Sparks fly even before actuary reviews pension plans
Ward 9 Councilman Steve Merolla is going to get what he wants – the city’s actuaries will appear before the City Council Monday night. Merolla said Tuesday he has plenty of questions, but added it might be more productive if the information they are working from is current and not three and four years old.
The latest development in what has become a debate of whether the city is capable of addressing its unfunded pension and health care liabilities, as the administration says, or is headed in the direction of some other Rhode Island municipalities, came up last Friday. On Friday, the administration scheduled its actuaries, Gabriel Roeder Smith & Company, to be in Providence to address the State Pension Review Board this coming Monday.
According to the mayor’s chief of staff, Mark Carruolo, the city was given several dates to appear before the review board. When one of them coincided with a council meeting, it presented an opportunity, as he said, “to kill two birds with one stone.” The mayor figured Joseph Newton from the Irving, Texas company could also be available to answer council questions.
This caught Merolla by surprise. Merolla’s resolutions to have the actuaries come before the council have not been signed by the mayor. Avedisian reasons it would make more sense to have actuaries visit the city when they are here anyhow and their expenses can be shared rather than on separate dates.
“We’re looking forward to them coming,” Merolla said Monday, “but we don’t have an actuarial report. How do we have a meaningful discussion unless that’s [the administration’s] intent,” he said.
Merolla’s claims touched a raw nerve with Avedisian, who observed Tuesday that the council has had the reports since July 2011 and that, in fact, they are also posted on the city’s website.
“If suddenly he realized he has a document he hasn’t looked at all this time, that’s his problem,” Avedisian said.
The 2011 report on public safety pensions, based on the performance of the pension plans for 2009 and 2010, projected pension contributions for the current fiscal year. Those contributions, which the administration has budgeted, are $14.2 million for Firefighters/Police I plan; $5.2 million for the Municipal Employees Retirement Plan; 26.59 percent of the employer portion of payroll for Police II and 24.67 percent of payroll for Fire II.
The reports show that the Police II pension has an unfunded liability of $21.9 million; Fire II, $7.9 million; and Municipal employees, $35.7 million. The granddaddy of the bunch is the closed Police/Fire I plan with an unfunded liability of $242.1 million.
Merolla didn’t back off when informed actuaries would not be providing any new reports at this time.
“It’s a cute move on their part to report on a report that’s two years old,” he said.
To that end, Merolla reasoned it might make more sense for the actuaries to come back when they have their most recent report in another couple of months.
“I would like to have them come back. Why pay them for now when it doesn’t make sense,” he said.
Merolla contends the issue of unfunded pension and retiree health benefits is a “huge” issue that has the city on the hook for “hundreds of millions.”
“This is the largest expenditure the council has to look at,” he said, adding that the council has not had the opportunity to question the actuaries since April of 2011.
“We haven’t received any information,” he said. Yet, he added, “No way are we paying to come if we’re going to get up to date information in three months.”
Carruolo said the actuaries would be back in the spring with their report on the municipal pension. The city schedules actuarial reviews of the pension plans on alternating years with municipal being done one year and public safety the next.
Further, Merolla says the actuaries will only be addressing the issue of unfunded pension liabilities and not the bigger issue of unfunded retiree health care costs and other post employment benefits.
Nonetheless, Merolla said he would have questions for the actuaries. For starters, he said, he wants to hear how their projections have fared. He also wants to know, with all the payments being made, why unfunded liabilities have not dropped more.
Merolla says the council questions have already paid off. He said that, following the council’s questioning of the city’s projected rate of return on investments of 8 percent, the actuaries dropped projections to 7.5 percent. He said that action, which triggered higher employee contributions, saved the taxpayers millions.
But Merolla says he’s concerned, even though Warwick’s situation can’t be compared to Central Falls, Providence, West Warwick and other municipalities.
“Everyone is saying Warwick is better off. It’s like saying we have stage two cancer and everybody has stage five. I don’t want any cancer,” said Merolla.
“If that’s his perspective,” Carruolo responded, “he’s been on the council for 14 years and it doesn’t say much for his effectiveness.”