Rob Horowitz: Providence Pension Deal Provides Model for All Communities

Tuesday, June 05, 2012

Rob Horowitz, GoLocalProv MINDSETTER™

The landmark tentative pension agreement struck last week between Providence and the city unions and retirees provides a model other Rhode Island cities and towns can adopt to put their local pension systems on a sound fiscal path. As has been well documented, the problems of exploding and unsustainable pension costs are not unique to Providence, but face most Rhode Island cities and towns

Produced after three months of negotiations, followed by three weeks of court-supervised mediation, this agreement will reduce the City’s unfunded pension liability by as much as $170 million and produce nearly $20 million of badly needed savings in next year’s Providence budget. It also provides retirement security for current and future retirees by putting in place a long-term structural fix that still allows for the future restoration of scaled-back Cost of Living Adjustments (COLAs) that will keep income for middle class retirees from eroding due to inflation.

Among the major cost-saving components is a 10-year suspension of all Cost-of-Living Adjustments (COLAs). At the end of the period, only COLAs for retirees who earn less than 150 percent of the state median income will be reinstated and these COLAs will be capped at three percent. The agreement also switches retirees from costly private insurance to Medicare once they reach the age of eligibility for that federal program.

Leaders of the municipal, police and fire unions and representatives of the retirees deserve praise for agreeing to the sacrifices needed to avoid bankruptcy; put Providence on a sound fiscal path and ensure retirement security. Central Falls -- where Bankruptcy resulted in draconian pension reductions for police and fire retirees -- provided an instructive example of the consequences of failing to compromise, according to some of the union leaders.

Mayor Taveras is to be commended for providing the consistent leadership that kept the focus on tackling Providence’s difficult structural fiscal problems and for building trust by being straightforward and transparent and insisting on shared sacrifice from all sectors of the city (full disclosure: I served as an advisor to the Taveras Mayoral Campaign). The tough pension ordinance recently advanced by Mayor Taveras and adopted unanimously by the City Council also sent a strong and unified message that the City meant business, helping to create a political environment conducive to an agreement.

Of course, this agreement must still be ratified by rank and file union members and retirees. But it is not too soon for other Rhode Island cities and towns to examine it as a model for how to fix their pension systems and to join Providence in ensuring retirement security and building a sound fiscal future.

Rob Horowitz is a strategic and communications consultant who provides general consulting, public relations, direct mail services and polling for national and state issue organizations, various non-profits and elected officials and candidates. He is an Adjunct Professor of Political Science at the University of Rhode Island.

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Comments:

Odd Job

2:48am on Tuesday, June 05, 2012

"this agreement will reduce the City’s unfunded pension liability by as much as $170 million and produce nearly $20 million of badly needed savings in next year’s Providence budget"

That's it? That's all the savings? So the unfunded pension liability drops from $900 million all the way down to a paltry $730 million and that's considered model reform?

vinny coia

8:06am on Tuesday, June 05, 2012

full disclosure . you served on the taveras campaign . and, judging from your biased stances on lively experiment you served in some capacity for cicilline also .
this , on its face appears to be beneficial for the city .
i have noticed in all mentions of pension reform, in every arena , this is no distinction between the truely injured , incapacitayed in the line of duty , and the majority of fraudently received injured on duty pensions .to the detrement of the incapacitate
retirees , receiving low end pensions and having to exist this this amount only .
many were heroic in their duty in their becoming seriously injured .
i wondr why more is not done to retract these fraudulent pensions ? i.e. revocation and possibly criminal charges .

Benjamin Algeo

1:47pm on Tuesday, June 05, 2012

Excellent observation, Odd Job. I would take "model reform" one step further, complete conversion to defined-contribution plans for all public workers. Defined benefit plans are extinct in the private sector. Challenges to attracting and retaining (needed) public-sector workers can be dealt with by adjusting other means of compensation as necessary. But then again, that's the problem with unions nowadays, they have distorted the true market value of the public sector job.

Bruce Rice

11:32am on Friday, June 08, 2012

Works for me if I will get a COLA.