Gloomy outlook for local pension plans as Cranston preps cuts

November 20th, 2012 at 3:03 pm by under Nesi's Notes, On the Main Site

Fixing Rhode Island’s local pension plans is going to make the state overhaul look like a cakewalk.

The 36 locally run pension plans, many of them underfunded, have become a growing burden on municipal taxpayers and a source of concern for retirees thanks to years of shoddy management. Last fall the General Assembly ordered the communities to study the problem and deliver solutions to a new commission, but Democratic state legislators have refused to sign off on cost-of-living freezes, citing labor contracts.

The towns’ solutions were due last week, and all but six communities complied. But the commission members don’t sound confident that real progress is in sight, Randy Edgar reports for the Projo:

In the long run, shifting troubled locally run plans into the state system would address many of the issues that got the plans into trouble in the first place. Retiree benefits would have to match those of other cities and towns in the state-run system, and cities and towns would have to make full “annual required contributions” each year to replenish low fund balances and keep up with annual payouts.

But as some members of the Locally Administered Pension Plans Study Commission noted Monday, forcing such moves would raise a host of potential problems. …

[T]he prospects for getting all of those plans adopted, and in some cases negotiating concessions from local unions, is far from certain.

“What we’re trying to figure out is what happens if that doesn’t work,” [commission Chairman Rosemary Booth Gallogly, director of the state Department of Revenue,] said. “Are we just going to keep meeting for the next five years and saying, ‘Well now you’re not 30 percent funded you’re only 22 percent funded, well now you’re not 22 percent funded you’re only 16?’ At some point we have to make people do something.”

To understand why Gallogly is concerned, look no further than Cranston, where Mayor Allan Fung wants the City Council to reduce benefits before its 18% funded pension plan runs out of money; Treasurer Gina Raimondo has suggested he should consider “a buyout scheme.” Yet lawyers for the retirees say the city can’t do what Fung is proposing, Mark Schieldrop reports for Patch:

The City Council met behind closed doors last night to talk with city lawyers about the mayor’s plan to cut pension benefits for police and fire retirees. …

The plan offers four possible options to save the failing pension plan, each recommending a freeze on cost of living adjustments (COLAs) for 10- to 15-years or a permanent freeze.

James E. Kelleher, a lawyer representing the retirees, told the council that the situation has echos of a legal dispute in 2003 that began when the city arbitrarily changed COLAs and other benefits for retired firefighters without going through the collective bargaining process. The city was taken to court and lost, Kelleher said. And the city did not appeal, which made the ruling a “final judgement,” he said. …

If the council acts, Kelleher warned, retirees would seek a Superior Court injunction ruling the City Council was in violation of a court order based on the Judge Daniel Procaccini’s ruling earlier in the decade that states any change to retiree benefits must be accompanied by collective bargaining.

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4 Responses to “Gloomy outlook for local pension plans as Cranston preps cuts”

  1. downsized54 says:

    Politicans selling their souls for votes and greedy unions.This is the end result thank you Democrats.

  2. Bob says:

    Just raise taxes and pay them. Some will leave and some won’t.
    Nobody in this state cares as evidenced by the election last week:
    Broke but approved every bond by a landslide;
    Gave the miserable Dems more of a majority.

    Screw ‘em, double the property taxes.

    1. Slippery slope says:

      Hi Ted,

      Municipal pension woes have distracted folks from an unfinished state pension issue,
      Will state retirees receive a COLA for the first half of this year prior to the reform statute’s
      effect date?

  3. Doug In South County says:

    Most of the locally run plans would never merge into the State system. Why? Local politicians would never agree to pay in full and lose control of those monies which have traditionally been their piggy bank for pet projects, lowering their tax rates, etc. They cringe every time they have to send the State a check for their teacher’s pensions. Local pols would have no control.