September 1, 2014
Rate this (Avg 4.5)
The Taxpayers' Spin
Stop downplaying Warwick’s pension crisis
Bob Cushman

During recent General Assembly hearings on pension reform legislation the mayors from three of Rhode Island’s four largest cities, Angel Taveras in Providence, Allan Fung in Cranston and Donald Grebien in Pawtucket, testified that their pension plans were in crisis and they needed help.

They practically pleaded with lawmakers to pass state enabling legislation that would allow them to suspend cost of living adjustments (COLAs) similar to the proposal for the state administered plans.

In presenting their case they also came prepared by providing facts and figures on how this one measure would save community services and help them reinvest some of the savings back into the underfunded plans.

Being that Warwick’s combined unfunded pension and other post-employment benefits (health care) are far worse than Cranston’s, one would have hoped that Warwick Mayor Scott Avedisian’s message to state lawmakers would be similar. Unfortunately, his testimony was the complete opposite.

Mayor Avedisian painted an upbeat picture for Warwick’s pension plans, indicating that all but one plan is well funded and that self-correcting mechanisms were in place to keep plans funded at required levels. What is most troubling is that many of his statements when examined more closely appear not to be entirely true.

For example, when the mayor testified as to the funding ratio for each plan, he claimed that new pension assumptions recently adopted by the state retirement board were also adopted in Warwick. The mayor states, “We mirrored the state ... we did the exact same thing and they were formally adopted by our city in July of this year.”

When a freedom of information request was made to the city clerk’s office requesting documentation verifying the mayor’s testimony, the response was as follows: “No formal correspondence, such as a formal letter, was sent to GRS [city actuarial firm] requesting incorporating the new state assumptions into our plans.” The response also included, “The City has not received new public safety valuation reports.”

The significance of this fact is that the mayor’s testimony may have led many to believe that all Warwick pension funding levels reflect the new assumptions. In reality, once these assumptions are used in calculations, the funding ratio of each plan will decrease, thereby resulting in additional taxpayer dollars needed to meet annual required contributions.

For state plans, billions of dollars of new liabilities were realized that will require over $300 million in new tax dollars without state reforms.

When the mayor described how procedures keep the newer public safety plans funded at required levels what he failed to mention was at what cost to Warwick taxpayers. Actuarial reports dated April 1, 2011 indicate that taxpayers will pay 21.48 percent and 19.89 percent, respectively, of a police and firefighter salary toward their pension. By 2015, that percent will increase to over 30 and 20 of salary, respectively. This level is simply unsustainable.

Further testimony by the mayor focused on new pension reform measures adopted by the city for new employees hired after July 1, 2012. The mayor testified that the city will realize savings of “$140,000 in the current fiscal year and increase to $500,000 in three years.”

Actuarial reports indicate that the $140,000 will not be realized until 2016. By that time, taxpayer contributions will increase by approximately $7.2 million. The $500,000 savings will occur in 2019 with taxpayer contributions increasing by more than $11 million by then. In 10 years, taxpayer pension contributions will double to over $41 million.

Already, Warwick municipal finances are heading in the wrong direction. Since 2004, over 45 percent of all new revenue allocated to the municipal budget is spent on retiree pension and health care expenses. After factoring in active employee health care costs and salary increases, approximately 92 percent of the new revenue is consumed.

Warwick city leaders don’t know how much lifetime retiree health care costs will increase over the next 10 years, that alone is frightful. However, the fact they haven’t even asked the experts to provide those figures should be more frightful to taxpayers.

We have all seen what happened in the city of Providence when the former mayor painted a false picture of financial stability. Warwick unfunded pension and health care liabilities are just as bad or, in some cases, worse than other cities.
According to a recent Beacon article, General Treasurer Gina Raimondo called on mayors and municipal leaders to follow the same path as the state and initiate pension reforms immediately if their plans face a crisis. Taxpayers must demand that the mayor stop downplaying the problem in Warwick and get the facts straight because you can’t fix a problem unless you first realize it exists.

Robert Cushman is a former Warwick City Councilman and School Committee Chairman.


Comments
4 comments on this item

Great Analysis Mr. Cushman. Avedisian said just last month said that Warwick's pension plans will be in the same shape as Central Falls if immediate steps are taken to reduce benefits.

Avedisian goes to the General Assembly and gives the impression everything is ideal with Warwick's pension plans.How wrong his analysis is.

Thank you Mr Cushman for stating the truth The hard working taxpayers of Warwick appreciate your efforts Bob.

FedUp1 must be Cushman's other alias. Way to pat yourself on the back Bob. Id rather listen to hot air coming from someone's rear end.

Thanks Mr. Cushman,

I've been telling people that Avedisian is pulling a Cicciline. The city council bows to him and now by getting an internal auditer their trying to get somebody else to be the bearer of bad news. Avedisian is going to run for statewide office. The city council, taxpayers, and public employees are going to be left when Warwick soars towards bankruptcy. And SteveD will have a very different tune. We have the highest paid retirees in the state. We are the same size as Cranston but our budget is in the tens of millions higher. And people in Cranston complain that Fung only knows how to raise taxes. It would be nice if the journalist in this state would show up to an interview prepared. Actually know the answers to the questions before they asked, and knew the answer to the follow question as well.

This city is screwed and we are going to continue to see 4% yearly property tax increases and you can expect to see the car tax rate to go up as well. If a republican mayor that is completely supported by the public unions seems to be management/labor utopia you are naive.

If its too good to be true, it probably is.

Bob,your right this place is awful. Do you remember, there was this guy, a real obnoxious person too, he thought he could give the teachers a contract just to get himself elected to the city council. Then after he was elected he voted to double his pay at the council! I'm not sure if he even had a pothole fixed while he was there, I mean the guy was a real joke. Well anyway as you can imagine the taxpayers saw right through this guy and tossed him at the next election. Thank you for pointing out all of the city's problems, good thing we have some smart people in office straightening out the mess from years prior.

You must be logged in to post a comment. Click here to log in.
Welcome to RIjobs.com
Copyright © 2014, Beacon Communications. Powered by: Creative Circle Advertising Solutions, Inc.