Providence Shells Out Millions in Out-of-State Pensions
Friday, February 17, 2012
The city of Providence doles out more than $1 million each month to pension recipients living outside of Rhode Island, according to a GoLocalProv analysis of April 2011 pension records.
In total, the amount of Providence pension money leaving the state was approximately $13.9 million last year, which doesn’t include the free lifetime health benefits awarded to many retirees. In total, 19 of the top 30 out-of-state recipients receive tax-free disability pensions and more than half are living in Florida.
At least two recipients are receiving more than $100,000 annually.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“I’m a retiree and I moved to South Carolina,” said former Providence Police Union President Robert Paniccia. “It’s too expensive to live up there.”
Mayor will Cut Benefits
But for Mayor Angel Taveras, pension payments and free health benefits have become too expensive to hand out regardless of where a retiree currently resides. The city is currently trying to tackle a $22.5 million deficit and Taveras has indicated that he intends to freeze all cost-of-living-adjustments (COLAs), with or without legislative approval.
The city is currently locked in a battle with retirees over a preliminary ruling that prevented the city from shifting retirees over the age of 65 to Medicare. The General Assembly passed a bill last year granting those rights, but public safety retirees sued and a Judge ruled in their favor. The city’s attempt to expedite an appeal was shot down by the State Supreme Court last week.
During his State of the City address Monday, Taveras said the bankruptcy of Central Falls proved that retirees can’t be successful in a failing city. He has continuously blamed lifetime health benefits and the five and six percent compounded COLAs awarded over two decades ago to some public safety retirees as the reason the city is on the brink of bankruptcy.
“An unbearable and unsustainable burden of five and six percent compounded pension COLAs – guaranteed annual raises for retirees – causes the black hole that we face to deepen with each passing day,” Taveras said.
Debate of Staying/Leaving the State
Retirees are allowed to move anywhere they would like and the vast majority do stay in Rhode Island, but Paniccia indicated that some do choose to move away from the state because it can be more affordable to live in states like South Carolina or Florida.
According to pension records, the average retired police officer or firefighter made approximately $42,000 in 2011.
Although critics of the state’s tax policies have said high taxes are the top reason people leave Rhode Island, studies have suggested that affordable housing is the primary reason people make the decision to move from one state to another.
A report produced last summer by Center on Budget and Policy Priorities noted that over the last decade, only 1.7 percent of Americans moved from one state to another. The study suggested that housing costs were often the deciding factor.
“A family might be able to cut its taxes by a few percentage points by moving from one state to another, but housing costs are far more variable,” the report stated. “The difference between housing costs in two different states is often many times greater than the difference in taxes. So what might look like migration in search of lower taxes is really often migration for cheaper housing."
Still, others suggest that high taxes are precisely the reason retirees leave the state. Last month, the website topretirements.com ranked Rhode Island the third-worst place to retire, due in part to the property taxes.
“The Ocean State has severely underfunded pension/health liabilities and budget deficits. It has the 5th highest median property taxes paid,” the website said. “Our prototypical couple would face much higher income taxes here than they would in most other states. It does have some great places to live, thanks to its extensive coastline and numerous bays and harbors.”
State GOP executive director Patrick Sweeney called the ranking another black eye for the state.
“This is nothing new to Republicans. We have one of the highest total tax burdens in the country due to the reckless spending of Rhode Island Democrats and we have nothing to show for it,” Sweeney said. “We need to lower our tax base and entice those outside of the state to reside here. As Senator Rubio says, ‘we need more taxpayers, not more taxes.’”
Taveras: Time to Share in the Sacrifice.
But for the city to remain afloat, Taveras says he will have to cut benefits all recipients. His administration believes the city can save $16 million annually by freezing COLAs. The Mayor has also indicated he wishes to cap pensions.
During his State of the City address, he noted the each of the city’s top 25 pension recipients are collecting more than $109,000 a year. He singled out former Fire Chief Gilbert McLaughlin, who retired in 1991 at a salary of $63,510.72 and now makes $196,813.08. Taveras said McLaughlin collects more than five times the income of an average Providence resident and he collects more money from the city as a retiree than any working Providence employee.
Taveras said it’s time for retirees to share in the sacrifice.
“While our city workers, teachers, police officers and firefighters are foregoing raises, many of our retirees continue to collect 5 and 6 percent compounded raises every year,” he said. “Taxpayers and business owners know that guaranteed yearly raises of this magnitude – or any magnitude in these economic times – make no sense. This must stop now.”
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