Following a Tuesday briefing for city and town officials, local mayors remained sharply critical of a proposed settlement in the legal challenge to the state’s pension overhaul and the manner in which it was negotiated.
“A lot of mayors were frustrated and angry … I voiced my opposition, my frustration, to the people that were there,” said Johnston Mayor Joseph Polisena. “We were never informed. It’s kind of a slap in the face … There was no appetite to accept this.”
“I was still disappointed in the outcome,” said Cranston Mayor Allan Fung, who has called on the General Assembly to reject the settlement.
Fung asserted that those who negotiated the proposed settlement are “treating [municipalities] like an ATM,” and said that “fits with what’s been going on in a secret nature.”
“It’s not something we can afford,” he said of the proposal.
The settlement, announced publicly by General Treasurer Gina Raimondo, Gov. Lincoln Chafee, other officials and the legal counsel for both the state and unions, would resolve six cases challenging reforms made to the public pension system in 2009, 2010 and 2011, the latter and most sweeping of which was championed by Raimondo. It was negotiated under the guidance of federal mediators during closed-door talks ordered by Judge Sarah Taft-Carter.
The deal faces multiple steps before being enacted, including approval by unions, the court and the General Assembly. Lawmakers would need to approve the deal without amendment for it to take effect.
Those backing the settlement say it would protect retirement benefits for public employees, preserve 95 percent of the savings realized under the 2011 law and stave off further litigation that could prove costly, lengthy and unpredictable for both sides.
The financial impact of the deal on the state’s cities and towns, however, has drawn significant criticism. The settlement would slightly increase the state’s unfunded pension liability to just over $5 billion – compared with roughly $4.8 billion under the 2011 law – and require an estimated $24 million in additional funding split between the state and municipalities for fiscal year 2016, which begins in July 2015.
Fung said for that fiscal year, Cranston’s share would be just shy of $1 million. Polisena said Johnston’s liability would increase by approximately $278,000.
The Warwick School Department would also be affected by the proposed settlement. The department’s business affairs officer, Anthony Ferrucci, said Wednesday that prior to the announcement the department was advised to budget a 10 percent increase in contributions. That would boost pension costs to almost $10 million for the next fiscal year. Ferrucci believes the settlement could tack on $600,000 to $700,000 on top of that.
The prospect of “re-amortization” – or extending the timeframe over which pension liability is funded – as a means of lessening the financial impact of the settlement was also raised during the municipal leaders’ briefing.
Fung said he finds that option problematic.
“Even with that, you’re going to incur a cost over time … there’s no free lunch,” he said.
Polisena was more receptive, saying such a move would be the “path of least resistance” and would make the added burden “a little more palatable.” He continued to voice opposition to the settlement, however, given the impact on local taxpayers.
“To have a tax increase, whether it’s this year, next year or the year after, it would be very difficult,” he said. “Right now, my concern is people are struggling to pay their bills.”
A former state senator, Polisena said he has reached out to Johnston’s legislative delegation to voice his concerns with the settlement. He said lawmakers, like mayors and town managers, find themselves in a difficult position.
“It’s not fair to them, either,” he said. “They’re probably just as angry.”
Polisena said he also believes the deal will be a “tough sell” to union members, and also questioned what impact it would have on private pensions negotiated by municipalities.
Fung said he found it “very surprising” to learn of a “side deal” the parties to the settlement made with the unions for Cranston’s police and fire personnel. Those unions opted not to participate in the settlement, and will instead continue to pursue litigation. They will, however, still be covered under the terms of the settlement if it receives the needed approvals.
“It gives those two bargaining units a free run,” Fung said.
Cranston’s fire union, in a statement, did indicate it is open to the creation of a private pension plan outside the state system. Fung said it is “something I’ll take a look at,” but added that any such arrangement would only be acceptable from his perspective if it is beneficial to the city’s taxpayers.