Moody’s Investors Service says Providence will benefit from winning approval of its deal with retirees to reduce pension and health care costs, but warns the agreement will still leave the capital city facing huge unfunded retirement liabilities.

“Providence’s total unfunded liability for pension and OPEB will be reduced to $2.1 billion, or 20.7% of its property tax base, still one of the largest unfunded liabilities in the state, exceeding those of the financially distressed cities of Central Falls and Woonsocket,” Moody’s analysts Vito Galluccio and Geordie Thompson write in a report Tuesday. (OPEB stands for other post-employment benefits, primarily retiree health care.)

To demonstrate their point, Galluccio and Thompson put together this chart:

R.I. Superior Court Judge Sarah Taft-Carter’s March 11 ruling on the fairness of the deal “is a credit positive for Providence because it signals that the court is likely to approve the pending agreement,” Galluccio and Thompson write. If the deal wins final approval on April 12, it will reduce Providence’s unfunded pension liability by $196 million and its unfunded OPEB liability by $400 million, according to Moody’s.

Providence spent more than a quarter of its budget on pension contributions, retiree health benefits and debt payments in the 2011-12 fiscal year, Moody’s notes.

• Related: Chart: The decline and fall of the Providence pension system (Jan. 25, 2012)

​By Tim White

PROVIDENCE, R.I. (WPRI) – The City of Providence has filed a multimillion dollar lawsuit against its longtime actuary Buck Consultants, charging them with “miscalculating” the estimated savings from pension reform, according to court documents obtained by Target 12.

Read the rest of this story »

• Related: Taveras, retirees strike landmark deal on pension changes (May 30)

​By Ted Nesi

WOONSOCKET, R.I. (WPRI) – Officials in Woonsocket on Monday asked the cash-strapped city’s retirees to agree to give up annual increases in their city-managed pensions and move to Medicare or else risk pushing the city into bankruptcy.

Read the rest of this story »

• Related: Woonsocket’s problems include debt, botched 2002 pension fix​ (June 14)

Last week’s Target 12 investigation of Scituate’s absentee pension board has sparked a renewed conversation about how the state should handle its troubled locally run pension plans. “There is a concerning set of facts that you’re hearing about in Scituate,” Treasurer Gina Raimondo said on Newsmakers Friday. But, she continued, local officials need to negotiate with organized labor if they want to go into the state-run system (MERS).

Josh Barro, a columnist for Bloomberg View and longtime friend-of-Nesi’s-Notes, also sees a lesson in the Scituate investigation – most municipalities are just not equipped to handle the complicated task of managing a pension fund:

In most states, public employee pension systems are run either by the state government alone or by the state and a handful of the largest cities. For example, New York City is the only municipality in New York state with its own plans; all other cities and counties participate in two large statewide funds.

Pension systems are complicated, and overseeing them properly takes time and expertise. This is a heavy lift for municipalities overseeing small pension plans. …

Of the 110 statewide pension systems covered by the Public Funds Survey, the worst-funded is the Illinois State Employees’ Retirement System, with a funding ratio of 35.5 percent. Sixteen of Rhode Island’s 36 local plans are worse funded than Illinois SERS. …

The more promising long-term fix, floated by some Rhode Island lawmakers including State Treasurer Gina Raimondo, is to close municipal pension plans and have one pension system for municipal workers overseen by the state government.

Read Barro’s full piece here.

• Related: Raimondo: Move 36 local pension plans into state-run system (Jan. 30, 2012)

One of the big questions that Tim White and I had while reporting out our Scituate pension investigation was who exactly has fiduciary responsibility for the police pension plan there. The answer, as we suspected, was the Scituate Police Pension Board, which met only once from mid-1999 to mid-2011.

Why does that matter? Because, legally, the pension buck stops with the entity that has fiduciary responsibility for the plan. Credit Treasurer Raimondo with driving this point home in recent years: pension boards, whether at the state or local level, are obligated to make prudent decisions based solely on the best interests of the pension system’s members, even if doing so causes larger budget challenges.

The former chairman of Scituate’s pension board, Ted Pryzbyla, tried to deflect the question of whether the board should have been meeting regularly by saying the town council was in charge of the pension plan. But while the council undoubtedly bears significant responsibility for the situation in Scituate, it’s the pension board that had responsibility to look out for the plan’s financial health no matter the consequences.

The Financial Times’ John Kay, writing about the banking sector, made this point a few days ago:

Fiduciary standards describe how people should behave when they manage the affairs of others. The key elements of the concept are loyalty – put your responsibilities to others ahead of your own interests – and prudence – discharge your responsibilities with care and skill.

Statutes define the fiduciary duties of company directors. The common law imposes demanding fiduciary obligations on other agents, such as the trustees of pension funds. In 1984, a landmark legal ruling on this matter was made in the UK. A case had been brought by Arthur Scargill, the leader of Britain’s main mining union. He sought the end of coal board investments in overseas businesses. The judge rejected Mr Scargill’s claim, on the basis that it is the duty of trustees to increase the fund’s value for its beneficiaries, regardless of their moral or political views.

If you live in one of the 24 cities and towns with a locally run pension plan, it’s worth asking who has fiduciary responsibility for your local pensions and checking whether that entity is carrying out its duties properly.

• Related: Pension board met once in 12 years as shortfall soared by $8M (Feb. 4)

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.

Rhode Island’s early November deadline for cities and towns with underfunded local pension plans to file proposals for shoring them up has come and gone, but six municipalities failed to comply with the deadline.

The six stragglers: Cumberland, Johnston, Narragansett, North Providence, Pawtucket and West Warwick.

The places with punctual pension plans: Bristol, Coventry, Cranston, East Providence, Newport, Portsmouth, Providence, Scituate, Smithfield, Tiverton and Warwick. You can download the PDFs of their funding improvement plans from this Web page. Seven others didn’t have to file a plan.

All these funding-improvement plans, and the earlier actuarial studies, were required under last year’s state pension law, which was signed a year ago Sunday. Governor Chafee’s office says state officials continue to work with the municipalities who haven’t produced a plan yet.

• Related: 13 local pension plans worse than RI’s; Cranston, Scituate lag (Dec. 5)

Former Auditor General Ernie Almonte delivered a 20-page report on Pawtucket’s pension and retiree health plans to Mayor Donald Grebien on Thursday, eight months after Grebien asked him to lead an ad hoc commission studying the issue.

“The City of Pawtucket has a seriously underfunded pension system and an unfunded OPEB (other post retirement employee benefits, e.g., health insurance),” the report says. It lists a long list of options for dealing with the problem, including larger contributions from the city and suspending pension cost-of-living adjustments (COLAs) until the plan is 80% funded.

Grebien described the report as “impressive in its scope and depth,” and said he will review its findings “with his administration and finance directors, in conjunction with union leaders, to determine options and recommendations that will be sent to the City Council for approval as required by the state.”

Click here to download the full Pawtucket pension report as a PDF. (Under last year’s pension overhaul, Rhode Island cities and towns are required to submit plans for shoring up their pension plans by next month.)

• Related: Pawtucket panel plans 6-week sprint to solve pension problem (Feb. 23)

The police union in Bristol is trying to convince town officials to move their officers out of the state-run Municipal Employees Retirement System (MERS) and back into the town’s underfunded locally run pension plan [pdf], which was closed to new hires in 1998.

The union hired an actuary from Milliman to help them make the case – here’s her slideshow:

What do you think?

The 2012-13 state budget Governor Chafee signed into law last week will help Rhode Island municipalities and school districts by providing $34 million in new education funding, Moody’s Investors Service says.

The nearly 4% hike in state aid for K-12 schools is the third annual increase in a row and “a credit positive for both school districts and for cities and towns,” Moody’s analysts wrote in a research note Tuesday. “State funding for education now stands at over $900 million, well above the pre-recession peak,” they said.

However, Moody’s said the impact isn’t uniform across the state because of the new school funding formula. Barrington will get the biggest increase in education aid in 2012-13 at 42%, while the Chariho school district will suffer the biggest drop, losing 14%. Non-education aid will be flat after plunging since 2007.

Moody’s also noted lawmakers’ $2.6 million appropriation to offset some of the deep cuts in Central Falls’ pension benefits will help that city emerge from bankruptcy, but expressed concern about the failure of a proposed supplemental tax sought by cash-strapped Woonsocket.

The failure to enact any laws to stabilize the 36 locally run pension plans also drew concern. “Members of the legislature have publicly stated that they intend to take up local pension reform, but the delay into the next legislative year highlights the significant political hurdles they’ll have to surmount,” Moody’s wrote.

(chart: Moody’s Investors Service)

Portsmouth’s leaders are breaking with the rest of Rhode Island when it comes to pensions.

The Portsmouth Town Council voted last month to slash its locally run pension plan’s projected rate of return from 8% to 6.75%, making the Aquidneck Island community one of the most risk-shy anywhere. The state lowered its return forecast from 8.25% to 7.5% last year.

A pension system’s rate of return forecast is part of what determines the annual deposit taxpayers must make to keep the fund solvent. The lower the projected return, the less the pension fund’s investments are expected to earn – and therefore, the more money taxpayers need to put in up front.

At 6.75%, Portsmouth may have set the most conservative investment outlook in the state. A study by the auditor general’s office last year found the lowest rate of return used by any municipality was 7% in Warwick, Jamestown and Coventry; the average among all 36 locally run pension plans was 7.81%.

(more…)

Remember those 36 locally run pension plans with the $2.1 billion funding gap? The shortfall is now nearly $2.3 billion and may get bigger, the Projo’s Randy Edgar reports:

The overall health of 36 pension plans managed by individual cities and towns is worse than previously thought — about $170 million worse, members of the state’s Locally Administered Pension Plans Study Commission learned Monday.

The spread between assets and liabilities for those plans, reported by the state auditor general last year to be $2.1 billion, is now thought to be about $2.3 billion, Susanne Greschner, chief of the state Division of Municipal Finance, told the commission.

And the spread could grow as cities and towns revise the assumptions they use to project long-term pension costs, based on a new set of state-mandated studies. Among the assumptions that could change are those for investment returns and longevity. …

Greschner said all but 4 of 24 cities and towns that have locally managed plans submitted the required studies. The state is still waiting for one or more studies from Cumberland, Little Compton, Narragansett and the Warwick School Department, she said.

If you want to find out how your town is doing, all the new studies are posted here. A quick perusal shows Coventry’s police plan [pdf] is just 11% funded, with less than $8 million saved to pay $67 million in benefits.

• Related: 13 local pension plans worse than RI’s; Cranston, Scituate lag (Dec. 5)

On Saturday morning, Providence Mayor Angel Taveras will convene a meeting of the city’s retirees to ask them to accept reductions in their pension benefits to help the capital avoid filing for bankruptcy, as nearby Central Falls did last August. What happens if they don’t come to an agreement?

David Skeel is a professor at the University of Pennsylvania Law School in Philadelphia and a nationally known expert on bankruptcy and Chapter 9. We spoke on Thursday about what bankruptcy would mean for Providence’s pension system, how Central Falls has changed the legal landscape, and why he doesn’t buy the case for Rhode Island’s bondholders-first law. The transcript has been lightly edited for length and clarity.

I was fascinated by the argument in your working paper that government employees’ and retirees’ property rights cover the pension fund but not the pension promises. Could you explain that?

The question is if a city or a state makes a pension promise, but does not fund the promises – which has been true in many states in recent years – what exactly is protected in the event of a default or of bankruptcy? A lot of people assume that what’s protected is the full promise, even if there’s no funding behind it.

Although this is certainly not free from doubt – this is unchartered territory in many respects – my view is that there’s a good argument that what’s protected is the amount of money that’s been set aside. Pension obligations are a form of what we refer to in the law as a property right, and other kinds of property rights are protected up to the value of the property that’s set aside for them. So if somebody has collateral for a transaction, we treat that promise as sacrosanct up to the value of the collateral.

(more…)

Pawtucket joined the pension parade on Thursday as Mayor Don Grebien’s new ad hoc panel said it would deliver recommendations for fixing the city’s underfunded pension and retiree health plans by April.

“It’s bad,” former Auditor General Ernie Almonte, who is chairing the committee, said at its first meeting this morning. “It’s a bad situation, and everyone has to give something up.” The group will likely draft a report outlining the situation and suggesting potential solutions.

Almonte said he wants to ensure Pawtucket avoids the “rather disgusting” outcome in Central Falls, where pension were cut up to 55% after the city declared bankruptcy. ”There should have been a better plan on how to deal with that,” he said. “But there should have a plan 20 years ago on having the money that wasn’t there.”

“Many of our urban areas are on the brink of bankruptcy,” warned Gary Sasse, another panel member, who was former Gov. Don Carcieri’s director of administration.

(more…)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The shortfall in Providence’s city pension fund climbed to nearly $901 million last year, a one-year jump of $72 million, after the Taveras administration ordered its actuary to lower its investment earnings forecast.

Providence had $423 million in assets saved to cover $1.32 billion in promised pension benefits as of June 30, 2011, according to a new report from city actuary Buck Consultants. The city pension system’s funded ratio fell from 34% to 32% compared with a year earlier.

The increase in the city’s unfunded pension liability would have been a more modest $37.5 million if the administration and Buck hadn’t changed some of the assumptions driving the data, including forecasts of mortality levels, interest rates, scalary scales and longevity assumptions.

The most notable change is a reduction in the average annual rate of return Providence expects its pension fund to earn over the long term, to 8.25%. The capital had been one of only three cities in Rhode Island using an 8.5% rate of return for its pension fund, the highest level in the state. A higher rate means a lower liability on paper.

(more…)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Treasurer Gina Raimondo thinks the best way to fix the state’s 36 locally run pension plans is to move them into the state-run system. But making that happen will be easier said than done.

“I believe that, ultimately, the long-run answer is get everybody in MERS,” Raimondo told WPRI.com last week during a half-hour interview in her State House office, using the acronym for the state-run Municipal Employees Retirement System. “The question is, how exactly do you that?”

The 36 local plans have a combined unfunded liability of $2.1 billion, but about 40% of that shortfall is in one city: Providence, where Mayor Angel Taveras has clashed with Raimondo over whether the General Assembly should pass legislation giving communities the green light to freeze pension cost-of-living adjustments (COLAs).

“I would be delighted to sit down with Providence if they would like any help,” Raimondo said. “I’ve offered. They say they have it under control. That’s great. I hope they do.”

(more…)

That’s the takeaway from an excellent bit of analysis by Jason Becker. ”A true COLA is key to ensuring that purchasing power is maintained throughout retirement,” he writes. “But the cost of goods has not increased 5% or 6% year-over-year ever in the past twenty years.”

Becker ran the numbers to compare what a Providence retiree with a $25,000 pension as of 1992 now receives thanks to 5% or 6% annual compounded cost-of-living adjustments, versus what the same retiree would now receive with a true COLA tied to inflation. Here’s what he found:

• Inflation-tied COLA: $46,132
• 5% annual COLA: $63,174
• 6% annual COLA: $75,640

Treasurer Raimondo made a related point at Tuesday’s local pension workshop, saying it’s important for pension plan fiduciaries to figure out what they’re actually looking to provide their retirees. Before last November’s new law, ”the Rhode Island retirement system was designed to provide an employee with more income at retirement than they got when they were working,” she said. “Is that retirement security?”

• Related: COLA means $796,871 pension for ex-fire chief if he lives to 100 (Nov. 30)

(chart: Jason Becker)

Johnston Mayor Joseph Polisena, a member of the new local pension commission, suggested Wednesday that the huge cuts in state aid to cities and towns are a key reason for the plans’ financial troubles.

There’s no doubt the roughly 75% drop in local aid since 2007 has made it hard for cities and towns to balance their budgets. But there’s also no doubt the 36 locally run pension plans were in trouble well before that.

Don’t take my word for it – look at the auditor general’s reports.

The first report looked at the 36 plans back in July 2007 – with most of the cuts in aid still to come – and at that point they were only 45% funded. The second report, in March 2010, found them 43% funded. The newest report last September said they were 40% funded.

Those numbers are clearly going in the wrong direction, but the situation isn’t radically different now than it was in 2007.

Indeed, Polisena’s own city of Johnston is home to two of the 36 locally run pension plans, and they were each only 31% funded back in 2007. Today they are 27% and 28% funded, making them the ninth and 10th worst-funded out of all three dozen.

• Related: 13 local pension plans worse than RI’s; Cranston, Scituate lag (Dec. 5)

The new local pension study commission got off to a so-so start at its first meeting Wednesday.

The 14-person panel – which counts among its members Providence Mayor Angel Taveras, Treasurer Gina Raimondo, Department of Administration Director Richard Licht, RIPEC chief John Simmons and Cranston Mayor Allan Fung – spent the bulk of the meeting getting an overview of how pensions work from Joe Newton, the state’s actuary.

But it soon became clear just how much divides the group, and just what a struggle it’s going to be to reach agreement on different solutions for 36 different pension plans in various states of duress.

The problem starts with the basic question of what the commission is even supposed to do. The law creating it defines its mission only in general terms. Fung said he was “concerned” that the panel might push local pension funds to adopt the 7.5% rate of return forecast the state is now using, which could balloon their liabilities.

(more…)

It’s almost impossible to overstate the amount of damage done to Providence’s pension system by three decisions: the union-controlled Retirement Board’s costly COLA vote in 1989; Mayor Cianci’s consent decree agreeing to the COLAs in 1991; and the Rhode Island Supreme Court’s decision [pdf] upholding Cianci’s decree in 2000.

The crucial year on paper was 1996, when an earlier ruling first forced the city to acknowledge the pension benefits awarded in 1989 on its books. The city’s unfunded pension liability shot from $167 million to $412 million, and its funded level plunged from 64% to 41%.

Take a look at this chart – the bleeding hasn’t stopped:

(more…)

Richard Ravitch, left, with Raimondo

How hard will it be to fix Rhode Island’s locally run pension mess? Really, really, really hard, apparently.

“I know this is going to be hard,” Treasurer Gina Raimondo told a roomful of local officials Tuesday as she opened a workshop to help them attack their pension problems. “I’ve got a few scars to show for it. But I also know we’re going to do it.”

“This is hard,” echoed Deputy Treasurer Mark Dingley, one of Raimondo’s closest advisers, as he walked the 50 or so officials through their legal responsibilities as fiduciaries.

“You have one of the toughest challenges of all, because you don’t have to be a rocket scientist to know how badly the economy has treated the state of Rhode Island,” agreed former New York Lt. Gov. Richard Ravitch, an invited guest who helped save New York City from bankruptcy in the 1970s.

“I don’t know what to say except I admire you for talking about this and dealing with it in an intellectually honest way,” Ravitch said. “Godspeed.”

(more…)

One important Rhode Island municipality was notably absent from Treasurer Gina Raimondo’s local pension workshop on Tuesday morning: the city of Providence.

According to the attendee sign-in list, Providence was the only one of Rhode Island’s 24 cities and towns with a locally run pension plan which didn’t send anyone to hear the presentations from Raimondo, former New York Lt. Gov. Richard Ravitch, Deputy Treasurer Mark Dingley, and asset consultant Allan Emkin.

Among the discussions they missed was Emkin’s detailed and bleak explanation of why it will be nearly impossible for pension funds to achieve the 8.5% average rate of return that Providence is expecting to earn year in and year out going forward. The city has defended that 8.5% target, saying it will be able to earn more than the state.

“The number that the state is using – 7.5% – we believe is reasonable, but it’s slightly optimistic,” Emkin said. He suggested the municipalities should use the state’s assumptions, and added: “Even the most aggressive public pension plan won’t get 8%.”

(more…)

Next week is shaping up to be all about Rhode Island’s 36 locally run pension plans.

The pension law signed in November created a new 14-member study commission to make recommendations on how to deal with both the 36 locally run pension plans and municipal retiree health costs. The panel will hold its first meeting next week, WPRI.com has confirmed.

Department of Revenue Director Rosemary Booth Gallogly, the commission’s chair, has called the first meeting for Wednesday at 2 p.m. The meeting will be open to the public but a location hasn’t been selected yet, a spokesman said. The panel’s 14 members include Treasurer Gina Raimondo and Providence Mayor Angel Taveras.

Earlier Thursday, Raimondo’s office announced she’ll hold a workshop for local officials on Tuesday with former New York Lt. Gov. Richard Ravitch to raise awareness about the pension law’s April 1 deadline for them to send the commission new actuarial studies of their plans.

(more…)

Treasurer Gina Raimondo is bringing former New York Lt. Gov. Richard Ravitch to the Community College of Rhode Island next week to speak at a workshop she’s holding for municipal officials who run their own independent pension plans, WPRI.com has learned.

Ravitch will discuss his role in helping New York City solve its financial crisis in the 1970s at the event on Tuesday, scheduled for 8:30 to 11:45 a.m. at CCRI’s Knight Campus in Warwick. Other speakers will include Raimondo; Joseph Newton of Gabriel Roeder Smith & Co., the state’s actuary; and Allan Emkin, the pension fund’s asset-management adviser.

While the 36 locally run pension plans were largely excluded from last year’s state pension law, it included a requirement that they submit new actuarial valuation and experience studies of their plans to the state by April 1. The 36 plans face a collective unfunded liability of $2.1 billion, and 24 are classified as “at risk” by the auditor general.

(more…)

Read all about it.

The position taken by Senate President M. Teresa Paiva Weed will play a key part in determining what role the General Assembly will play in dealing with Rhode Island’s 36 locally run municipal pension plans next year. Jim Baron of The Pawtucket Times and The Woonsocket Call sat down with the Newport Democrat and got her take.

Paiva Weed told Baron she wants “sustainable, long-term structural changes, not simple quick fixes” for the local plans. Also interesting – she expressed some support for the idea of the state appropriating $2 million to boost pension benefits in Central Falls, which have been cut up to 55% since the city’s August bankruptcy filing.

Read the interview here.

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%).

(more…)

Arlene Violet and I sparred a bit on “Newsmakers” last month about whether Treasurer Gina Raimondo has a legitimate legal argument in favor of leaving the locally run pension plans out of the law passed last month.

Arlene, who has a law degree from Boston College and a term as attorney general under her belt, explained why she thinks Raimondo had it right in her Valley Breeze column this week:

No doubt there are problems in our municipalities, but studies and a finely honed solution are required to pass constitutional muster.

Providence, Cranston and other cities and towns do not have up-to-date information about either the problem or the crafted solution. This factual footing is a condition precedent to withstand a challenge that impairs a contract right of past or present employees. … The city or town that wants a modification has to establish that each of the underlying contracts it wants to change is in peril to justify the abridgment of a contract right.

In January 2012 if a city or town wants relief it should put in a separate legislative bill drafted by its own solicitor in consultation with the expertise of the treasurer for as many of its retirement plans that are in jeopardy with a justification for change and why the solution is equitable.

But can the General Assembly pass a bill targeted at the pension plans of only one city or town? Former Providence City Solicitor Charles Mansolillo said Monday that lawmakers can only pass legislation of “general application,” not specific measures that targeted an individual community for special treatment. That’s an important question.

Has Central Falls turned a corner? It’s starting to look that way after a series of positive developments this month.

Last week, the bankrupt city signed new agreements with its unions to cut costs and stabilize its budget. A tentative agreement on pension cuts has been reached with its retirees. And Tuesday, its Adams Memorial Library said the city will rejoin the state lending system on Dec. 1 thanks to a flood of donations from celebrities and others.

“This is all good news for the city and its taxpayers,” retired Supreme Court Justice Robert Flanders, Central Falls’ state-appointed receiver, told WPRI.com on Tuesday. “It definitely is a new beginning for the city.”

Governor Chafee’s spokeswoman, Christine Hunsinger, echoed the sentiment. “The governor believes this is what happens when people come to the table and work together to solve a problem,” she said. “He’s very grateful for all the hard work the unions and Judge Flanders’ team did in Central Falls.”

(more…)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Providence’s pension system has been around for 88 years, but the bulk of its huge funding shortfall stems from “a comedy of errors” that took place between 1983 and the mid-1990s, a former city official said Monday.

The General Assembly created and controlled Providence’s pension system from its creation in 1923 until the city got home rule in 1983. But the decade that followed saw a series of mistakes that have now thrown it into financial jeopardy, former City Solicitor Charles Mansolillo told a special City Council subcommittee studying the problem.

The focus at Monday’s hearing was mostly on the past – particularly how the city wound up boosting the pension checks of many retirees with 6% and 5% COLAs, compounded annually. “It was just a comedy of errors of misreading decisions by the court,” Mansolillo said.

Donald Iannazzi, business manager for Local 1033 of the Laborers’ International Union of North America, the city’s largest union, suggested the city may need to join the state-run MERS pension system and called on officials to come up with a solution by July 1.

Read the rest of this story »

(photo: Ted Nesi/WPRI)