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.

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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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