The City of Cranston’s ongoing attempts to dig itself out of financial abyss and away from a looming state takeover should serve as a sobering reminder to other communities to get their financial houses in order.
Cranston is now buckling under the weight of an unfunded pension system. With an estimated $170 million shortfall in the city’s police and firefighters’ pension fund, Cranston has seen dozens of police officers and firefighters abruptly retire. The public safety employees are afraid that if they stay on their respective force, their retirement plans could be in jeopardy.
If this situation were limited to Cranston it would be alarming enough, but according to the Rhode Island Public Expenditure Council, it is hardly isolated.
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RIPEC suggests that there are at least a dozen communities throughout the state that are facing some kind of unfunded pension liability, meaning they do not have enough money to cover the costs for retiring police and fire workers. Providence, for example, is estimated to be nearly $500 million short.
Each city and town in Rhode Island has a pension fund. Some are under a state plan, while others are privately funded. Some of the plans, according to the Rhode Island League of Cities and Towns, are adequately funded – others are not. One of the problems with those cities and towns that fund their own plans is that all too often, other capital projects emerge and annual contributions are reduced. It’s an old story and we’re beginning to see – as is the case in Cranston – that the ending has the potential to become expensive for taxpayers.
There are reasonable approaches to ensure that pension plans remain viable. In Woonsocket, for example, city officials have adopted a "pay as you go" approach.
Woonsocket switched its police officers over to the state pension system in 1980 and its firefighters to the state system in 1985. The city is now working to make up lost ground in covering employees hired prior to those dates. This year, the approach will cost the city $5.2 million. Next year, the bill will run to $6 million. But the approach is working and the long-term picture is bright.
"It’s a very practical solution to the problem," said Woonsocket Mayor Susan D. Menard.
There is also legislation pending at the General Assembly, sponsored by Charlene Lima, a Cranston Democrat, that would require cities and towns to contribute two percent annually to their pension plans.
"It seems to me that we need to force cities and towns, especially those that are requesting the legislature to pass bills that would allow them to go out to bond, to set aside money for these funds," she said. "We need to stop the problem before these cities and towns are so much in debt that the state has to take over."
Lima’s proposal is a broad one and does not address in detail the issue of municipalities selling pension liability bonds. We do commend her, however, for bringing a critical issue to the legislature. We hope this marks the beginning of a concerted effort to address a problem that is not going to go away on its own.
