PROVIDENCE – The city has reached a tentative agreement with its current and retired workers on a package of benefit cuts large enough to keep Providence out of bankruptcy and end a high-stakes court fight, Mayor Angel Taveras announced Wednesday afternoon.
The deal, which union leaders were scheduled to vote on later Wednesday, will suspend retirees’ annual cost-of-living pension increases for 10 years and eliminate all 5 and 6 percent compounded increases permanently. It also moves any retiree over age 65 from city-paid insurance into Medicare.
“This settlement saves the pension system for current workers, protects retirees from losing their pensions and puts Providence on firm financial ground so that we can move forward to create jobs, improve public education and make Providence a more livable and vibrant city,” Taveras said in a news release announcing the deal. “I hope that history will show this to be one of Providence’s finest hours: the moment when those with the greatest stake in Providence’s future came together to accomplish the painful and difficult work needed to pull Providence back from the brink.”
By reaching an agreement with workers and retirees, the city heads off a potential court fight with its workers over pension cuts passed this spring that would have suspended COLAS indefinitely. Next year alone the new pension rules are estimated to save the city $18.5 million.
The agreement should also end a pending lawsuit challenging the city’s decision to move all retirees 65 and older into Medicare, which is expected to save the city $4.2 million in the next fiscal year. The two sides had been ordered into mediation earlier this month by Superior Court Judge Sarah Taft-Carter with a trial set to begin in June if they did not reach a deal.
This winter, Taveras said if the city lost the Medicare case and was unable legally to implement its pension cuts, it would be faced with bankruptcy.
In exchange for accepting the cuts, retirees with pensions of less than $100,000 a year will receive a $1,500 one-time stipend five years from now.