November 28, 2014
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Pension COLAs in mayor’s sights

The city administration has had “internal talks” about changing retiree benefits, including the cost of living adjustments (COLAs), Mark Carruolo, the mayor’s chief of staff said at Monday’s City Council budget hearing.

The disclosure came during a discussion of pension costs and in response to former Ward 1 Councilman Robert Cushman. Cushman has consistently argued the city can’t sustain the “legacy” costs of pensions and retiree health care. He provided council members with three pages of graphs showing the trends of municipal and school spending and how, since 2004, more than 50 percent of new revenues raised by taxes – a total of $15.9 million – flowed into retiree pension and health care costs.

To break the cycle, Cushman argued COLAs for police and firefighter retirees should not be linked to the salaries of active members of the two departments.

“It can’t be done,” said Carruolo. “It’s a legally binding pension.”

Carruolo went on to point out that no group represents retirees and that the unions of the active employees can’t negotiate on behalf of retirees.

While Providence and Cranston have revised retiree benefits to reduce future costs, Warwick hasn’t.

Cushman pressed that, unless action is taken, a greater and greater percentage of city expenditures will go into paying for pensions and retiree health care. Of the $282 million budget the council approved Monday, $26.2 million will pay for pensions and $7.3 million will pay for retiree health care.

Pension and retiree health care costs were not issues unique to Monday’s hearing.

Last Wednesday, Ward 9 Councilman Steve Merolla argued that, like active employees, retirees should co-pay for health insurance. Were retirees co-paying at the same level of active employees, he pointed out, taxpayers would save about $1.6 million annually. Retired schoolteachers, administrators and employees have a co-pay, but city retirees don’t. School health care retiree costs total $1.3 million, according to the School Department’s director of business affairs, Anthony Ferrucci.

In addition, many police and firefighters retire in their 50s, meaning the city is carrying the full cost of health care until they reach 65. At that point, they go on Medicare, but city costs don’t end because it picks up the cost to equate to the benefits of Blue Cross coverage provided to active employees. In addition, their pension payments increase as active members of the force win pay increases.

Cushman wanted to know if there was a way out.

“You didn’t create the plan, I didn’t create the plan. The plan is the plan,” a frustrated Personnel Director Oscar Shelton finally told Cushman.

In later testimony, Rob Cote, who launched the taxpayers’ car revolt two years ago in response to the reduction of the automobile exemption, called for a defined contribution pension system. He suggested that pension payments shouldn’t kick in until a certain age. Without naming the person, Cote said he knows of a city retiree who during his employment paid $22,000 into the pension system, but since retirement has been paid $950,000.

“People are taxed enough in the city,” Cote argued. “I don’t think it is reasonable to retire at 45. My kids and their kids are going to pay.”

He said defined pension benefit plans have bankrupted cities.

Changes in benefits could dramatically change the cost to future taxpayers.

“Have you approached retirees as a group … said, we need to talk?” asked Cushman.

Carruolo broke the awkward silence that followed.

“We have had talks internally,” Carruolo said.

To go further, he said, could jeopardize those talks.

Mayor Scott Avedisian likewise said yesterday there have been discussions but didn’t elaborate.

Cushman also wanted to know if the city has a five-year budget projection. Carruolo said the city does forecasts. He said the forecast includes projections on the cost of wage contracts along with pay increases. Avedisian said yesterday that the city has been doing the forecasts for as long as he has been mayor.

Cushman’s study of the budget showed an increasing amount of local tax dollars flowing into the city side of the budget.

While that is the case, Avedisian pointed to a statewide study showing that Warwick provides a greater percentage of overall school funding than other communities. At $118.6 million [what the mayor recommended in school funding], city funding represents 75 percent of his proposed $156.6 million school budget.

Cushman said that city pension costs have doubled in 10 years and that actuarial reports predict they will double again within 10 years. He put pension liabilities at about $600 million. His study says that the actuarial liability for retiree health care is $240 million.

“That’s not sustainable,” Cushman reasoned.

“I hope you agree to cut COLAs because if we don’t, we’re in big trouble.”


Comments
16 comments on this item

I'm feeling a bit vindicated. A smug little smile on my face. The mayor and his minions after years of mocking those that defied them, are finally admitting to the serious difficulties that we face. Mr. Cushman your leadership on this matter has been invaluable. Thank you.

"Avedisian pointed to a statewide study showing that Warwick provides a greater percentage of overall school funding than other communities. At $118.6 million [what the mayor recommended in school funding], city funding represents 75 percent of his proposed $156.6 million school budget. "

Gee, " Warwick provides a greater percentage of overall school funding than other communities". No kidding, but context is everything. So which communities? Providence, Pawtucket, CF, of course.

According to the latest available RIDE info, Warwick provided 74% of the school funding in 2011 (and that data has the total local nut at $126 million--wrong, it was $118). That's actually about the middle of the pack. Here is the file:

http://infoworks.ride.ri.gov/files/reports/ucoa-revenue-source-by-district-fy2011.pdf

Here is who Warwick didn't spend more local tax dollars than:

Jamestown - 92%

Barrington - 92%

East Greenwich - 92%

Little Compton - 91%

Narragansett - 89%

Westerly - 83%

Scituate - 81%

Smithfield - 81%

Lincoln - 81%

South Kingstown - 81%

Portsmouth - 78%

Tiverton - 77%

North Kingstown - 77%

Chariho - 77%

North Smithfield - 76%

WARWICK - 74%

Johnston - 74%

Exeter/W.Greenwich - 72%

Cumberland - 70%

Cranston - 67%

North Providence - 66%

Foster - 66%

Coventry - 66%

etc.

@JohnBarry: that figure is a red herring by the Mayor and he threw it out there to to try to point the blame on the schools and distract others from focusing on reviewing his twelve plus years as mayor where his policies have done next to nothing to halt this spending trend.

In fact if we perform the same analysis on the city side of the budget, ($99.6 million of local tax dollars to fund the city overall budget at $126.3)

----- 78% of the city budget is funded by local tax.

That's 3% greater than the 75% of local tax dollars allocated to fund to the school budget sighted by the Mayor.

The bottom line is that Mayor Avedisian and his administration still refuse to admit that his pension reform policy and healthcare policies have failed to halt the yearly increases that have pushed city spending to record highs, along with the new local taxes allocated to support legacy costs for retired workers.

And that spending will continue into the future along with the new tax dollars needed to pay for these legacy expenses.

JohnBarry,

many thanks to you for that data and Bob is correct - that is a red herring stat thrown out by the Mayor to mask the punishment that he and the Council have metered out to the schools over the last several years. And yet, the public will lap it up as somehow indicsative of how supportive they've been. It's sickening. I'm sure his comments at tomorrow night's dedication of the Toll Gate Complex in honor of Mr. Shapiro will contain ringing endoresments of schools, education, etc. if on;y his actions matched his words (and the same for the Council).

Please be advised that Mr. Howell has again made a major error in his quotes in this article. The facts are as follows: What was said was that the individual contributed $22K during his career and that his contribution was returned within his first 6 months of retirement, and that the value of his pension was approximately $900K. I further stated that this information was available on the RI Freedom of Prosperity web site, look for your self.

http://riopengov.org/municipal-pensions/

What is deeply disturbing is when false quotes are made by reporters who fail to take accurate notes, (of which the statements are recorded) and ultimately spin the article and present fiction to the public. When does it end?

Rob Cote

RI Freedom of Prosperity web site must have been designed by a blind monkey....

Cushman and company can cry all they want. I will not negotiate with the city. A contract is a contract. Pay up.

Dave I'm not crying. I'm actually doing you a favor by pointing out facts and trends. Your just too igorant and selfish to realize that.

You won't even look at the facts. Did you even bother to paste the link I supplied in the other articles and take a look at the budget and revenue numbers over the past ten years? Are you capable of understanding that analysis?

This system can't continue to exist in its current form, the numbers don't lie. Over 50 PERCENT of new revenue going to retireed employees. You think that's sustainable? Several years from now something is going to give and your not going to be happy.

You will be the first in line waining and crying - "How could this happen?"

In fact from some of the converstations I have had with Warwick municipal union workers, it demostrates that many are not happy with all the scarfices they are making while retireed Warwick employees make none and more and more of their pay is paying for benfits they will never receive.

sell that library; sell those parks; sell the city buildings-----we have a contract that none of you signed, but pay up or else.

Great comments by the city retirees. I bet the workers in Central Falls said the same thing before their pension benefits stopped. The city can afford the ridiculous benefits promised by the corrupt politicians.

The taxpayers never made you any promises so we have no obligation to continue paying such a huge debt. Too bad but your payments will stop.

Another moronic statement made by SteveD, a member of the department that has raped the taxpayer to the tune of 9.2million in overtime in the last 3 years.

Retirees should make a contribution toward their healthcare. The question I have is can it be legally done? Can retirement benefits stated in a contract be enorceable? Is there any RI caselaw?

You people are all blaming retirees. The city just negotiated the contract last year. In less than one year they now want to break the contract. Why? What happened in one year? The police NEGOTIATED a three year pay freeze that saved the city millions. Now they want retirees to pay in to health care? Cushman, et. al, why are you not yelling at the politicians to stop entereing into these contracts if the city can't afford it? Why does the city not put its foot down and say 'No more retiree healthcare wtihout co-pay'. Why? The retirees have a contract. It is legally binding. Why should they agree to co-pays when they gave up raises to retiree without co-pays? The city signed the contract. There was no gone at their heads.

Why Dave you ask?? Here's why. There were about 6 people at the budget hearings. Where were you? If you would have been there you would have heard that in fact Mr. Cushman has been yelling at the politicians, in fact, for years. The community is so dumbed down that the council meetings are empty, the taxpayers don't know what is going on behind their backs, and the vast majority of the people lack the gonads to get up and voice their opinion when it counts. Welcome to Warwick, the silent city. That's what the signs leading into the city should say.

The city (and all public sector entities) needs to begin to transition to a defined contribution plan for new employees, and probably for those under age 30, as well. Taxpayers should not be on the hook for former employees throughout their life expectancy, especially since many will be retired for far longer than they were ever employed.

And if I understand the retiree's position, it is: "...pay up." Nice. You're making plenty of allies. Guess what, genius. When the city goes to court and says: "We can either cut pensions in half, or go bankrupt and pay nothing" no one will be lining up to root for retirees.

Does Mark Carruolo work for the city or not? Why does he keep making statements in the paper like:

“It can’t be done,” said Carruolo. “It’s a legally binding pension.” Is he a lawyer?

He also says, "no group represents retirees and that the unions of the active employees can’t negotiate on behalf of retirees." Well, Central Falls did it. Providence did it.

If the city ever has a chance to renegotiate or to change things, making statements like this hurts the case. Maybe Carruolo should say stuff like, "we are looking into it", or "things have changed in other cities", or "retirees came together in Central Falls to make a decision but it was too late for them", or "Look at what happened to Central Falls, we would hate for something like that to happen in Warwick, I hope the Retirees figure out there is an issue before we are bankrupt."

Every time he opens his mouth he is saying nothing can be done. Find a way to make it happen. That is why you are the chief of staff. You are not the chief of We Can't Do Anything. This guy is a cheerleader for the opposition... Maybe that is because he is with the opposition. Change starts at the top... Election 2014.

Save the retirees pension by trying to negotiate now. Admit the is a problem and start working to fix it before it is too late.

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