Providence pension panel says suspend COLAs, cap benefits
April 19th, 2012 at 8:33 pm by Ted Nesi under Nesi's Notes, On the Main Site
This is the ballgame, folks.
After six months of work, the Providence City Council’s Subcommittee on Pension Sustainability released an inch-thick report Thursday night on the capital’s cash-strapped employee retirement system. The key section is this table on page 35 laying out the panel’s seven recommendations on how to stabilize the system:
Councilman David Salvatore, who has chaired the subcommittee since it was established in October, told WPRI.com he is hopeful the panel and then the full council will pass all seven recommendations. ”This isn’t about changing the rules; this is about preserving the retirement system,” he said. “If we do not make these substantive changes, there will not be a pension system for [retirees] one day.”
If the City Council approves the recommendations, it would almost certainly kick off a legal fight over whether the city government has the authority to do so, a question that probably will be answered by the Rhode Island Supreme Court in the end. If the courts eventually rule against the city and say retirement benefits cannot be changed, Providence will likely be forced to file for bankruptcy.
“We’re confident that it will be upheld in the courts,” Salvatore said. “There is a compelling public purpose argument that we are sticking to. It’s very different from 10 years ago, when this was [last] brought to court – the state of the city’s finances. We’re in dire straits. We’re confident that it will be upheld.”
• Related: Chart: The decline and fall of the Providence pension system (Jan. 25)
Tags: david salvatore, municipal, pensions, providence, providence city council, providence financial crisis
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
No mention of eliminating overtime from the pension calculation?
GaryM, Providence does not calculate overtime into the pension, never has never will. This is Robery of the retiree’s. Not the retirees getting 6% but the regular retiree’s. You know the one’s they never show. How about the 50% disability? Someone totaly disabled would in no way be able to live on that amount. Funny in the private sector, workers comp is 66 2/3s. and they can sue for pain and suffering.
You cannot collect workers comp for life. Suing for pain and suffering can take years and the pay off is not usually enough once the lawyers take their cut. You are then at the mercy of SSI. Try living on that for life!
Steve D
I was told that Police and Fire do have overtime in the calculation, but not on the municipal side. My info may be wrong as you have pointed out.
I agree with the “robbery” aspect, the robbery being that the leadership lied for years about funding levels of the plans leading us to where we are today.
But bankruptcy is such a harsh solution. The courts make it so hard on the workers by using math that is so conservative (generally assumptions used by the PBGC) that the resulting court awards allow only pennies on the dollar outcomes.
That is why overtime / extra work in pension calculations is such a problem. The reward goes to a few leaving the crumbs to those left in the waiting line.
The providence pension system does not include overtime. I know this because I am a retired fire captain. To the other people posting, what leadership are you talking about? The city actuaries are the ones that said the raises of 3% were OK. We do not hire the actuaries, the city does. So if this train wreck was coming, where was Buck consultants back then? They were the actuaries for as far as I remember.
Steve,
Thanks for the post. On your point about being a retired Fire Captain, do rank and file have a mirror image pension plan? I am still curious about overtime being in the negotiated contract which is what I was told.
On the actuarial assumptions used by Buck Consultants to compute the liabilities, those are always set by pension trustees, not the actuary. The actuary follows what the pension trustees decide, but at times, trustees act on the “advice of” actuaries. This is often a get out jail free card for trustees (the “we acted on the advice of counsel and professionals” escape clause).
I can’t believe there isn’t one lawyer on the Council’s Subcommittee? This will fail in court, like all the rest. Something must be done but done legally. Maybe bankruptcy is the only answer?
Binding arbitration and the thrteat of binding arbitration pushed through these extraordinary and unreasonable COLAs. That means that the council and the mayor were forced to accept a contractual obligation by a panel of three people who had no relationship with them or the city’s taxpayers. As a result, these ‘contractual obligations’ are with the arbitrators and the labor controlled Pension Board. They did not take into account the ability of the taxpayers to pay them, they never looked at the future implications or produce a study into how the ‘benefit’ would spiral out of control. They didn’t measure its affect on other city services and programs. After they rewarded themselves and their supporters , they forced the ‘decision’ on the elected body. That is a coerced obligation. So it’s shouldn’t be legally binding on the property owners of the city. Let the arbitrators pay for the COLAS and the unwarranted disability pensions. The ‘contrcat’ is with them.
Restatement of Contracts syas forceably that “contracts are meant to be enforced”.
Florida court very recently re-enforced the R.I. Ct decision that a fiscal crisis is not in iiutelf a reason to break a collectively bargained contract because there are legal remedies available even though politically damaging.
Ever hear of having clean hands?
@oreo – There are several lawyers on the council’s subcommittee including vice-chair Zurier, and majority leader seth yurdin and the law department of course.
Really? Why would they try this then? Liberal lawyers maybe? Mr. Obama is a liberal lawyer who thought the individual mandate was illegal in 2008 and was correct. “Obama railed against the idea that government could force individuals to buy health insurance. His attacks came in speeches and in ads he ran against Clinton during their long battle for the 2008 Democratic nomination”. I do hope I’m wrong but contracts must be worth something.
Contracts CAN be broken if the reason for breaking them is “reasonable and necessary to serve an important public purpose.” Certainly, avoiding a city from going into bankruptcy fits that description.
I believe there’s more to it than that, we shall see.
ProvLawyer
You are partly correct. The problem here is that US Supreme Court has not yet taken up the question of what defines “reasonable and permanent” contract modifications. They have addressed temporary actions, but we have a different set of circumstances here.
This is headed for the US Supreme Court. We’ll know then what the answer is.
FOR THE EDIFICATION OF THOSE WHO WOULD ABANDON CONTRACT LAW IN RHODE ISLAND, THE RECENT RULING:
“The case law does not preclude but rather supports this Court’s holding that Plaintiffs, as ten-year veterans of the State, possess a contractual relationship with the State pertaining to retirement allowances and COLA benefits which are not subject to collective bargaining.”
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All the proposals EXCEPT Recommendation #6 are fine. The 20% copay is WAY too low. Public Sector workers should get no better than the taxpayers who pay their way, and few Private Sector Retiree healthcare Plans subsidize more than 50% of the cost of a MODEST (NOT “Cadillac”) Plan when the employee has 35 years of Full-Time service (with proportionately less subsidy for less Full-Time service), with the employee paying the balance.
Taxpayers should pay NO MORE than this.
Again, more ignorant posts. The city is self insured, meaning they pay no where near the amount they claim. If they did they would just buy insurance. Also there is the problem with on the job injuries, what you’re saying is..we should be paying for 50% of on the job injuries? I will give you a short list of mine. Broken ankle, fractured vertabrae in neck, two surgerys on that, separated shoulder, knee injury from falling through floor. All these injuries will cause me problems in the future, but what do you care?
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