Chafee bill allows struggling cities and towns to suspend local pension COLAs
Governor Lincoln Chafee’s bill to aid struggling cities and towns — slated to be unveiled later this week — would allow communities to suspend “benefit adjustments,” according to a copy of the legislation obtained by RIPR.
The Chafee bill is dubbed the Critical Plan Empowerment Act-Municipal Pensions. It reads in part:
In order to mantain the sovereignty and fiscal stability of as many municipalities as possible, as well as to safeguard the well-being, public safety, and welfare of the citizens of the state and their property, it is essential that the state take immediate and proactive steps.
Chafee’s bill says that locally administered pension plans have “unique features, offer distinctive benefits,” and it says that “their administrators are in the best position to understand the financial condition of such plans and choose the tools best suited to remediate them.”
The bill goes on to call its prescriptions “reasonable and necessary to protect the compelling public interest listed herein.”
To be eligible for the bill, communities must adopt a related ordinance, supported by fiscal data; offer “findings demonstrating that alternatives to suspending benefit adjustments have been considered and/or are being implemented”; and show “a finding that that the ordinance is reasonable and necessary to achieve the municipality’s fiscal stability and protect its property, and the health, welfare and prosperity of its citizens.”
The governor’s bill goes on to say that notwithstanding:
any other statute, ordinance, interest arbitration award, or collective bargaining agreement to the contrary, a municipality in critical status shall not be required to provide benefit adjustments …. Once the municipality is no longer in critical status, it shall resume providing cost of living adjustments, but such adjustments shall not exceed the consumer price index for all consumers (CPI-U) as published by the United States Department of Labor statistics determined as of September 30 of the prior calendar year until the actuarial value of the locally administered plan’s assets is one hundred percent (100%) of the actuarial value of such plan’s liabilities ….
The bill calls for steering at least 50 percent of money resulting from COLA suspensions to be “reinvested exclusively” to increase a plan’s funded percentage.