Gov. Lincoln Chafee’s legislative package of municipal reforms may do little to offer relief to Warwick taxpayers but, nonetheless, is an important tool that addresses issues faced by other cities and towns, said Mayor Scott Avedisian.
Avedisian singled out the escalation of school aid and the reduction in disability benefits for employees that can perform other jobs as being helpful to Warwick. But, as Avedisian points out, much of Chafee’s legislative package is designed to assist highly distressed communities. Warwick doesn’t fit that definition, meaning if the measures gain legislative approval, the city could not employ a series to measure to cut expenses.
While Warwick isn’t facing the financial uncertainties of Providence and Woonsocket and several other municipalities, its Fire and Police pension plan – Fire and Police I – fit the definition of being “severely underfunded.” At the last actuarial study, the plans carried an unfunded liability of about $220 million. That amount is projected to grow since the city lowered estimated investment returns and adopted the mortality assumptions adopted for state administrated plans.
Plans that are not funded at 60 percent or more are in “critical status.” The legislation would give the council the power to pass an ordinance suspending cost of living adjustments [COLAs] to retirees provided it is “reasonable and necessary to achieve the municipality’s fiscal stability.”
The city implemented a 40-year plan 18 years ago to meet the long-term cost of the plan that it has faithfully followed. Yet, the plan is still only 22.3 percent funded, according to draft report to be released soon.
While this aspect of the Chafee plan may be applicable to this pension plan, Avedisian is not sure it would be of use. The pension plan does not have a set COLA, but links increases in retiree benefits to the most recent contracts for police and fire. For example, if police and fire receive a 2 percent pay increase, retirees would likewise get a 2 percent increase.
The administration is just starting contract negotiations with fire, police and municipal employees and those packages will certainly take into consideration many more issues than salary increases.
“It may not save any money,” Avedisian said of the provision.
The Chafee package has raised questions and criticisms among some legislators.
Rep. Joseph McNamara called lifting the mandate on school nurse teachers, “short sighted,” as he believes parents will take their children to local hospital emergency rooms, pushing up costs and resulting in lost classroom time for students.
McNamara favors in-school preventative programs and treatment of minor medical needs observing, “Students can’t learn if they’re sick.”
Also, McNamara is wary the governor’s package lumps municipal pension plans together.
“Warwick pensions are very well funded [with the exception of Fire and Police I] and one design does not fit. It’s not an answer to put everyone in a state plan,” he said.
These are the details of an overall larger plan being advanced by the governor.
In announcing the package on March 15, Chafee said, “We are facing three choices in Rhode Island: let our communities go bankrupt, watch property taxes continue to skyrocket, or give our municipal leaders the tools and relief they need to achieve fiscal stability for their communities.”
He said the measures will “empower municipal officials to address the structural problems that threaten our cities and towns and hold them hostage to the very future of our state.”
The definition of highly distressed applies if ranked in the lower 20 percent of three of the following four criteria: percent of tax levy to full value of property; per capita income; percent of personal income to full property value and per capita full value of property.
Warwick does not fit any of the criteria.
Among mandates a distressed community could waive, with council approval, include suspension of bus monitors, suspension of nurse-teachers, suspension of teacher step increases, consolidation of city and school administrative functions, suspension of educational incentive pay for police; suspension of non-public school transportation.
Mayor Avedisian said yesterday he has requested Ward 1 Councilman Steven Colantuono to introduce a resolution in favor of the legislative package.
The Governor’s municipal reform and relief legislative package includes seven bills:
- Allowing municipalities with poorly funded pension plans to suspend annual cost of living adjustments until the plans are better funded – just as the state did as part of its pension reform.
- Offering mandate relief and binding arbitration reform for four highly distressed communities – Providence, Pawtucket, Woonsocket, and West Warwick. These communities were hit hardest by the loss of state aid to municipalities in recent years. The state cut $220 million in municipal aid between FY 2008 and FY 2011, but did not repeal costly mandates, forcing cities and towns to raise property taxes and slash services. This legislation provides mandate relief to control costs and reduce the need for additional property tax increases. It also limits the scope of binding arbitration in highly distressed communities to only salary-related issues, and places primary emphasis on a community’s ability to pay when deciding awards.
- Instituting new budget accountability measures for school spending, following numerous cases of significant deficits and fiscal mismanagement by school committees. The state will have greater oversight of school budgets and have an early warning system if schools are spending above their budgets.
- Requiring communities with overly generous pension benefits to bring pensions in line with the state system.
- Reducing disability pension benefits for employees that can perform other jobs.
- Advancing municipal aid to avoid cash flow problems.
- Providing certain exemptions for school maintenance of effort requirements.