Pawtucket’s Unfunded Pension Liability Nearing $145 Million
Friday, October 26, 2012
Pawtucket has a nearly $145 million unfunded pension liability and its funding ratio is just 34 percent funded, according to a report released by a special panel led by former state Auditor General and 2014 gubernatorial candidate Ernest Almonte.
Pawtucket Mayor Don Grebien noted the report was timely as the city prepares its response, due next month, to the state, which put Pawtucket, and a number of other communities, on “critical status” for pension obligations funded below 60 percent and requiring a rehabilitation plan to resolve them within 20 years.
“What the special panel put together in its report is impressive in its scope and depth. It will greatly assist us as we focus on an area never before subjected to this kind of an examination that must lead to corrective action,” Grebien said.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
The Almonte report put the unfunded pension liability for city police and fire pensions (other city employees are in the MERS state retirement system) at approximately $144.8 million at a funding ratio of 34 percent, and post-employment (OPEB) benefits obligations, which are on an unfunded pay-as-you-go basis, at $378.2 million. A pay-as-you-go plan for police and fire employees hired before 1974 has an obligation of $3.4 million.
The report by the panel, called the Ad Hoc Committee on City of Pawtucket Pensions and OPEB Obligations, also noted that employees “paid their share of the contributions on time,” but that, “For several years the city did not make any contributions and for many more did not make its full contributions.” Recommendations included budgeting 100 percent of annual required contributions on a “consistent basis,” examining benefits and retirement age provisions, cost of living allowances and maximum amounts, and “consider a buyout of outstanding pension obligations on a volunteer basis,” among many others.
Grebien praised Almonte, who agreed to chair the panel and whose private firm created a proprietary “dashboard model” at no cost to the city that, using actual data from city personnel obligations, provides “real time” analysis of proposed changes in actuarial and other assumptions and factors. The city will retain full, free use of the model.
“The city owes a big note of thanks to Ernie and his staff, the members of the panel, and our own staff, who all donated many hours to this task over many months,” Grebien said. “Their hard work will help the City of Pawtucket better understand and find ways to resolve our underfunded pension obligations, which is the most critical financial issue facing our city today and for the foreseeable future. If Pawtucket is to continue to stay clear of bankruptcy or other state financial intervention, addressing our pension problems needs to be very high on the list.”
The “dashboard” model, created by Virtual DBS with Almonte Group LLC, immediately reflects the savings, costs or other mathematical outcomes of any pension plan changes or other factors. Almonte gave the first public demonstration of how the model works at Thursdays’ meeting.
“It’s amazing how quickly the dashboard turns any changes being considered into hard data that can be used as a basis for sound financial decisions,” Grebien said. “We were fortunate to benefit from it for free as the first ones that it was tested on, but I would highly recommend that other communities with pension issues seriously consider taking a look at it as well.”
Grebien said he will now review the report’s findings with his administration and finance directors, in conjunction with union leaders, to determine options and recommendations that will be sent to the City Council for approval as required by the state.
