Rob Horowitz: Chafee Package Can Save Cities and Towns
Tuesday, March 20, 2012
Together with key Mayors and other local officials, Gov. Lincoln Chafee last week unveiled a sweeping legislative package designed to give cities and towns the tools they need to solve their structural fiscal problems. Chafee starkly framed the choice facing the state: municipalities must have the tools to stop the bleeding or more municipalities will go bankrupt or jack-up property taxes to unaffordable levels.
Chafee’s definition of the gravity of the problem is reinforced by disturbing developments in our cities and towns. Central Falls with its bankruptcy declaration has turned out to be the proverbial canary in the coal mine. Woonsocket is slated to run out of money to fund its schools in April—two months before the end of the school year. Providence’s bond rating was downgraded last week to only two notches above junk bond status. And facing a yawning budget gap, East Providence is now under state fiscal supervision.
Exploding pension costs are squeezing our cities and towns at least as much as they were squeezing the state budget before last year’s comprehensive state pension reform. Taken together, our municipal pension funds are only 40 percent funded with an unfunded liability of $2.1 billion. These rapidly rising pension costs are combining with large cuts in state aid to bring many of our municipalities to the fiscal brink. (Disclosure: I served as an advisor to the Taveras mayoral campaign.)
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The most important component of Governor Chafee’s seven-bill package gives cities and towns the ability to follow the state’s example and suspend cost-of-living-adjustments (COLA’s) for retirees, if a municipalities’ pension fund is less than 60 percent funded. This tool is essential to allow cities and towns to put their fiscal houses in order and to ensure that municipal pensions are available for future retirees. Among other provisions, the legislative package mandates that municipal pension benefits offered by independent local pension plans can be no more generous than that which are offered by the State-run Municipal Employee Retirement System. The plan also reduces disability pensions for people who can work in other capacities and provides more transparency and accountability to the local contract negotiation process.
Chafee also proposes giving four severely distressed communities—Pawtucket, Providence, West Warwick and Woonsocket-- broad authority to suspend some aspects of collective bargaining agreements and to avoid certain expensive state mandates such as putting safety monitors on buses and busing private school students.
Chafee’s proposal faces an uphill fight in the General Assembly. Not surprisingly, the proposal has already drawn the opposition of impacted unions and AFL-CIO President George Nee. Gen. Treas. Gina Raimondo, who was instrumental in the adoption of comprehensive state pension reform, is so far staying on the sidelines and the legislative leadership has adopted a wait- and- see approach.
Yet, the fiscal struggles of our cities and towns, which will continue to lead media coverage, create the political impetus for at least some action.
To put the worst of our fiscal problems behind us, last year’s landmark state pension reform, needs to be coupled with local pension reform. Gaining the adoption of at least the most important core elements of Chafee’s proposal is an urgent and high priority.
It will take a focused and persistent effort by the Governor to accomplish this goal and his work must be supplemented by reactivating the coalition that actively backed state pension reform. By putting a tough, sweeping and substantive proposal on the table, Governor Chafee deserves credit for getting this important fight underway.
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