Are city benefits sustainable?

Final part of a three-piece series analyzing city pension, healthcare benefits

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Are the healthcare and pension benefits provided to members of the city’s fire department, police department and municipal departments contributing to a cost burden that is ultimately unsustainable in Warwick in the long run, which could potentially lead to larger fiscal implications?

That question has been the driving force behind this series. The first two pieces examined what the exact pension and healthcare benefits given to union employees in the city are, and analyzed the financial implications of those benefits using historic city budget and actuarial data.

We found that since FY03, healthcare costs have increased more than 150 percent, and healthcare provided to retired members of the city’s three bargaining units specifically has risen more than 190 percent to the present expense of about $10.5 million – which equates to an average annual percent increase over that time of 13 percent for municipal retirees, 12 percent for police retirees and 10 percent for fire retirees.

Extrapolated out using those average annual increases, the city would be looking at a cost of over $18 million just for covering retiree health expenses for the three unions in five years. That’s not a guarantee, as healthcare costs can obviously fluctuate, but it is not out of the realm of possibility either.

This final piece in the series sought to directly ask stakeholders in the city, on all sides of the issue, that same question – can the city afford these benefits in the long run, and whether or not changes or concessions needed to be made in order to create a more financially stable situation in Warwick.

The reaction, as you may imagine, depends on whom you ask.

They’re not sustainable

Bob Cushman – the former city councilman and former school committee member who has long been an outspoken critic of the benefits given to city workers – has not strayed from his beliefs on the subject for quite some time.

“The fact of the matter is that when you look at the overall cost of the pensions and the healthcare costs, we can't afford it. Something has to be done,” he said on Tuesday. “I think politicians want an easy answer, but I don’t think there is an easy answer.”

Cushman believes that a citywide effort needs to be undertaken to fully flesh out what benefits are given to which workers, and what the various complexities within those benefits are. He thinks that an easy answer is for politicians in power to make changes to benefits given to new employees, but that such an approach won’t provide the kind of financial impact needed to make a difference before the cost of the existing benefits becomes too burdensome.

“The math shows you that in order to make the city viable and be able to afford what you want to do, you have to cut these existing benefits,” he said. “I say within the next decade, Warwick will be looking at receivership if we don't start to cut these benefits.”

For Cushman, the only example he needs to demonstrate how certain benefits have gotten out of control comes from a list he received through a public records request that broke out recent retirees from each of the city’s three bargaining groups.

Of that group, the list showed how much six recently retired members of the fire department would receive in bi-weekly pension payments versus how much money they had contributed into the pension system over their careers. The smallest benefit examined amounts to an approximately $47,000 a year pension, while the largest represented a nearly $100,000 annual benefit.

Over time, Cushman calculated how the largest, nearly six-figure pension will be worth over $2.6 million throughout the course of the next 20 years, despite the firefighter only paying a little over $157,000 into the system over his entire career tenure.

“Don't you think that's excessive?” Cushman offered.

Ranking members of the Warwick City Council agree that the benefits as they exist are a cause for concern.

Ward 5 Councilman and finance committee chairman Ed Ladouceur put it succinctly when asked about a new piece of legislation that is reportedly being worked on by the City Council in regards to the issue – though he wouldn’t delve into specifically what aspect of the benefits the legislation will be targeting.

“Pretty much everything is on the table,” he said.

Speaking for himself, Ladouceur said that he felt pensions like the one mentioned above are not sustainable. “A pension larger than the mayor’s salary, there’s something wrong with that,” he said.

Ladouceur said he was hopeful to find a way to fairly implement cost-saving measures – such as enacting higher co-pays on retiree health benefits – that would take into consideration the amount a retiree makes in their pension, so as to not unfairly punish retired city workers who only earn a modest pension benefit.

“I don’t know what that number is going to be, but in my mind, there's going to be a number that will be considered for the copay,” he said as an example.

Ladouceur also finds trouble with the prescription drug out of pocket expense cap – which is $300 for individuals and $600 for family plans, and is given to all active members of each three unions, and the retirees of the fire and police departments. “You don’t see that given out by Fortune 500 companies,” he said.

Above all, Ladouceur wants to see a real discussion happen regarding the benefits given out. He said that finding a way to “stop the bleeding” by enacting changes to new contracts and new hires was “a given, as far as I’m concerned,” but that “everything is open for discussion” in terms of finding other means to curb costs.

“We need to have this debate, this conversation now, and we need to figure out what is sustainable and what is affordable,” he said. “If we're going to make things sustainable, then we have to bring a reasonableness to what's going on today and what will happen in the future.”

City Council President Steve Merolla, too, has expressed his firm belief that certain things need to change in order for the city to avoid greater fiscal danger.

“This is a lose/lose or a win/win for everyone,” he said Wednesday. “I feel like a Russian Roulette scenario where people think that when they spin the barrel, they're not going to get the bullet. The message that everyone needs to understand is this can only go on so long before you get to a crisis situation where you can't pay those [benefits]. You either negotiate those changes now, or a judge or a receiver will negotiate them for you later.”

Merolla hearkened back to the presentation of the city’s actuary in September, when Edward Echeverria, senior actuary at Danziger & Markhoff LLP, said flat-out that the benefits contributing to a some-$352 million other post-employment benefits (OPEB) liability in the city were “not sustainable.”

“That’s not City Council President Steve Merolla saying that, it’s the city’s actuary,” Merolla said.

Union perspective

For the city employees represented by the unions in question, things aren’t so cut and dry.

“I don't think the benefits are undeserved. I think it's more that it was negotiated,” said Michael Carreiro, president of the IAFF Local 2748 for the fire department, on Wednesday morning. “It's a stressful job and we do risk our lives for the city, and we have given concessions over the years.”

Warwick FOP president Jed Pineau echoed the sentiment that the unions have given concessions in recent negotiations.

“I think they've been fairly negotiated throughout. We've tried to listen to outside complaints in regards to certain things and have made concessions which I think have been fair,” Pineau said Wednesday. “We do a job that not a lot of people want to do and we sacrifice a lot and we pay our fair share.”

One of those concessions mentioned most includes a provision from the 2012 contract negotiations which split the Fire2/Police2 and municipal pension funds into two tiers, with one tier increasing the years needed to collect a full pension, reducing how much that maximum benefit could be and increasing the contribution rate necessary to the pension fund.

Notably, however, the fire department maintains that they never agreed to the Tier 1/Tier 2 split, and have successfully challenged it through an arbitration award that went in their favor, as the language was never properly codified into the city’s contract. As such, there are currently no members of the fire department that are in Tier 2. The city is contesting the arbitration award in court.

In regards to the fact that fire department members in the Fire 2 pension system having an average retirement age of 51 years old, meaning they can receive full health insurance at the city’s expense for at least 14 years until attaining Medicare age, Carreiro said that he felt this was fair due to what firefighters go through on the job.

“I believe that is fair when you do 20 years of this occupation where it's stressful, it's strenuous,” he said. “Doing 20 years takes a toll not only on us physically but mentally.”

The other concession occurred in 2015, when all three unions agreed that new hires brought onto their departments after June 30, 2015 would only be able to get individual healthcare. Pineau said this concession cannot be understated, and that such a change will eventually result in widespread savings as older retirees pass away and the city has to only pay individual healthcare for newer retirees.

“You're not going to see savings this year or next year on that, but you'll see savings 20 or 30 years later when they retire,” Carreiro said on the same subject.

Pineau also maintains that the police department members – which contribute an average of 16 percent of their salary to the pension fund – is comparatively higher than other departments in the state, and that their pension funds are healthy. He further argued that when the pension funds do well, the city reaps the rewards of those investments as well.

Pineau also brought up the point that in order to attract recruits to do the job in Warwick, benefits and salaries need to be comparable to other municipalities.

“If we're not out there with enticing ways to be able to entice people to do this job, that's a serious issue down the road,” he said, adding that they had recently lost a top recruit to the Massachusetts State Police and to the Cranston Police Department. “We're losing guys to other area departments. It never used to be that way.”

Pineau said that mutual understanding of financial feasibility was important to the FOP.

“We understand that we're all in it together,” he said. “If the city can't pay, we don't get those benefits. We have that realization.”

Alexis Lyman, spokeswoman for Local 94 of American Federation of State County and Municipal Employees that represents city municipal workers did not return calls.

Mayoral perspective

As the man who negotiated all but one of the current contracts included within the scope of this series’ analysis – the IAFF contract has still yet to be ratified and is being negotiated by Mayor Joseph Solomon – former Mayor Scott Avedisian has a unique perspective on the city’s financial health and, specifically, how union benefits factor into that health.

Avedisian recalls a time when union employees had no co-pays for their insurance, which was something he took pride in changing.

“By the time I left, every union had co-pays toward their health insurance,” he said during a recent interview. “That's a big win, because there weren't any when I started.”

Avedisian was also negotiating for the tiered split of the pension system, and the 2015 change to healthcare for new hires. He said that the new fire contract was not completed at the time he left office in May of 2018 because “they didn't want to give on some things,” and that he was curious to see what headway Mayor Solomon will be able to make as he negotiates future contracts, including the ongoing negotiations with the fire department.

“The issue will be with future negotiations – we got co-pays – it will be interesting to see what they get as they negotiate their contracts,” he said. “It will be interesting to see if they can get agreements that will be more advantageous for the city. Every negotiation is give and take.”

Being asked the main question about Warwick’s financial stability, Avedisian said, “No, the city is not in trouble,” but added that “We'll see what they've [the Solomon administration] done in their first full budget year soon as to what the fund balance stays at.”

During his weekly Beacon interview on Wednesday, Solomon hinted that a new contract with the fire department was coming close to a conclusion, but didn’t divulge any further details. When pressed further about whether or not changes need to be made to curb costs of benefits, Solomon said he was interested in pursuing changes regarding new hires, but stopped short of saying that benefits granted to retirees should be subject to changes.

“I firmly believe that when someone was promised something or they were hired 25 years ago with an expectation to receive a particular benefit at a time when they may have been paid significantly less for their duties than they would have been paid in the private sector – to change the rules after one has retired would not be fair to the retiree,” he said.

Solomon said that national changes in how healthcare is administered could have an affect on the city’s financial burden going forward into the future, as could changes made through negotiations in future contracts. He stressed that the issue was as much of a concern to him as it is to the collective bargaining units as well.

“They're aware of the stress caused and they're willing to sacrifice and that's what the negotiation process is, and you will see changes,” he said. “No one is oblivious or turning a blind eye. Not elected officials and not employees who are working for us. Everyone wants to see a system that is solid and able to afford what people have been promised. That is going to be done through negotiations.”

Comments

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incredible

Avedisian creates the fiscal mess.....on his watch lifetime healthcare was given to husband and wife....and he wants credit for a co-pay for healthcare benefits.

AVEDISIAN IS DELUSIONAL.

Avedisian sets the fire and he wants credit for calling the fire dept. He is a disgrace. Too bad Joe is just as bad.

Thursday, November 14
Apollo

Yes very sustainable

Thursday, November 14
Patient Man

Time will tell.

Thursday, November 14
Just saying

These benefits were negotiated in good faith many years ago before Avedisian. You can’t fault the unions or expect them to accept lesser benefits than they were promised when taking the job.

Thursday, November 14
Bubbaburger

Merolla & Ladoceur should do the right thing and give up their own "unsustainable" healthcare coverage for part time employment.

Meanwhile, Governor Francis III residents facing $20K+ sewer assessments are being ignored.

Thursday, November 14
Apollo

Guess it's sick human nature to want to single out and blame one group of people for everything even though it's not justified. Great history lesson kids.

Friday, November 15
whatever

Joe....you ran for Mayor telling everyone you would put a stop to unsustainable retirement costs.. So far you have done NOTHING. The only thing Joe has done is make sure his pension grows dramatically.

Your new fire contract is laughable. You gave away the store. Joe did nothing to address the ever increasing legacy cost. You made Avedisian proud. You guaranteed the union vote.

I hope the Warwick voters wake up to your con game at the next election.

Friday, November 15
FASTFRED WARD 4

You can never please everbody

Tuesday, November 19