Pension Reform Coming For Providence
Friday, October 07, 2011
The city of Providence took its first steps toward comprehensive pension reform Thursday when the City Council agreed to establish a Subcommittee on Pension Sustainability designed to lower the city’s nearly $1 billion unfunded pension liability.
At the Council meeting, President Michael Solomon, Majority Leader Seth Yurdin and Councilman David Salvatore also introduced four ordinances that, if passed, will make changes to the pensions of both elected officials and city employees over the next decade.
"Pension reform is the next step forward on Providence’s path toward fiscal stability,” Solomon said. “The problems associated with our pension system loom large and threaten the financial well being our city as well as the retirement security of current and future retirees. We must address these problems head on, and this includes starting with ourselves.”
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A report issued this summer showed the city’s unfunded pension liability had increased to $882.5 million and that 16 percent of the city’s general fund is devoted to paying the annual required contribution to the pension system. Within five years, the report said, that annual contribution is expected to balloon to $71.1 million if the city continues to fully fund the system.
The Council Subcommittee, which will include Council members David Salvatore, Michael Correia, Samuel D. Zurier, Sabina A. Matos, and Leader Yurdin, will devise a plan to address the city’s pension liabilities and related fiscal challenges in the coming months.
“The purpose of the subcommittee is to engage the public and to better understand the problems that are making our pension system unsustainable,” Yurdin said. “Through this process, the city will make comprehensive changes that will ensure the system’s viability.”
Under the initial ordinances, the Council would eliminate its eligibility for the special elected official pension by 2015 and Council members would no longer be allowed to use their time as an elected official in conjunction with time spent in other city jobs for a single pension.
Another ordinance would force city employees with more than 25 years of service to continue to contribute to the pension system (currently they can opt-out at 25 years). The final proposal would extend the base number of years used to determine finance average pay from the three highest paid years to the highest five paid consecutive years over the last ten years. The Council claims $2 million would be saved annually if the ordinances pass.
Councilman Salvatore called the creation of the pension subcommittee a step in the right direction.
“The City’s pension system faces many challenges, among them an $828.5 million unfunded liability and a disability pension system which has been the subject of internal and external audits,” he said. “This subcommittee will serve as a much needed forum to transparently address these issues and garner support for real solutions. Each and every taxpayer of Providence deserves the assurance that we will continue to deal with the tough issues to get our City back on firm financial footing.”
Mayor Supports Reform Measures
In a statement released Thursday, Mayor Angel Taveras backed the Council’s proposed ordinances.
“I commend the City Council for introducing these important pension reform measures and look forward to vetting these proposals as they move through the Council’s process,” Taveras said. “These are welcome steps on our shared path toward reforming out city’s pension system and securing Providence’s financial future.
