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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 [email protected]. Follow him on Twitter: @danmcgowan.


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