Inexplicable math in Taft-Carter’s Providence Medicare ruling

January 30th, 2012 at 4:51 pm by under Nesi's Notes, On the Main Site

Judge Taft-Carter’s decision in the Providence Medicare case on Monday contained this rather odd passage:

Moreover, the Court notes that $6 million in lost savings – although hardly a paltry sum – is less than 1% of the City’s approximate $1.5 billion in liabilities for non-pension post-retirement employment benefits. Immediate receipt of these alleged savings would not save the City from financial ruin.

That’s an apples-to-oranges comparison. The $6 million is how much the city projects it will save from moving retirees to Medicare in one fiscal year. The $1.5 billion is how much the city projects it owes them in health benefits forever.

Think about it: by Taft-Carter’s logic, the pension law passed in November had a negligible impact, because the $128 million it saves in the 2012-13 state budget is only about 1.8% of the old $7.3 billion unfunded pension liability. But the number people care about is the drop in the unfunded liability to $4.3 billion, a 41% reduction.

A more apt comparison would be how important the $6 million is in balancing Providence’s 2011-12 budget. If we take the original projected deficit for Providence – $110 million – the Medicare savings closes more than 5% of the shortfall. Or if we take the remaining deficit for this year – about $30 million – it’s equal to 20% of the shortfall.

If, on the other hand, Taft-Carter wants a number that’s comparable to the $1.5 billion unfunded retiree health liability, she would need an estimate of how much the move to Medicare shaves off that figure. It’s not clear to me if that figure is available, but it would be substantially more than $6 million.

An earlier version incorrectly described the reduction in the pension liability as 59% rather than 41%.

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11 Responses to “Inexplicable math in Taft-Carter’s Providence Medicare ruling”

  1. snow says:

    To fulfill the public purpose prong of the three prong test, the City must show the benefit contributes to the potential ruin of the City. If the total unfounded liability is used to show how expensive the benefit is, how is it illogical to use the savings as an example of how expensive it is not?

  2. Math Wonk says:

    Ted is right. $6 million in savings is a huge amount of money for a city like Providence. Speaking of math, isnt this the 3rd decision in a row where Judge T-C has ruled in favor of the unions. Interesting.

    1. Cranstonres says:

      It’s funny how people bash public employees every chance they get, It’s always the unions that are breaking the bank. Now when they actually go to court and get the support of an unbiased Judge, people automatically question the Judges integrity.. Can’t have your cake and eat it too. How about attacking the cities and towns that have mismanaged the money all these years that the workers have paid into these systems. It can’t continue to fall on the backs of the workers. At some point these corrupt cities and towns need to be held accountable.

  3. Downsized54 says:

    Taft Carter shows an obvious city should get this judge removed.

    1. Mr. Fish says:

      yay! democracy!

  4. Downsized54 says:

    obvios bias is what I meant tosay.The city should have tried to get her removed in the beginning.Is Carter the only one who can hear these cases???

    1. John R says:

      Don’t blame the judicial decisions handed out, they are based on the laws in effect. If you don’t like the situation try looking to the politicians that approved the deals, if you can find them, try looking under a rock.

      The unions job is to get whatever it can for its members, however, elected officials are supposed to represent the best interests of the taxpayers and residents who live in their communities.

      The judge is merely interpreting the laws which apply to the obligation (contract) before her. No judge can satisfy those whose bias has no foundation in law.

  5. RD Nagle says:

    Contracts, explicit or implicit, are a foundation of civilization. Pirates don’t like to keep unfavorable commitments…nor do corporate wall street types. Uncivilized. Raimondo and Taveras are the latter, aspiring to act like the former. If the city or state can just say oops, we don’t want to pay our bills out of more taxes from everyone because we want to pay our bills by breaking our promises to employees who worked 30-35 years of their lives for us BECAUSE this promise- that’s making government a pirate, an unreliable forceful bully. Think the Taliban or the Somali pirates can be relied on to keep promises? It’s supposed to be different in the USA isn’t it? Private companies found out 50 years ago they could ‘go bankrupt’ then raid the pension funds they set up for employees and the Feds would bail out the pension…strange? Pension money should be in Trust, by law. Untouchable by the company that promised it and paid it out in return for labor. Not a plum grabbed by corporate raiders like Romney who declare a taken over company bankrupt then loot the pension. Now Romneys and Raimondos have found their way into government and want to do that there. However the constitution has an issue with passing laws in order to abrogate contracts. Going back to the Greeks and Romans, honoring a commitment was one of the foundations of civilization. Lets not lose that now.

  6. [...] the city from forcing its retired police and firefighters to sign up for Medicare. Taft-Carter dismissed the $6 million cost of her decision as “alleged savings” that “would not save [...]

  7. Vinny says:

    Letter about court ruling 1-31-2012

    Please,, the former mayors have given away everything so they can get the votes. If you spent 20-30 years on the fire or police depts, and were told that each week the city matched your 9-10% of your pay to go to your pension, then you find out they haven’t done it for 50 years, WHO is at fault.???
    People who get contracts thru CBa’s are held to strict guidelines by law, because without the laws, the contracts would be voided every year by the city or state who failed to contribute the matching share to the pensions.
    On 1-30-2012 the judge in the latest go around with the city of providence sided for the plantif,
    the fire and police, stating that a contracts were in place all the time and the rule of law was clearly on their side. If people keep playing games electing the same people every year and expect a different result are not realizing what they are doing, Please stop electing pupputs and put people in these important positions that will reflect your well-being and your voice. These contracts are public info anyone can view them under the foia that is federally ordered. Look at the years and timming to elections and SUPRISE they seemed to be unaware of their own actions. When people see this what do they do ? they promote them to congress and other places.Fire and police work hard for the monies they earn, and yes I am a retired firefighter who retired with a broken back. I have lost a kidney to cancer, and 2 other cancers covered under the law and had 2 heart attacks as well. Here I am at 66 years old and feel like the begger at a corner looking for a hand out, no I just want what was promised in writting and fairly due me, my family deserves that at least for service to the city and the loss of earnings I could have made. REMEMBER fire and police do not pay social security tax’s due to private pension. I worked enough in the 60′s to get my quarters in so I started getting S/S. My 1st check was for $ 111.00 and no cola’s for last 3 years , so now you might understand why this issue has pushed me to write this. If you want to screw someone at least have the #^%@’s to tell them up front, not after all these years. By the way I pay for medicare, so I really feel screwed by the city of providence. If the mayor or anyone in power has anything say,say it to my face abd stop this behind closed doors and behind my back bull-shit.
    V.S.

  8. [...] small, but important component” of the city’s balanced budget plan. Taft-Carter had argued the “alleged savings would not save the city from financial [...]