October 30, 2014
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Lookout
Legislators punted pension problem back to municipalities
John Hazen White Jr.

Progress on the pension reform front remains mixed after the General Assembly scotched Governor Chafee’s seven-bill package of reform measures for local communities. Lawmakers never embraced the governor’s insistence on providing them relief through legislation at the state level. Their inaction leaves a number of Rhode Island cities and towns squirming under the debt loads they face in meeting pension obligations going forward.

Mayors of some of those communities – considered “distressed” because of their underfunded independent pension plans – were ardent supporters of the governor’s relief package. This package would have allowed a suspension of COLA payments to retirees, among other related relief measures. If passed into law, it would have provided state authorization to abrogate certain contractual obligations. Cities and towns viewed the relief package as an extra measure of authority to break contracts, which is otherwise almost impossible to do, and also to provide them another layer of protection in court when challenged by their unions.

But lawmakers balked, eyeballed by labor and mindful of the election season approaching for all of them. In not taking up the governor’s relief package, they punted the problem back to the municipal level, forcing city and town councils to wrestle with their individual unions in gaining concessions that would, in fact, be claw backs of measures written into collective bargaining agreements.

Some communities may be successful in getting claw backs from unions and retirees, but in other localities that won’t be easy or possible. If imminent bankruptcy faces a city or town – as in Providence most recently – unions have shown that they will negotiate. After all, as has been pointed out, half a loaf is better than none at all. In Providence’s case, the city did receive concessions on COLAs at the last minute. Retirees have endorsed them by a majority vote, but the city’s police and fire unions have not yet scheduled their votes on the issue with their members. (Should members of one or both of those unions buck their leaders’ agreements with the city, bets are off for the capital city avoiding bankruptcy, despite all that has been accomplished.)

Elsewhere on the pension reform front, local funds have been given 20 years by the state commission authorized to assist them to implement reform measures to eventually bring their plans back to health. That’s more time than some municipal leaders want, being ever mindful of how much additional money they will have to put into pension payments over such a term. Facing exploding pension obligations, they are going to have to go all out in convincing their unions to meet them halfway as soon as possible.

One such local leader, Mayor Allan Fung of Cranston, told Lookout recently that his unions see no tax increase occurring or further personnel cuts happening to reduce the city’s payroll and take that to mean that the city is fine with the way things are and union concessions aren’t needed. As the mayor conceded, nothing could be further from the truth. Thankfully, Governor Chafee intends to bring his pension relief plan back next year.

It’s hard to take away public sector retirement benefits that retirees have been receiving or are working to earn for their own future retirement, but that’s the reality we face. In the private sector the uncertainty about affording retirement is on the back of the individual and that is risky indeed. People are living longer, which is a good thing, but the cost of paying for retirement gets more daunting all the time. Public employees are not the only ones taking a haircut or living with retirement anxiety these days.


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