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Now let's visit a small state that's dug its pension system into a big hole - $9 billion deep. That's a lot of money for Rhode Island. If lawmakers do nothing, that state could soon be spending 20 percent of its budget on pension checks. Here's Catherine Welch of Rhode Island Public Radio.

CATHERINE WELCH, BYLINE: There's a slate of reasons why the pension system is in such bad shape.

KIL HUH: Essentially, lawmakers kicked the can down the road, and they've just run out of road.

WELCH: That's Kil Huh, director of research at the Pew Center on the States, summing up the lack of political will that for decades allowed lawmakers to make expensive promises to state workers.

The 2008 crash on Wall Street didn't help, either. It took a big bite out of the pension fund's investments. Retirees are also just living longer. It's why major pieces of the pension overhaul include raising the retirement age and freezing cost-of-living adjustments, or COLAs, for current retirees.

The initial plan called for freezing COLAs for 19 years, frightening retirees like 94-year-old Milt Bronstein.

MILT BRONSTEIN: This proposal, waiting 19 years - God, most of us will be dead and buried by 19 years.

WELCH: Bronstein collects a $46,000 pension. And changes to the bill means he'll have to live on that until the pension fund meets investment targets, which lawmakers hope will only take five years.

General Treasurer Gina Raimondo crafted the pension bill, knowing she'd hurt retirees.

GINA RAIMONDO: As much as I worry about retirees forgoing a COLA, I also worry about young teachers who might be left with nothing, and I worry about the average Rhode Islander who certainly has no COLA, and probably has no pension, and is being asked to pay for this system.

WELCH: One of the people she's got to convince is Democratic State Representative Ray Gallison. And for him, the pension is personal.

STATE REP. RAY GALLISON: It does hit home. My wife was a teacher; she is now a retiree. She wasn't in Social Security, so she has to rely on what she has now.

WELCH: Many Rhode Island teachers, like Gallison's wife, don't collect Social Security. And now, after teaching in public schools for 34 years, she might have to live on a pension that will never go up. She didn't want to talk with me about it, but the couple has spent hours discussing her pension at the kitchen table. Gallison says his wife knows something needs to be done to fix the system. She just doesn't like the idea of freezing the COLA.

GALLISON: She's threatened to me - to say that I'm going to have to sleep on the couch. But she understands that, that the benefits that she is receiving have to be protected.

WELCH: He's convinced her that the situation would be worse if the pension system runs out of money. Rhode Island is expected to immediately save $3 billion. But that isn't enough to convince state workers that they need to make a sacrifice.

(SOUNDBITE OF RALLY)

UNIDENTIFIED MAN #1: The unions didn't create this pension, but politicians did. We'll help them fix it, but not on our backs.

WELCH: State workers and retirees hate the COLA freeze; and thousands of them rallied against it this week outside the Statehouse.

(SOUNDBITE OF RALLY)

UNIDENTIFIED MAN #1: Keep the promise - we did.

WELCH: The unions have pushed the legal question of whether state workers have a contractual right to their pensions through to the state Supreme Court. If the justices disagree with the unions and the changes become law, then Rhode Island may go from being a little state with big pension problems, to a national model for pension reform.

For NPR News, I'm Catherine Welch in Providence, Rhode Island.

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