Guest MINDSETTER™ Tom Kenney: Who’s to Blame for Providence Going Broke?
Thursday, February 16, 2012
Active Providence firefighters and retirees explain that they never missed a payment into their retirement system. They say it was mismanagement (bordering on criminal mismanagement) by elected officials which has lead to the unfunded liability which threatens the entire system. They say the pension provisions, including COLA’s, have been negotiated fairly and are protected as part of their CBA, which was signed by the mayor and ratified by the City Council. They say it is not fair to blame them and the City cannot break a contract…period!
City and state officials, general taxpayers, bloggers, newspapers and other media say the taxpayers can’t afford it. There is no other choice than to nullify the contract and make the necessary unilateral cuts they deem to be fair…period!
Neither side believes they should have to find any compromise between the two positions.
Something has to give.
Who’s Really to Blame?
No one wants to talk about the fact that the City of Providence (as are all other municipalities in the State of RI) is struggling in their financial efforts to avoid bankruptcy due primarily to the millions of dollars in state aid to cities and towns which have been pulled out from under them by former Governor Carcieri.
No one wants to talk about the fact that the last three mayors of Providence (Cianci, Paolino & Cicilline) continually failed to meet the City’s annual obligation in funding the pension system…or the fact that Cianci raided the pension on more than one occasion to “borrow” money from the system.
No one wants to talk about the fact that Mayor Cianci is the sole person responsible for the 5% & 6% COLA’s which are responsible for creating the obscene pensions often mentioned in reports about the outlandish sums being paid to some fire and police department retirees. He, and only he, signed the contracts for the City which awarded these unsustainable COLAs.
No one wants to talk about the fact that these previously mentioned factors are the reasons Providence’s police and fire pension system has been unsustainable…not the pensions being paid to 80% of the retirees from this system who are being paid 3% COLA’s on a much smaller based pension.
No one wants to talk about the fact that there have been numerous concessions and changes to the Providence police and fire pension system over the past several years as a result of both fire and police unions negotiating give-backs to the city when called upon to participate in “shared sacrifice” to help the city through tough economic times.
No one wants to talk about the fact that the highest single cost for employees and retirees is an out-of-control health insurance system that needs to be brought under control - not just absorbing and passing on the already obscene premiums charged by a company (companies) that continually racks up record profits quarter after quarter!
Here are some of the changes already negotiated that have been negotiated with the city.
Providence firefighters have paid an extra 1.5% toward pension & OPEB (other post employee benefits) costs than the Providence police for the last 15 years or so. This 1.5% is officially being held for OPEB by the City of Providence (or at least it should be) via contract agreement.
Providence firefighters earn the right to retire at 50% of base pay at 20 years of service. As of our last contract any member who chooses to retire after 20 years will have to wait for 5 years before they are able to begin collecting their pension and an additional 3-4 years before collecting any COLA. This is a change from being able to collect their base pension immediately upon reaching 20 years and then waiting 3-4 years for COLAs to begin.
As of our last contract Providence firefighters are required to utilize Medicare coverage as their primary health care coverage for themselves and their spouse once they turn 65 years of age. This change will add over $5,000 per year in costs to retirees plus additional co-pays and prescription costs. It will also save the City millions.
- The accidental disability pension rate for current retirees is under 20% compared to the 90-95% during the late 80’s and 90’s. Any suspected abuse of the disability pension system has been cleaned up over the past 10-15 years, and there are much tougher requirements for accidental disability pensions currently in place.
What Can be Done?
There are some things that could be done to amend Providence’s police and fire pension system which would most certainly be welcomed by much of the active membership of both unions, and the City should at least attempt to negotiate with the retirees.
The first (and most immediately important) is to address the COLA issue. Retirees should NEVER make more in retirement than the person who is actively performing the same job. This is common sense and although the current retirees have no legal requirement to give up their annual raises, they must certainly be worried about the issue going to court once again and the outlandish amount of their pension being reviewed by the public, the media and by a judge.
Here are a few more options:
Cap the pensions of 5% & 6% COLA retirees where they are. No more raises…period! Or … attempt to cut their pensions back to 100% of the current employee’s base pay for the rank they left.
Cap the pensions of 3% COLA retirees at 100% of the current active member’s base pay for the job the retiree left.
Calculate future COLA’s to coincide with active members’ raises. This way if an employee retires at a pension of a 75% of his base pay his retirement will never exceed 75% of an active member’s base regardless of his length of retirement or COLA rate.
Negotiate a change for new employees to be required to reach a minimum age (55?) before being eligible to collect a service pension.
- Have an audit of the system and determine if a raise in contribution percentage is required for current employees.
Attempting to implement these changes or negotiating these changes with unions and retirees would be the first step I would take if it were my job to rein in costs to Providence’s pension system. You can’t discount the changes that have already been implemented because they haven’t saved the City millions so far.
The fix to the system must be a long-term solution – not a quick fix.
As such, these changes will take some time to correct the system. The capping (or cutting) of the ridiculously out of control 5% & 6% COLA’s presently being paid would be the biggest immediate savings for the plan. It would be a substantial amount.
We have to get the system on the track to fiscal health without penalizing the normal retiree (or future retiree) who collects a fair pension for years of service to the City. These retirees are not getting rich in retirement; they are merely attempting to reap the benefits that they paid for over a 25 – 35 year career.
Tom Kenney is a Captain with the Providence Fire Department
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