13 local pension plans worse than RI’s; Cranston, Scituate lag

December 5th, 2011 at 6:00 am by under Nesi's Notes, On the Main Site

By Ted Nesi

PROVIDENCE, R.I. (WPRI) - More than half of Rhode Island’s 39 cities and towns have an independent pension plan that’s not part of the state-run system, but only one of those plans is funded above the 80% level experts say is adequate.

The 36 locally run plans spread across 24 cities and towns are the next big battleground in Rhode Island’s pension fight after they were largely excluded from the overhaul approved last month. A WPRI.com analysis of their financial health shows 13 of the 24 communities’ local plans are in more dire straits than the state retirement system was before the new law.

Unlike the dozens of pension plans in the state-run Municipal Employees Retirement System (MERS), which are required to be funded and are mostly in good shape, two-thirds of the independently managed so-called “non-MERS” pension plans are classified as “at risk” by the auditor general’s office.

The healthiest locally run pension plan is Jamestown’s police plan, which is 99% funded, followed by Middletown’s plan for most employees hired before 2001, which is 78% funded.

After Central Falls’ two plans, which are being restructured in bankruptcy, the worst-funded are in Cranston (16% funded), Scituate (23%), Coventry (25%), West Warwick (26%) and Johnston (27%).

Using the most recent data from the auditor general’s office, WPRI.com ranked all 24 by funding status after crunching the numbers to get a single statistic for those cities and towns that have more than one locally run pension plan. These are the results:

However, the auditor general doesn’t account for the wide variation in valuation dates, investment forecasts and mortality tables used by the 36 plans; for example, North Providence’s figures date back to 2007. Treasurer Gina Raimondo has warned that many communities need to update their numbers, and the pension law requires them to complete new studies by April 1.

One measure that allows for a quick comparison is investment return forecasts, or the amount cities and towns expect their pension funds to earn on average each year. When the state revised its pension data in April, it lowered its return forecast from 8.25% to 7.5% based on outside asset experts’ advice.

The auditor general’s data shows 17 of the 24 cities and towns with a locally run pension plan are banking on earning more from their investments than the 7.5% return the state thinks it can get. Here are those numbers – note that some of the communities with multiple non-MERS pension plans use different forecasts in their different plans, so they’re listed twice:

• 8.50% East Providence, Providence, Smithfield

• 8.25% Scituate, Woonsocket

• 8.00% Bristol, Coventry, Cranston, Cumberland, Lincoln, Portsmouth, Warwick, West Warwick, Westerly

• 7.875% Pawtucket

• 7.75% Central Falls, Johnston

• 7.50% Central Falls, Little Compton, Middletown, Narragansett, Newport, Tiverton, Warwick

• 7.25% North Providence

• 7.00% Coventry, Jamestown, Warwick

• Related: Target 12: Warwick has RI’s biggest average pension payouts (Nov. 16)

Tags: , , , , , , , , , ,

14 Responses to “13 local pension plans worse than RI’s; Cranston, Scituate lag”

  1. roger jadosz says:

    Where does North Kingstown rank?

    1. Ted Nesi says:

      Roger, all of North Kingstown’s pension plans are in the state-run MERS system that are restructured in the new pension law, so it doesn’t have a locally run plan to worry about.

  2. GaryM says:

    These numbers tell only part of the story. Where the danger lies in in the ability to pay the pension mortgage. Consider the following:

    Cranston – Total Households 29,931, income per household $58,877 local pension liability $244,833,000 (16% funded)

    Providence – Total Households 59,356, Income per household $37,273, local pension liability $828,484,000 (34% funded)

    Now ask the following question: If you had to lend money to either of the two cities above, which would it be?

    In spite of Providence having a better percentage pension funding, it doesn’t take much to realize which city has the better ability to carry the mortgage.

    1. GaryM says:

      BTW – you can find the above numbers at:

      RI Auditor General Reports

      http://www.oag.state.ri.us/reports/MuniPensionsRI2011.pdf

      US Census Quick Facts (median 2005-2009)

      http://quickfacts.census.gov/qfd/states/44/4459000.html

  3. John R says:

    Ted, if the two pay-as-you-go pensions plans for judges and state police were actuarially factored into the two funded plans for the same groups, the resulting funded percentage would easily rival those of some of the worse municipal plans indicated above. However, Gina and the GA failed to address that issue, preferring to sweep it under the rug, to keep it from public and legislative consideration.

    As it stands now, the state has no idea what is owed for future benefits to those retirees. If the state took the time and made the effort to calculate those obligations, surely it would shed a whole different light on the pension reforms recently passed for those groups.

    The result would easily be an eye opener, especially for the state police who have a large number of retirees that left at an earlier age than most.

    1. janskor says:

      Absolutely. The State Police and Judges are “GOLDEN BOYS” and weren’t touched, but Gina made such a to do about teachers and other state workers who don’t even come close to the expense of the golden boys, that the public were led away from the issue.

  4. Aldo says:

    Ted,

    In some cases you are comparing apples and oranges. For example, only 10 years ago, West Warwick’s Pension Plan had an Unfunded Liability of only $1.6 million. The WW plan was actually funded at over 96%!!!!

    You cite a current funding level of 26% but that is based upon figures from 1 July 2010. And that is based upon GASP45 standards. When you factor in Health Care under GASP25, I believe the figure drops to about 14%. And that was almost a year and a half ago!! What do you think has happened to the town’s portfolio in the interim?

    What makes this particularly egregious is the fact that over the intervening years, I have personally raised red flags about the Pension Fund and was rewarded by being sued by a former Chair of the Pension Board for my efforts.

    It was only after I raised the issue with former Auditor general Ernie Almonte, that the WW Town Council came up with a plan under which they should be paying 100% of the Actuary’s ARC. Yeah right. Not even close.

    You can check out the last Report on the Pension Plan at:

    http://www.westwarwickri.org/vertical/Sites/%7B7B7C7E47-F7C1-4511-8CF3-EA8EBAF7D539%7D/uploads/2010_PensionValuationSigned.pdf

    Unfortunately, I am of the opinion that the report really doesn’t tell the entire story because it blames the current condition of the fund on a lack of contributions by the town. I’m of the opinion that there were many other factors in play but because of internal town politics, nothing was ever done nor was any forensic audit ever conducted.

    The other communities you’ve cited have always had problems. WW was not in the same category. If you really want to delve into what is wrong with Municipal Pension Funds, take a long hard look at WW and the players involved.

    1. Ted Nesi says:

      Thanks, Aldo. That number shouldn’t reflect GASB 45 though – it’s a pension number, not a pension/OPEB number.

  5. bob says:

    Poor Flanders won’t get a vacation for years.

  6. ed says:

    Any town or city under 50% has other issues. For the benefit of the taxpayers it would be best if these cities file chapter 9 and break all these contracts.

  7. Doug from South County says:

    If I remember right, Narragansett was telling it’s employees less than 10 years ago that the plan was 105% funded. Now the auditor general says it is only 69.9% and the town only put in 63% last year. What happened to their big fix a few years back? Where did the money go? Sounds like some town officials (the ones still living) have explaining to do….

    1. GaryM says:

      Doug,

      The Treas Office also tracked the high of the state of RI pension funding as being in late 1999 just before the dot com bubble burst. There is a chart in one of the 2008 reports I saw out of the Treas office that shows the down hill in the pension trust fund (on a percentage funding basis) that happened in the 3 years after 1999.

      It never recovered

      1. GaryM says:

        Doug

        I found the Treas report referenced above at the below address. You will see on page 29 a chart showing how ERSRI stacked up against other plan funding ratio’s. 1999-2000 appears to be the glory years for everyone.

        http://linux01.crystalgraphics.com/view/9f9d0-NjJkY/Special_House_Commission_to_Study_All_Aspects_of_The_State_Pension_and_Retirement_System_flash_ppt_presentation

  8. John H Lyman says:

    From your figures it seems that the only ones that paid their share into the system were the employees and the teachers. The money came out of each pay check on time and in the right amount. If the state and local politicians had put their share in the only bad guy in this would be the investements. The politicians withheld their pension moneys to balance local and state budgets hopeing that investements or future tax surpluses would cover them.
    Their bet failed now the only ones with clean hands are made to pay the price.
    Often forgotten in this blame the unions strategy is that unions do not sign a unilateral contract – management also has to agree or no contract. Workers, union members,retirees, and taxpayers are having to pay for the sins of the politicians. They should be the ones paying or being the guest of the corrections department and still taking from the state not helping the state.