1/19/12

Municipal Pension Commission a Good Idea

I don’t always agree with Governor Chaffee but on the matter of forming a commission to study the municipal pension situation, I think he’s doing the right thing. The commission has been tasked to study the various independent pension plans out there across the state, many of which are grossly underfunded, and come up with recommendations for legislation by the General Assembly this session. The commission includes labor leaders and municipal leaders so it aims to be inclusive. (So did Gina Raimondo’s study group, which also included labor representatives, though they complained later that the set of recommendations passed on to the legislature was a whitewash as far as they were concerned.)

The most immediate issue for the commission is to throw a lifeline to struggling cities and towns in the form of enabling legislation that will allow them to halt COLA payments to retirees. Otherwise, some mayors have asserted, they could go broke like Central Falls – or need advance state education aid payments like East Providence to cover the bills. Beyond COLA relief the commission will study ways in which municipalities can bring these plans into line with the guidelines that cover plans under the state system. In passing pension reform last fall the legislature did sketch out a reform mechanism for cities and towns, and we can expect the commission to further that mechanism.

Having enabling legislation in place to halt now unaffordable COLA payments to retirees will help stop the hemorrhaging that’s taking place in a number of RI cities and towns. Lawsuits will inevitably follow and all of this will end up in court, but, in the meantime, cities and towns will be in a better position to continue making payroll and pay retirement benefits, and not have to go hat in hand to the state for bailout payments. Plus, legislative assistance to troubled municipalities will help stabilize their sinking credit ratings.