Providence City Retirees: Who Makes the Most?
Monday, July 26, 2010
The top 20 highest-paid Providence city retirees have been able to triple the income from their pension in about 20 years, thanks to a compounded cost of living increase.
In all, the top 20 highest-paid pensioners – 16 firefighters and four police officers – cost the city of Providence about $2.3 million in 2009. In just five years, their pensions will cost $3 million. The soaring costs come at a time when the city is facing a massive $1.2 billion pension liability, 70 percent of which is unfunded.
“It’s shocking because what you see there is the result of numerous years of pension abuse,” said councilman John Igliozzi, who chairs the council’s finance committee. “The numbers are so high and so large and so outlandish.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTFor example, former Deputy Fire Chief Robert Anthony has benefited from a compounded cost of living increase (COLA) that has caused the income from his pension to triple in the 18 years since he retired. In 20 years, his pension could double to $438,770, according to city records secured by GoLocalProv.
Even firefighter union president Paul Doughty was taken aback by the numbers. "They're outrageous," Doughty said. "When you're making three times as much as an active person, that's probably too much."
Providence Mayor David Cicilline said the high costs were the fault of his predecessors
"This is exactly why the pension system is not fully funded at this moment – the 5 percent and 6 percent COLAs provided to the unions by my predecessors, at the same time the city was neglecting to pay into the pension fund, put the system in a precarious situation pretty quickly," Cicilline said. "The outrageous levels of these pensions show exactly why pension reform was such an urgent priority for my administration."
Taft Manzotti, president of the Providence police union, defended the past contracts. “It was a mutual agreement that these people and the city of Providence agreed to at that time,” Manzotti said. “You can’t go back and renegotiate someone’s contract."
Doughty and Igliozzi agreed that there was little the city could do about the high pensions. Igliozzi said the city has gone to court to try to revise the contracts—and had failed.
Could It Happen Again?
But Igliozzi said the city can stop it from happening again by renegotiating two proposed firefighter contracts – for 2007 to 2010 and 2011 to 2013 – that have the same method of calculating COLAs.
"If the city and the taxpayers and their representatives have learned any lessons, let's not repeat the horrible mistakes of the past," Igliozzi said. "Their proposed contracts will repeat the mistakes of the past." The new 3 percent COLAs would add about $10 million to the pension burden of the city, according to internal city auditor James Lombardi.
But the reason the highest-paid retirees and other pensioners are making so much is because their cost of living adjustment was 5 to 6 percent, according to Doughty. The new firefighter contracts, on the other hand, ask for only 3 percent. Without those COLAs, he said retirees would lose their “earning power.”
"There's a strong desire to punish the active people for the sins done in the past," Doughty said. "Frankly, I think there's enough blame to go around all sides." Plus, he said most of the firefighters among the top 20 pensioners were senior managers, not members of the union.
But Igliozzi said the problem is not so much the value of the COLA—whether it be the 3 percent being proposed now or the 5 to 6 percent that has been used in the past—as how the COLA used to increase the income of somebody on a pension.
There are two ways of calculating the COLA: simple and compound. The compound method, which is used in Providence, causes income to rise by much more than the simple method, according to Lombardi. For example, a firefighter who makes $55,000 in his first year of retirement and had a 3 percent COLA would be making $82,525 after 25 years, according to the simple method of calculation.
But under the compound method, that same firefighter would be earning $111,804 in his 25th year, according to Lombardi. Over those 25 years, the compound method would cost the city $280,160 more than if it had used the simple method, he said.
GoLocalProv will continue to explore this issue – the cost of these contracts, the effect on the pension systems and the corresponding impact on taxpayers.
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