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‘Confidential’ Memo Shows West Warwick Pensions Just 19.8% Funded

Monday, December 03, 2012


West Warwick’s unfunded pension liability ballooned to $115.3 million and its funded ratio dipped to 19.8 percent during the 2012 fiscal year, according to a report released to members of the town’s Pension Board from Indianapolis-based Nyhart Actuary & Employee Benefits.

The report, dated Nov. 26 and marked “personal and confidential,” certifies that the town’s pension plan is in “critical status,” which state law defines as any plan that is less than 60 percent funded by the beginning of the plan year. Nyhart had previously suggested making deep cuts or re-amortizing the fund to avoid making a contribution of more than $10 million to the pension system to help right the ship.

Separately, West Warwick is still projecting a $1.2 million yearend deficit and fiscal year 2014 deficit of more than $10.1 million, according to a quarterly report released by Town Manger Michael Stampfler early last month.

Those projections have city and town leaders threatening that tax increases and massive cuts may be the only way to keep the city from falling into bankruptcy the Central Falls did in 2011.

“Anyone who thinks they’re going to get out of this without feeling the pain is out of their mind,” said Councilman Angelo Padula, the former Council President.

Padula’s is concerned the state may decide to appoint a fiscal overseer in the near future to help address the town’s financial woes, a decision that could lead to Council members being stripped of their decision-making abilities.

“I think it’s a dog and pony show,” Padula said. “We know where the cuts need to be, but we don’t have the power to do it. So the state will come in and the Council will take a backseat.”

Padula: “We’re Dead in the Water”

Padula blames members of the General Assembly for not giving cities and towns more financial flexibility during the last session when it failed to pass the majority of Governor Lincoln Chafee’s municipal relief package.

Chafee’s proposal would have allowed distressed communities (Providence, Pawtucket, West Warwick and Woonsocket) to freeze cost-of-living-adjustments and would have given mandate relief and binding arbitration reform to those municipalities. The package also included disability pension reform and would have given communities more control over their school budgets.

The Governor has blamed cuts in state aid as the reason cities and towns across the state have fallen on hard times. Since the beginning of the recession, the state cut funding to communities by more than $240 million and Chafee believes the result has been skyrocketing property taxes and growing deficits.

“Massachusetts raised the sales tax and Deval Patrick took a beating over it, but it stabilized Massachusetts," Chafee said earlier this year. "We did it differently. We hit the cities and towns. We just passed it down to the local levels. That’s what cost us.”

But Padula said the taxpayers haven’t helped by supporting General Assembly candidates who are backed by organized labor. He pointed to State Senator Michael Pinga’s loss in September’s Democratic primary as an example of an “excellent” lawmaker who was targeted and defeated.

“As long as the teachers unions and special interests are running the state, we’re dead,” Padula said. “We’re dead in the water.”

Town Failed to Make Required Contributions

Politics aside, the town’s pension problems stem from years of underfunding the system. The Nyhart report shows that the town’s unfunded liability increased from just over $30.5 million to its current $115.3 million in just ten years.

Records show the town hasn’t made more than 58 percent of its annual required contribution (ARC) to the pension fund since 2001. For the 2012 fiscal year, the town contributed just over $1.1 million, which was just 12.6 percent of the $8.8 million it was supposed to invest.

"West Warwick has a local pension plan that's far worse than critical status, they are on life support at under 20 percent funded,” said Rhode Island Statewide Coalition (RISC) executive director Donna Perry. “Unfortunately the town now appears to have a fiscal profile that's very similar to Central Falls when it went under, when you look at the pension liability, budget deficit, and other factors. I think it's rather ironic that in the same week state unions go to court to try and overturn the pension reform law, it’s coming to light that in yet another community we have a local pension plan that's in deep, deep trouble.”

That trouble, some say, can only be addressed through achieving significant concessions from retirees and the police and fire unions. Earlier this year, Stampfler introduced a plan that would freeze salaries, increase employee healthcare contributions and raise property taxes by four percent (the maximum amount allowed by state law) for several years.

Nicholas Denice, a member of the town’s pension board, said he hopes town leaders can strike a deal with organized labor to help turn the town’s finances around.

“We’ve done our job. Now it’s time for the Council and labor to get to the number,” he said.

But Padula, who is opposed to raising taxes, remains doubtful town leaders will be able to solve the problems in short order.

“Unless they have a magic wand,” he said.

Dan McGowan can be reached at dmcgowan@golocalprov.com. Follow him on Twitter: @danmcgowan.


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Malachi Constant

wait a minute ---- blame the unions for management's failings.....no wonder why RI is messed up....folks like Padula and Perry keep blaming the victim....and GoLocal gives them a soapbox to do it!

Christopher Lee

RI state and local governments are pricing themselves out of business. Government overhead costs in RI are out of control. And Chaffee thinks RI has a revenue problem, not a spending problem – what a cop out. But I get it.

Voters reward profligate politicians who pander and expand government; voters punish fiscally responsible politicians who dare to say no to the electorate and reduce government. We get what we deserve. To Chaffee I say raise, raise, raise, and raise taxes still more until the takers out-number the makers even more than they do now!

Gary Arnold

The pensions, COLAs and don't forget health care (debts) have been an increasing problem, state wide in every city and town and yet no private citizen outcry.
Look over the last 10 to 15 years and these debts have doubled or tripled for all cities/towns and increasing at a faster rate every year. It has now grown to such a large number or % of taxes that even those with their heads in the sand have to notice.
The private sector has to organize to give the GA the push to get rid of the mandates, put control back into the local administration, reform pensions, COLAs and health care for public employees.
Have each city and town do a five year forecast on their budgets, that will be an EYE opener to seeing RI’s financial cliff.

Ford Renner

All good comments, and Mr lee is right. There is no retreat now, may as well make a mad dash for the cliff and RI throw itself off. I wont be here though, leaving in a year, for good. See ya!

Walt Barrett

Sell your property and get out while there is still time to salvage anything. It's never going to change!

jon paycheck

its all politics...anyone who thinks descisions are made for the best interest of the state is sadly mistaken.

michael riley

Towns and cities in Rhode Island are clearly in danger of economic upheaval.Most town Charters have budget processes that allow for completely ignoring pension plan obligations. Often those who do the budgeting don't even understand that pension plans are not "pay as you go" plans. State law and the Auditor general have pointed out for years and produced reports showing this violation is rampant. There is no penalty or fine associated with a budget that simultaneously allows for raises to town employees while at the same time refusing to fund their pensions. This can not work and allows elected and appointed officials to do exactly what they have done and place the burden on future generations and taxpayers. This behavior is wrong . In addition to the clear solvency issues of pensions in many cases the health care or "opeb" underfunding is even worse. These issues must be number one on the State House Agenda in January.

David Beagle

Did anyone really think an old failing mill town like West Warwick, run by used car salesmen and house painters would ever make the right decisions in order to survive?

george pratt

When they go bankrupt we'll get the taxpayers around the state are going to have to pay the retirees $5,000 bonuses. Just as we did in Central Falls. It cost $2,500,000 in Centrasl Falls, what will it costs to bailout the West Warwick retirees? It was a bad precedent that was set.

marie manny

Blame the state, blame the unions, blame previous town councils, blame citizens for voting out ineffective politicians, blame Santa Clause if you want to just don't admit that you wanted a job that you were never capable of doing.

marie manny

David Beagle...I know the ex.con on the council but which one is the house painter? Really Qualified aren't they.

Harold Stassen

And just how long has Mr. Padula been on the City Council? During that time, what has he done to address these issues? Just flapping your lips and saying "we ain't gonna raise taxes" accomplishes nothing.
However, I do agree with his comments about union influence in electing candidates sympathetic to their causes. However, don't the voters have some complicity for electing these drones?

jon paycheck

if soembody does their homework, i think westw arwick was almost fully funded 10 years ago

Edward Smith

Wait a moment... This under the watchful eye of a Town Manager? I thought Town Managers were a smarter, more professional and accountable alternative to elected Mayors?

I guess not.

Odd Job

Just jack up the taxes until their is no pension problem. RI'ers obviously don't care as they keep voting in these union stooges, so screw em them.
Pay up you idiot voters!

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