October 21, 2014
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LETTERS
St. Valentine’s Day financial massacre

To the Editor:

Enough is enough.  Over the past several legislative sessions, our representatives at the State House have inflicted significant financial pain on the local taxpayers. First, they eliminated general revenue sharing monies to local municipalities. Next, they eliminated funding to permit a phase out of the burdensome car tax. And now, the taxpayers of Rhode Island are getting hit with another bill thanks to a closed-door, behind the scenes deal. Cities and towns have worked hard to withstand the loss of hundreds of millions of dollars in state aid. Services have been cut, employees have agreed to concessions, and property taxes have been increased.

In 2011, the governor and the general treasurer persuaded the General Assembly to enact the Rhode Island Retirement Security Act (“Act”) in order to avoid the huge employer contribution requirements resulting from changes to the investment rate of return and other actuarial assumptions, as well as the realization of investment losses. Cities and towns, recognizing the importance of needed pension reform, sought to expand these efforts to include the even more troubled locally administered pension plans, many of which had benefits tied in contracts. Unfortunately, municipalities again were left to fend for themselves as state officials ignored our pleas to address problems festering within our locally administered pension plans.  However, we still supported the passage of the Act because it was the right thing to do for the state pension system and the taxpayers.

As expected, unions and retirees sued the state over the passage of the Act. After mediation was ordered, cities and towns, who were not at the negotiating table as part of the suit, urged our state officials to proceed with extreme caution in their consideration of any potential mediated benefit changes to the enacted law. We felt it would be irresponsible for the parties involved in the mediation process to reach any type of agreement, which would increase the employer contribution rate paid by local governments. The implications of higher pension contributions would be disastrous to many cities and towns, some of which are still teetering on the brink of fiscal collapse.

After months of closed-door negotiations, the Governor and General Treasurer have agreed to a settlement that favors the unions and retirees at the expense of the taxpayer. This is a major step backward for the taxpayers of the State of Rhode Island. Beginning in 2016, taxpayers will have an annual bill of $24 million, and the State’s unfunded liability will be increased by nearly a quarter of a billion dollars. The bill to Cranston alone will be almost one million dollars. These costs cannot be dismissed by suggesting that 95 percent of the original package stays intact.  Regardless of the percentage of the original savings, this is a significant amount of monies for struggling cities and towns. These municipalities will only have one place to turn for additional revenues; raising property taxes.

According to the Tax Foundation, Rhode Island’s property tax burden currently ranks as the 7th highest nationally, far above the national average. Once again, if the General Assembly were to approve this settlement, the taxpayers would have to foot the bill.

Interestingly enough, risk avoidance was given as a justification for pursuing a deal with the public sector unions and retirees. Yet the General Treasurer has for years stated that the pension reforms instituted are constitutional, and even the Governor’s Director of Administration, who is also a lawyer, was recently quoted in the Providence Journal saying, “We would ultimately win the case.”  If the governor and general treasurer believe the state would be successful in litigation, then why settle for an additional quarter of billion dollars in new unfunded liabilities and $24 million in increased operating costs to the taxpayers? Why not fight for the taxpayers and our cities and towns?  This is simply outrageous.

In 2011, after an in-depth public debate on the issue, the Act was approved with overwhelming and bipartisan support in the legislature. The members of the General Assembly must again show courage and leadership to reject this deal. Our state and local budgets have no room for increased spending on pension benefits, whether it is in the short or long term. Let’s permit the court to rule once and for all on the constitutionality of the Act.

I’m asking the taxpayers of Rhode Island to stand with me in rejecting this closed-door, behind the scenes deal. Enough is enough. Together we can move Rhode Island forward.

 

Mayor Allan Fung

Cranston


Comments
2 comments on this item

Could Mayor Fung please release the records of Cranston's contribution to the State retirement system for the last 30 years. I am not a State retiree,but those in the system had ther contribution taken out of their pay every paycheck. Did emplyers in the system make their contributions? If not,when,and auothorized by who. The system is clearly underfunded,and needed to be changed,but it's time to audit the system,and see the myriad causes that caused it to be in the state it is in now.

The unions have worked hard getting their puppets elected for the sole purpose of maintaining a status quo that was never honest. I'm at the point in which I truly believe in an all out tax revolt in which public pensions would be rolled back to average what the average taxpayer receives from social security who have worked over 40 years in the private sector, that Obama would refer to as "Income inequality… Peter A. Filippi III

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