Taveras Unveils Budget: City Council Reacts
Tuesday, April 24, 2012
Less than three months after warning that Providence was on the verge of bankruptcy, Providence Mayor Angel Taveras on Monday proposed a fiscal year 2013 budget that will not raise taxes, but will depend on retirees having their cost-of-living-adjustments (COLAs) frozen and tax-exempt institutions contributing millions in payments in lieu of taxes (PILOT) to the city.
Citing the extreme sacrifice made over the last 15 months when the city raised property taxes ten percent, closed public schools, made cuts in nearly every department and laid off 200 employees, Taveras said his $638.4 million budget “offers a balanced, comprehensive approach that guides Providence through the immediate fiscal crisis” the city still faces today.
“We asked everyone to do more with less,” Taveras said. “Actually, we asked them to do better with less.”
Much of the $24.6 million increase in proposed spending in the Mayor's budget is tied to Governor Chafee’s proposal to accelerate and fully fund the school funding formula. Taveras' plan also includes a $7.7 million contribution to the city’s severely depleted rainy day fund, but relies on the assumption that slashing retiree benefits will not be ruled illegal by the courts and that the tax-exempts will agree to contribute more to the city.
To date, only a handful of retirees having willingly agreed to have their COLAs frozen and Johnson & Wales University is the only nonprofit has reach an agreement to increase its PILOT payments.
“Despite the progress we have made, we still face a challenge in the current fiscal year,” Taveras said. “We must close a $22.5 million budget gap before the end of June. It has become abundantly clear that in order to restore structural balance to our budget we need our tax‐exempts to be part of the solution and we must reform our pensions. These structural reforms help protect our priorities in future years and help strengthen our ability to manage cash flow through the current fiscal year.”
President Solomon: Council is Up to the Task
Taveras urged the Council to immediately pass all seven recommendations made by Council subcommittee on pension sustainability, which includes freezing COLAs and placing a cap on pensions moving forward.
City Council President Michael Solomon said he was happy to learn of the Mayor’s plan not to raise taxes and said everything comes down to the Council passing the pension reform proposals. He said the Council Finance Committee will begin the vetting process today.
“I feel good. Obviously I’m happy that there’s no tax increase,” Solomon said. “It’s predicated that we have to get this Providence pension protection plan passed. I think the Council is up to task. It’s not going to be easy, but I think this Council is up to the task.”
Council Majority Leader Seth Yurdin said he too believes the Council will ultimately support the pension reform proposals.
“I think people on the Council know how important it is to the sustainability of the city,” he said.
Councilwoman Sabina Matos said that while she was delighted by the Mayor’s decision not to raise taxes—especially after raising the possibility of a supplemental tax hike three months ago— but also expressed concern about the question marks in the budget.
“I’m happy to hear we are not talking about tax increases, it’s really refreshing to hear that,” Matos said. “My concern is that we still have a few ‘ifs’, and that’s the same thing we had last year.”
Fire Union President: “A Dangerous Practice”
But Paul Doughty, president of the firefighters union, did express concern that the budget relies so heavily on an issue that will likely be decided in a court room. Doughty said that while he believes the Mayor and his staff have been honest and transparent, he considers the attempt to freeze COLAs “very problematic.”
“I think it’s a dangerous practice,” Doughty said. “I think last year shows us that when you bank on money saving ideas that haven’t been fully vetted or are dependent on the court’s decision, I think you set yourself up to fail.”
Doughty was referring to Judge Sarah-Taft Carter’s ruling earlier this year that said the city could not switch retirees over to Medicare after they turn 65 because they were guaranteed lifetime health coverage from the city.
“I think any unilateral action after what happened last year and the compounding effect if another [temporary restraining order] is issued or if they ultimately lose the lawsuit. I think it’s very problematic. I think it took a long time to get into this situation and it’s going to take while to get out of it.”
Council Members Cautiously Optimistic
Other members of the City Council expressed cautious optimism with the Mayor’s proposal. Councilman Bryan Principe said he is still unsure where he stands on pension reform, but said he was happy the budget does not include any tax hike.
“I like the idea that there’s no proposed tax increases,” Principe said. “I think the people of the city of Providence are way too strained in the environment to absorb another tax increase. I think there are still a lot of variables, but the benefit is this year we are a year ahead of where we were last year.”
Councilman Michael Correia, who served on the pension subcommittee, said he supports the pension reform proposal and believes it will be passed by the Council. He too said he was happy with the Mayor’s decision not to raise taxes, but raised concerns about the assumptions made in the budget.
“I’m ecstatic that there is no tax increase,” he said. “There was rumors and speculation that there was going to be. There’s still a lot of ‘ifs.’”
The “Next Great American Comeback Story”
For Taveras, the budget represents an opportunity to place Providence on a path to fiscal security. Sounding more optimistic than he has in recent months, the Mayor declared that he believes the city has an opportunity to become the “next great American comeback story.”
“Indeed, this budget represents hopeful progress for our city of Providence,” Taveras said. “It shows our city successfully pulling back from the brink and positioning for a new era of growth and prosperity.”
Now, he said, it’s time for the Council to finish the job and pass his budget.
“This budget counts on our ability to finish the difficult work of structural reform,” he said. “It once again relies on increased support from all of Providence’s large tax‐exempt institutions. And it rests on the conviction that Providence must finally fix its broken pension system in the days and weeks ahead.”