Providence Mayoral Candidates Tackle Pension Costs
Tuesday, July 27, 2010
Candidates for Providence mayor yesterday tackled the city’s skyrocketing pension costs, fueled by generous cost of living increases, or COLAs, that allowed some of the highest-paid retirees to triple their annual retirement benefit over 20 years.
“Anybody can see that there is a problem with a contract when someone who earned $54,000 a year while actively working can make $529,000 a year in retirement,” said independent candidate Jonathan Scott (pictured right). “I understand that the COLAs were once as high as 6 percent compounded but it is not realistic to have been there and it is certainly not realistic for the unions to use that history as some sort of bargaining chip.”
The current proposed firefighter contracts, covering 2007 to 2010 and 2011 to 2013, have another compounded COLA of 3 percent.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBoth Scott and Democratic candidate Angel Taveras (pictured left) said COLAs need to be calculated using the simple, rather than the compound method—which makes retirement incomes rise much faster.
“We can all agree that compounding COLAs are ridiculous and have been a part of creating a mind-boggling unfunded pension liability,” Taveras said. “The concept of a COLA is to ensure people do not fall behind, not so they profit year after year. My administration will put an end to contracts with compounding COLAs.”
Lombardi Offers Alternatives
However, a third candidate for mayor, Democrat John Lombardi, doubted that the city would be able to end the compounded COLAs. He pointed out that past contracts that have gone to binding arbitration have resulted in compound COLAs for city firefighters.
If the council refuses to ratify the new contracts, Lombardi (pictured left) said the city could go back to binding arbitration. “What happens if we get hit worse than we’ve already gotten hit now?” he said. “What if the binding arbitrator says, ‘No, we’re going to give you a 4 percent compounded COLA?’”
He did not say how he would vote on the new firefighter contracts, saying he would need to review all the facts before making his final decision.
In the meantime, Lombardi said there are other ways to combat the rising costs of a pension system that has more than $800 million in unfunded liabilities. Those include increasing the amount of co-pays employees have for their health insurance, raising the age at which a firefighter or police officer can retire, and requiring that they work for a longer period of time before they can retire.
He also said the city should consider adopting a cross between the old pension system—in which benefits are guaranteed regardless of employer contributions—and one more like a 401(k), in which contributions are fixed while the benefits are not.
Scott also backed a 401(k) plan, or something like it. “It will always be theirs and it will always be there,” Scott said. “It is not subject to the whims of politicians who would ‘borrow’ from it to stop gap budget shortfalls and cover their mistakes.”
If elected mayor, Lombardi said he would appoint a blue-chip commission comprised of representatives of his office, the city council, the unions, and other experts to study the issue.
Unlike Taveras and Scott, Lombardi was in office during the period in which the 5 to 6 percent COLAs were granted, having served as a city councilman for more than 25 years.
He said that in his early years in office, the council didn’t even have the power to ratify employee contracts until it went to court. But the responsibility of negotiating contracts still rests with the mayor and the council does not have a seat at the bargaining table, Lombardi added.
Candidates Say City Hall Needs Fresh Blood
Scott and Taveras said the issue shows why Providence needs to stop doing business as usual and get some new blood in city hall.
“The current situation with the astronomical costs associated with compounded COLAs is the perfect example of why the taxpayers of Providence need to stop business as usual and elect a Mayor who comes with fresh, bold vision with the skills and courage to move Providence forward,” Taveras said.
“We can not afford politics as usual and we can not afford these politicians,” Scott added. “Business as usual is bad business for Providence.”
A fourth candidate for mayor, Democrat Steven Costantino, did not respond to requests for comment.
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