Pension problems and complications continue to weigh on
Rhode Island. Two communities in financial trouble because of unmet pension
obligations – West Warwick and Cranston – are getting resistance from their
unions and retirees when it comes to readjusting pension payouts. And the
state, in the biggest challenge of all, is attempting to remove the Superior
Court judge sitting in judgment on the union challenge to the landmark state
pension overhaul that was approved by the General Assembly last fall, citing a
potential bias because of family union connections (a state trooper son and a
retired mother). The judge, Mary
Taft-Carter, says there will be no bias in her decision-making, and she asked
for and received a judicial panel review that supported her position in the
case.
Contrast these situations with what’s happening in
Providence – there the firefighters union has just agreed to cut COLAs for its
members, and both retired police and firefighter retirees previously agreed
over the summer to similar cuts. In Providence’s case you have the public
safety unions and retirees agreeing to concessions to help save the city’
finances. In West Warwick and Cranston just the opposite is occurring – in
those communities unions and elected officials are balking at any compromise.
As a result, West Warwick, which is in a more dangerous position than Cranston
is at the moment, is probably going to get a state takeover, as occurred in
Central Falls.
West Warwick’s situation is dire. The town hasn’t made its
required pension payments for ten straight years now and has an unfunded
liability of $115 million. The town manager has offered some bitter medicine:
raise taxes, freeze salaries, slash overtime, and cut payments to retirees and
end their COLAs. The town council, which previously ignored a financial
consultant’s advice not to invest its pension funds in a less than stellar
outfit, doesn’t know what to do and has, in effect, thrown up its hands. The
state is poised to intervene, warning that what happened in Central Falls might
repeat itself in West Warwick.
In Cranston, where pensions costs currently total some
20-percent of the city’s budget, Mayor Fung has asked for pension relief from
city retirees – specifically no more COLA payments for a period of ten years,
with renewed COLAs of no more than three-percent coming after the ten-year
time-out period. First reactions came back in the form of a big NO with these
offered alternatives: close buildings, cut spending, and raise taxes, even
though higher property taxes would affect retiree homeowners too. As this
column went to press, however, the head of the city’s firefighters union, who
also represents former firefighters, has indicated that he is willing to meet
with the mayor on the issue, so perhaps some compromise can be worked out.
West Warwick’s and Cranston’s pension problems have come to
light due to the state’s requirement that cities and towns with troubled
pension funds (those with less than 60-percent long-term funding) report to the
state on the conditions of their plans and remedies they are taking to rectify
the problem. To see how big the pension shortfall is across the Ocean State, it
has been reported that 17 municipalities out of 39 are in poor shape with their
locally administered plans. Eight of those did not meet the state’s Nov. 11
deadline to report.
It is indeed hard to take back money promised, and for years
delivered, to retirees who, in many cases, depend on their set amount each
month to get by, and who have also been granted COLAs every year. Some argue –
hence the case against the state – that those promises are contractually
binding and can’t be taken away without the consent of the recipients. That’s why it is possible that the state will
lose in Superior Court, perhaps lose before the state’s Supreme Court, and have
to take the case to the Federal Appeals level. If that wasn’t possible, the
unions wouldn’t be pursuing it.
But Central Falls shows what can happen when the dollars
finally run out. And Providence demonstrates what a community needs to do to
avoid becoming the next Central Falls. If a community becomes insolvent the
state can step in and change the rules overnight, forcing everyone to receive
less than they could have retained through reasonable compromise. West Warwick, which doesn’t look like it had
responsible leaders for some time, may have to go that route. Hopefully
Cranston and other communities will find the means to compromise and ride out
the storm.
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