”