Mayors look to Assembly for relief

GATHERING FEEDBACK: Gov. Lincoln D. Chafee has started holding meetings with local leaders, the business community and public-employee unions on a municipal-pension bill. / PBN FILE PHOTO/RUPERT WHITELEY
GATHERING FEEDBACK: Gov. Lincoln D. Chafee has started holding meetings with local leaders, the business community and public-employee unions on a municipal-pension bill. / PBN FILE PHOTO/RUPERT WHITELEY

When Central Falls declared bankruptcy last year, Pawtucket Mayor Donald R. Grebien knew those expecting the fiscal illness to spread to other communities in Rhode Island would be watching his then-ailing city for symptoms.
So far, Pawtucket has avoided any new setbacks or complications, but Grebien and other Rhode Island mayors say the financial health of the state’s cities remains precarious and they need the kind of dramatic legislative help in 2012 that lawmakers delivered to the state pension system last year.
“Pawtucket was fortunate enough to slip by: we went from negative to stable,” Grebien said, referring to his city’s bond rating and outlook. “But we are far from out of the hole.”
With a sweeping and controversial overhaul of the state retirement system now out of the way, the plight of Rhode Island’s cash-strapped cities and towns has taken an unobstructed place in the 2012 political spotlight.
In the past few months, East Providence has been placed under the oversight of a state budget commission, and Woonsocket has been put under a bond-rating watch that could end with a downgrade.
Having failed to attach relief for struggling municipal retirement plans to the 2011 state pension overhaul, Gov. Lincoln D. Chafee has vowed to file a new bill in the early days of the new legislative season to solve what he called a “crisis.”
A former Warwick mayor, Chafee has promised not to stop at pensions, but to work to find other measures to help communities, such as expediting state school aid and reining in some of the unfunded state mandates that frustrate local leaders.
Yet as long and difficult a process as scaling back the benefits for public workers in the state plan appeared last January, fixing the structural problems that threaten local governments, especially their poorly funded local pension plans, may be more difficult.
The legal, practical and political challenges that prompted leaders in the General Assembly and General Treasurer Gina M. Raimondo to pass on municipal pension-plan reform in the state overhaul bill remain.
House Speaker Gordon D. Fox and Senate President M. Teresa Paiva Weed have both voiced reservations about attempting to change independent municipal pensions in the same manner as the state system.
One of the most difficult aspects of changing municipal pension systems is that, unlike the state retirement system, the problems facing each community are different, with some being significant and others hardly affected at all. In an email statement about a potential municipal pension-relief bill, Paiva Weed cited the complexity of the situations facing different plans as a reason to wait for the results of new actuarial studies spelled out in the state pension-reform bill.
“It is important to recognize that … there is no one-size-fits-all solution,” Paiva Weed said in the email. “It is also important to ensure that the measures proposed are legally permissible, long-term solutions that afford true retirement security and sustainability.”
Fox said he would look to a planned pension-study commission to advise the General Assembly on the best way to help cities and towns. He said the panel would make recommendations to the General Assembly in April.
Members of the new pension study commission include Providence Mayor Angel Taveras, who has pushed strongly for municipal pension reform, Johnston Mayor Joseph M. Polisena and Jamestown Town Administrator Bruce R. Keiser.
Chafee has begun holding a series of “strategy sessions” with groups, including local leaders, public-employee unions and business leaders, to gather feedback on a municipal-pension bill before filing a proposal.
As it was last year, the remedy local leaders are seeking to help their independent pension funds is the authority to freeze annual cost-of-living increases.
In addition to pension help, Chafee has said he also hopes to help communities by easing the burden of some state mandates and accelerating the speed with which state education aid to cities and towns is distributed.
Daniel Beardsley, executive director of the Rhode Island League of Cities and Towns, said local leaders are also looking for changes to labor laws, including allowing municipalities to provide partial disability retirements at the same level the state now does.
How important these other issues are to mayors and town administrators varies.
Providence’s pension plan has one of the largest unfunded liabilities, at $829 million, and its 34 percent funding level is considerably worse than the 48 percent level the state pension plan was at before the passage of the recent legislation.
Pawtucket’s independent plan for police and firefighters has a $140 million unfunded liability and is only 31 percent funded.
With the tax increase needed to make up that gap larger than what taxpayers could or would be willing to pay, Grebien said, the city is instead maintaining the same funding level this year and hoping conditions improve. Pawtucket, like several communities, will need to take out a tax-anticipation loan to fund city services until property taxes are collected later in the year. If the city has more money upfront, such as state school aid, it could reduce some of these borrowing costs, Grebien said.
An inability to secure tax-anticipation financing was a contributor to East Providence being placed under the supervision of a state budget commission.
In Warwick, Mayor Scott Avedisian said while he supports and will participate in discussions over municipal pension plans, the issue is not as critical for Warwick’s four local plans because they already include self-correcting mechanisms and are mostly above 70 percent funded.
On unfunded state mandates, Avedisian said they may seem small, “but they add up.”
He pointed to a requirement for the city to advertise its water-quality reports when the same reports are already posted by the reservoir that provides all the water, as an example of inefficiencies.
In Cranston, Mayor Allan Fung said pensions – the city has one plan that is only 17 percent funded – were still his overriding concern.
“Those legacy costs are going to continue to be the biggest budget busters in the future if we don’t control them now with some reforms,” Fung said.
Cranston has a $256 million unfunded pension liability, and during this fiscal year is paying $21.7 million toward the pension plans, $2.4 million short of the annual recommended amount. During the next fiscal year, the recommended contribution will go up another $1.6 million, Fung said.
Although it has been left in the background during all of the recent pension-related debates, the cost of providing health care to retired employees could be an even larger concern facing communities in the years to come.
In Pawtucket, for example, the unfunded retiree health care liability stands at $378 million, Grebien said.
With all of the legal and political hurdles that stand in the way of scaling back pensions, some have suggested that cities could be better off by going bankrupt like Central Falls did.
That view doesn’t sit well with most mayors.
“I don’t see how another community’s bond rating dropping helps anyone,” Grebien said. “Businesses are not going to want to come into Rhode Island with this uncertainty.” &#8226

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