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Licht: 5.5% assessment meant to curb RI’s use of contract employees

November 18, 2011

The only amendment added Thursday to the state’s new pension overhaul law — it mandates a 5.5 percent assessment for “non-state employee services” — is meant to curb state government’s use of contract employees. That’s what Richard Licht, director of the state Department of Administration, told me after Governor Chafee signed the pension overhaul into law this afternoon.

I asked Licht if the 5.5 percent assessment will curb the state’s use of outside employees. He responded:

That’s correct, and that’s actually the purpose of it. And independently of pension reform, our department is doing an analysis of contract employees, because there are instances where people working side by side — one works for an independent contractor, one works for the State of Rhode Island — yet they’re doing the same work.

So we are re-looking at it, and seeing whether this is a practice that was started in the last administration and whether it’s one that we should continue.

Licht says the Chafee administration helped draft the language for the amendment with the 5.5 percent assessment, although, he says, the final version emerged from the House. (Asked about the amendment, Chafee told me, “I don’t know all the details of the bill. An amendment? a late amendment? . . .  I’ll get up to speed on that.”) 

Licht says the 5.5 percent assessment will be levied on the state. “The contractor doesn’t have to pay it,” he says. “It’s assessed against the state, and that money goes into the pension plan, so it just makes the pension fund that much stronger. We don’t have a final fiscal estimate, but I think it’s [impact] is in the neighborhood of $2 million a year.”

Chafee’s predecessor in the governor’s office, Republican Don Carcieri, came under criticism, particularly from public-employee unions, for increasing the state’s use of contract employees. The liberal blog Rhode Island’s Future captured this excerpt from a ProJo article in 2008:

Despite a yawning budget deficit and a sharply downsized state work force, the Carcieri administration plans to use 584 contract employees in the current fiscal year, including a $238,140 project manager at the Department of Labor and Training, a $196,000 database administrator at the Department of Corrections and an $87,500 junior help desk assistant at the Rhode Island Veterans Home.

…“… By our count, at least 73 individuals are going to be making above $90,000 a year… when the state is going through one of the worst economic crises in history,” [Council 94’s Jim] Cenerini said.

The 5.5 percent assessment is perceived by more than a few Smith Hill observers as an inducement to attract labor support for the pension overhaul bill. While the reduced pension benefits in the new law represent a loss for labor, other aspects — including the exclusion of locally managed pensions outside the state retirement system — are more favorable.

Meanwhile, the 5.5 percent assessment was not discussed in a hearing prior to its introduction Thursday evening, and it generated little attention even then. Asked if the subject deserved more public discussion, Licht says: 

I leave that to legislative leaders. There was discussion of it, but perhaps it wasn’t in the bill. This was such a complex process. And it’s really only impacting the state . . .  It doesn’t impact any contractor directly.

5 Comments leave one →
  1. November 18, 2011 11:47 pm

    Using the billed cost of a contractor as if it’s the guy’s salary? Is that what we’re doing now?

    • Mister Guy permalink
      November 19, 2011 12:50 am

      According to SEIU’s Phil Keefe:
      “It will be based on payroll. It’s a moneymaker for the state and could be changed to total contract [value] under new contract terms.”

      This appears to be a backdoor way to cover at least some of the costs that were added to Raimondo’s amended pension “reform” plan by removing many, but not all, “public safety employees” from the new hybrid pension system. It doesn’t sound like it will generate a lot of money though, and all of it appears to be coming from the state anyways. It’s probably more silly, backroom nonsense.


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