Allan Fung: ‘Listen: pension reform … has to happen’March 28th, 2011 at 11:25 am by Ted Nesi under General Talk, Nesi's Notes
Cranston Mayor Allan Fung took to the pages of The Providence Journal this morning to offer a tough critique of Governor Chafee’s proposed MAST Fund. The headline: “A colossal stealth property-tax hike.” Fung said MAST will only make cities and towns’ financial situations worse unless it’s paired with legislation allowing them to cut pension and retiree health benefits.
I talked with Fung this morning to get a better sense of his concerns and what he wants from the governor. The transcript has been lightly edited for clarity.
Aren’t you blaming Governor Chafee for something that’s Cranston’s fault? He didn’t force the city to promise generous benefits and then fail to fund them.
It’s not just a funding problem. I think this is indicative of all pension plans, whether it’s local, state or even the federal plans that we have right now. It’s a combination of the sins of the past, not only from a failure to fund them, but also the problem of generous benefits. And what I was saying in my editorial was, look, we cannot – cannot – just see this as a revenue problem, where all you’re doing is raising taxes to meet your obligations, because all you will do is crush the taxpayers. There has to be some corresponding reforms of those generous benefits, to peel them back so it’s not as burdensome on the taxpayers.
Have you approached your own unions there in Cranston about that and tried to bargain with them? I know Mayor Taveras is looking at that in Providence.
In the past I have. For instance, one of the big successes that I had was with my Teamsters. I think that was probably one of the first unions in the state that has agreed to move new employees out of a defined-benefits plan and into a defined-contribution plan, and I was able to get the enabling legislation passed last year so any new Teamsters – and they’re all the municipal City Hall employees – are now no longer in a pension plan. So that’s one of the big first steps that we have to move towards.
How about the other unions? Have you tried with them?
Yes. It’s difficult, because with the police and fire we were in concession discussions. Pension discussions did come up, and they will still come up; in fact, I’ve sent letters to them because of the governor’s MAST proposal to try to initiate discussions to peel back on some of those benefits if possible.
But the difficult question it comes down to is about those that are vested and retired: Who represents them? That’s one of the difficulties that we’re going to encounter because for some, the unions may not represent them. And that’s always been this question that’s been hanging out there.
Someone may read this and wonder why the state needs to be involved. Why can’t cities and towns just go ahead and make these changes on their own?
When I was on the City Council and former Mayor Laffey was mayor at the time, we tried to peel back some of these benefits, particularly with police and fire, where we went after the compounding COLAs as well as the escalator when they hit age 55. We lost in Superior Court, and the judge had a well-reasoned opinion. So it’s very difficult to just do it locally, because [these benefits are] in the collective-bargaining agreements [CBAs].
As I said in the editorial, these should never have been put into collective bargaining – they should have been either by statute or by ordinance, just like the state does, so that you can reform those types of benefits. That’s why we need the state’s help because on the local level they are in the CBA, at least on a going-forward basis, with enabling legislation to allow us to take some of this stuff out of the CBA or even peel it back.
We need that help and we need it now, because we can’t continue to have these constant struggles with the various unions, some willing to change, some not. There should be some uniformity at all levels, not only for Cranston but for every city and town across Rhode Island.
That sounds like it would be an epic fight, convincing the General Assembly to remove retirement benefits from collective bargaining. I know you think doing so is necessary, but politically – you’re a politician, do you think it’s plausible?
Listen: pension reform as well as retiree benefits reform, particularly their health care, has to happen. As that op-ed shows, it’s becoming unsustainable, because as much as I’ve been cutting our operations in the City of Cranston for two successive years now – and this upcoming budget will have more cuts – what’s happening is those old legacy costs, those sins of the past, continue to grow. And as they continue to grow, you’re just cutting more into the bones of your operation, your services. So it’s not sustainable, and it’s not healthy for the efficient growth of any city and town or even the state.
How about the fairness issue? There will be retirees who hear this and think, I signed up and was promised a certain set of benefits, now you’re looking to take those away from me. What would you say to them?
A lot of it is moving forward, particularly with those employees who are new and coming on board or those who are non-vested. A lot of those reforms that we’re going to be pushing for are definitely needed, because if it’s not done we’re not going to be able to effectively operate as a city or a town.
In fact, one of the bills that the cities and towns have been pushing for is bill number H 5884 – and it has a lot of reforms on a lot of different ideas that we struggle with: police and fire [personnel] that are injured on duty; it increases the years of service as well as retirement age before you start being able to get a pension; gives cities and towns the flexibility to move to a defined-contribution plan; and provides cities and towns that have [locally-administered] plans, like Cranston, the authority to reduce some of these benefits.
But it has to happen because of the state and the situation that it’s in. It’s not sustainable.
But just to be clear, are you talking about reducing benefits for current retirees who are already receiving them, or only for current and future employees? Because if you don’t touch current benefits, that doesn’t really get rid of your funding problem.
It doesn’t get rid of your problem, so it’s got to be a two-pronged approach, and this is what, as I said, makes it a little bit difficult when you’re also talking about current retirees. It needs to include the current retirees as well. But the question comes down to, who represents them?
With the non-vested [employees] and even those that are vested and not retired yet, as well as the new employees and future employees – yes, the union represents them. But there’s always that hanging question with the current retirees that have worked and are getting a pension check – who represents them?
But the days of continuing to fund health care for life until they reach Medicare without any co-shares, with these generous plans – there’s got to be reforms to it, because it’s not sustainable. So there is also an overarching question as to whether or not you can even attack some of those benefits, because we’ve tried in the past in Cranston, and the court says that we can’t. But that decision also left open the possibility that it can be negotiated out if the retirees are willing.
(photo: Committee for Allan Fung)