Now it is time to help the Cities and Towns on pensions
The Rhode Island General Assembly has approved a historic pension overhaul. But RIPR political analyst Scott MacKay reminds that there is still much to be done to help the state’s struggling cities deal with pension red ink.
There were smiles and affectionate back slaps all around as Governor Lincoln Chafee signed into law the big pension changes approved by the General Assembly just before Thanksgiving.
But let’s not forget that there are some Rhode Island politicians and taxpayers who aren’t giving the Smith Hill crowd thanks just yet.
Take Angel Taveras. The new Providence mayor has spent just about every day of his 11 months in office dealing with the tide of red ink he inherited. Taveras has cut programs, laid off workers and squeezed concessions from the unions representing the city’s teachers, cops, firefighters and City Hall workers.
Yet the soaring cost of pension deals made in the bad old days threaten the capital city’s long-term financial status. Consider that about 20 cents of every dollar collected from Providence property taxpayers goes directly out the door to support retiree pensions.
A huge problem is the legacy cost of bloated pension benefits for police officers and firefighters. Thirty Providence retirees collect pensions of more than $100,000 a year. One retired fire chief, Gilbert McLaughlin, is hauling down about $185,000 annually.
How did this happen? It was no fault of Angel Taveras or recent City Councils. This mess goes back to the 1980s, a time when the city’s public employee unions gained control over the Providence Retirement Board.
The result: in 1991 every police officer who retired in Providence – 21 in all—got a job-related disability pension, according to a trenchant piece by Tom Mooney of the ProJo. That same year, 48 of the 52 retiring firefighters received disability pensions. These disability pensions in most cases entitle retirees to two-thirds of their salaries and are tax-free.
Compare those disability rates with workers who have similar jobs. The state police are a good example. The state police disability rate is 7 percent of retirees. State police officer John Lemont, who was nearly shot to death while on patrol in 1995 lost his spleen and a kidney. After a long rehabilitation, Lemont is still on the job as a detective.
Then there are the cost -of-living adjustments, which for a class of city retirees grants annual COLAS of 5 to 6 percent every year, compounded. They are the reason for the bloated pensions of the cops and firefighters.
Other cities and towns have problems similar to Providence. Cranston, East Providence, North Providence, West Warwick and Woonsocket all face pension liabilities that are far worse than the red ink in the state pension system.
The Assembly refused to approve enabling legislation that would give the mayors and town councils the ability to trim cost-of-living adjustments. Governor Chafee and House Speaker Gordon Fox tried to get such a measure approved, but they ran up against a brick wall of opposition from unions, General Treasurer Gina Raimondo and Senate President Teresa Paiva Weed.
Chafee has warned lawmakers loud and clear about this omission. So has Taveras and Cranston Mayor Alan Fung. The Assembly too often in recent years has made itself look good by refusing to raise taxes, only to shift the burden to the property taxpayers in Rhode Island’s 39 cities and towns. The worst example was the last budget under Governor Donald Carcieri, when income taxes for the wealthy were cut while the cities and towns endured massive cuts in state aid. All the State House crowd did for the communities was allow them to impose car taxes on the owners of previously exempt clunkers worth $6,000 or less.
There is some good news here. The Assembly will be back in session shortly after Auld Lang Syne is sung on New Year’s Eve. Maybe then our lawmakers will get down to business and give the cities and towns the tools they need to enact pension sanity and solvency.
We already have one bankrupt city, Central Falls. The last thing our recession-battered state needs is another community going belly up because of legacy pension costs.