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Unions May Go To War Over Municipal Pensions

Tuesday, October 18, 2011

 

A proposal that will put a dent in the combined $9 billion shortfall between the state and local pension systems will be introduced by Governor Chafee and General Treasurer Gina Raimondo today, but as of Monday, union leaders and elected officials said they were still mostly in the dark as to how the state will address independent locally administered plans.

The tie-up, officials say, is that while the 36 local plans that aren’t part of the state’s Municipal Employees' Retirement System (MERS) (Read GoLocalProv's A-Z Guide to Pension Terms Here) have unfunded liabilities exceeding $2 billion, some plans are healthier than others and each plan includes different language depending on the municipality, which could make a total pension overhaul difficult to pass for state lawmakers.

The problems are two-fold. Politically, state lawmakers will likely face a great deal of pushback if asked to vote on reform that includes non-MERS plans, which are mostly given to firefighters and police officers. On the other side, union leaders say there is no doubt that any plan that seeks to alter non-MERS that were collectively bargained will end up in court.

“It seems like they’re balancing everything on our backs,” said Paul Reed, President of Rhode Island State Association of Fire Fighters. “If they take benefits away from us, obviously we’re going to have to go to the legal system.”

Avedisian & Paiva Weed: Passage Could Be Difficult

The unions aren’t the only ones opposed to having state lawmakers dive into municipal pension reform. On one side, Governor Chafee and the leaders of at least nine communities including Providence Mayor Angel Taveras and Cranston Mayor Allan Fung say they want local reforms included in the state package. But Treasurer Raimondo, Warwick Mayor Scott Avedisian and Senate President M. Teresa Paiva-Weed have all raised concerns.

“I am worried that the complexity of adding all of the nuances relative to each individual municipal plan could create problems with passage of real reform,” Avedisian said Monday. “I believe that the Governor and the Treasurer are both committed to working with each individual community and on each individual plan. Each plan would require its own actuarial study, updated assumptions addressing rates of return on investments and mortality rates. I know that Governor Chafee and Treasurer Raimondo stand ready to be full partners with cities and towns. Rhode Island stands on the threshold of making major pension reforms. I thank the Governor and the Treasurer and look forward to working with them on communities’ individual pension plans and in strengthening Warwick's one problematic pension plan.”

Paiva-Weed said she understands locally administered plans need to be addressed, but because they are governed by collective bargaining agreements, any reform could face legal and political obstacles.

“Careful analysis and actuarial study is necessary before making wholesale changes to local retirement systems that vary widely from community to community and plan to plan,” she said. “After many months of work by Treasurer Raimondo to develop a thoughtful plan that will ensure an affordable and sustainable retirement system, I am confident that any hurdles can be overcome with regard to the state administered pension systems. Much more analysis is required to ensure that local systems are addressed responsibly, in a manner which best meets the needs of all involved communities, and in a manner which will withstand legal and political challenges.”

Local Plans Must Be Included

But Taveras and Fung maintain that for any plan to be called “comprehensive reform,” it must address the non-MERS pension plans. According to a report issued recently, two-thirds of the local non-MERS plans are at risk.

A letter send last week to Governor Chafee and Treasurer Raimondo that was signed by mayors and town managers in nine communities called for local plans to be covered by the state.

“Comprehensive statewide pension reform must be an integrated solution including cities and towns and our locally administered pension plans,” the letter stated. “Our ability to implement reforms at the local level will be hampered without state-level action that gives us the tools and flexibility needed to put our pension plans back on firm financial footing. As you finalize your reform proposal, we ask that any reforms brought to the state and MERS pension systems also be applied to the locally administered plans.”

Mazze: RI’s Approach is Flawed

But that might be easier said than done, according to Dr. Ed Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island. Mazze said he doesn’t expect the unions will be willing to budge when it comes to altering the pension system.

“The unions are not going to give up much in the upcoming battle over pension and health benefits,” he said. “They will argue that their members received their benefits through tough collective bargaining sessions where unions gave up some of their demands to protect member's pensions. They will go to court to get an injunction if any legislation is passed that changes the terms of their agreements. They will mobilize their resources against those who vote for the changes. This battle could have been avoided if both parties had told the truth during past negotiation sessions when the parties knew that there would be a day of reckoning. No funds, no pensions, no COLAs, no free health benefits. The Rhode Island approach to collective bargaining is ‘go along, to get along, and don't worry about tax revenues to support labor contracts.’”

Union Leader: Not Logical or Practical

Still, union officials say forcing municipal pension reform into one package is not the way to handle reform. Reed said the state’s pension woes were not created over night and “it’s not logical or practical” to attempt to address the problem through sweeping changes.

“The problem is there no one private or municipal plan,” Reed said. “Our plans are all collectively bargained and it’s our opinions that they’re trying to take that away from us. We bargained for this. We don’t think that is fair.”

Reed said a legal battle is not out of the question.

“If you take away what we believe is a contractual right that we collectively bargained, then yes, we may entertain going to court,” he said.

 

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