Moderator at forum about unfunded pension and OPEB liabilities: ‘One of the great public policy crises of our time’

A SEMINAR HOSTED by a law firm and the R.I. League of Cities and Towns addressed the issue of unfunded pension and OPEB liabilities. / PBN FILE PHOTOS AND ILLUSTRATION
A SEMINAR HOSTED by a law firm and the R.I. League of Cities and Towns addressed the issue of unfunded pension and OPEB liabilities. / PBN FILE PHOTOS AND ILLUSTRATION

PROVIDENCE – A change in accounting standards that will require governments to start disclosing the amount of unfunded pension and retiree benefits on yearly balance sheets could put new pressure on public officials to step up payments on these plans, according to speakers at a conference organized by Donoghue Barrett & Singal P.C. and the Rhode Island League of Cities and Towns.
The Friday afternoon presentation, called “The Gathering Storm: The Looming Rhode Island Financial Crisis in Public Pensions and Other Post-Employment Benefits,” featured a panel of noted actuaries and union leaders, as well as former Providence Mayor Angel Taveras.
Each addressed the unfunded pension and OPEB liabilities that are carried by many Rhode Island cities and towns, and which by fiscal 2018 will have to be reported on their annual financial statements.
As a result, many municipalities can expect to see net valuations that are in the red, which will be reported on financial statements that participants said are likely to draw more public scrutiny. Rating agencies and auditors already are reviewing that data, but the new requirements will make it more publicly visible.
In the aggregate, the liabilities across Rhode Island towns and cities are now at $5.6 billion, mostly driven by health care costs of retirees. In Providence, the OPEB liability alone is $1 billion and is not funded.
“This is one of the great public policy crises of our time and it needs to be brought to the table,” said William Dolan III, a trial attorney with Donoghue Barrett & Singal, who served as moderator.
The audience of municipal officials included Cranston Mayor Allan W. Fung, Providence Finance Director Lawrence J. Mancini and Providence City Councilman Sam Zurier.
Taveras, who shepherded pension reform through Providence during his tenure as mayor, said he has since spoken several times about the experience. His presentation, “The Providence Experience,” highlighted the structural deficit he faced on taking office, and the changes enacted as he left office.
The pension reforms included eliminating generous, 5 percent and 6 percent cost-of-living adjustments for pensions, and freezing all COLAs for 10 years.
In 1989, he said, the city’s annual required contribution for pension plans was $12 million. As a result of contract changes negotiated at that time, the payment increased to $32 million annually, but the city didn’t make the required payment.
Over time, the city’s pension fund dropped from being 57 percent funded in 1991, to 32 percent funded in 2012, Taveras said.
“That’s just to give you an idea of how the unfunded pension liability grew to over $900 million in 2012,” he said. “Again, a problem that wasn’t addressed for over two decades, and finally, something has to be done about it.”

No posts to display