Chafee unveils plan to cut local pension costs

Rhode Island Gov. Lincoln Chafee on Thursday announced his long-awaited plan to give cities and towns greater power to reduce benefits to retired municipal workers — something mayors across the state say is vital to restoring their fiscal health.

Chafee, an independent, also proposed giving leaders in the state’s most distressed communities more oversight of education costs, an end to required teacher raises based on seniority, and relief from the requirement that safety monitors ride along on school buses.

The proposal would represent a sequel of sorts to sweeping changes made last year to the state-run pension system covering teachers, state workers and many municipal employees. But Chafee said more work remains because those changes didn’t apply to city-run pension plans that face a combined $2 billion unfunded liability.

“We can let the communities go into bankruptcy, we can let them raise their property taxes up, up, up or we can take action,” Chafee said at Pawtucket City Hall, backed by several mayors.

Union leaders vowed to fight the proposal in the state’s General Assembly – and the courts if necessary. Rhode Island AFL-CIO President George Nee said Chafee’s proposals represent a significant attack on both public workers and the sanctity of labor contracts.

“This would give them (cities) the power to go in and just decimate existing contracts,” he said. “Either contracts mean something or they don’t.”

Mayors praised Chafee for trying to give them the tools to address rising pension costs that they say are crippling city budgets. Woonsocket Mayor Leo Fontaine noted that this week school officials in his city considered – but rejected – a proposal to end the school year early because of a $10 million education budget deficit. The city has already eliminated positions, closed fire stations and darkened street lights to save money.

“We are on the brink,” he said. “A lot of cities and towns are at the end of their ropes.”

In West Warwick, the change that would limit all local pension benefits to the same benefits offered under the state’s Municipal Employee Retirement System would save the community millions.

“The town has taken great measures to reduce staff, consolidate just to balance the budget. However, we’ve reached a point where you’re now into either reducing public safety even more, laying off critical teaching staff. We’re at a crossroads, and in West Warwick we’re going to need some assistance if we’re going to survive this,” said acting Town Manager Malcolm Moore.

Dan Beardsley, director of the Rhode Island League of Cities and Towns, gave Chafee credit for tackling such a big issue and organized labor.

“It’s one of the boldest legislative initiatives I’ve seen in over three-and-a-half decades representing local government interests,” Beardsley told NBC 10 News.

Chafee’s proposal now heads to lawmakers, still smarting from a bruising fight with unions over last fall’s overhaul.

States across the country are grappling with public pensions as rising costs, the economy and investment losses expose weaknesses in state pension funds. More than half the states have made some changes to pensions, most recently New York, where officials this week struck a deal to raise retirement ages and increase contributions from future employees.

But no state has made changes as drastic as those in Rhode Island. The Pew Center on the States reviewed scores of pension changes made by nearly half the states in the past decade and determined that Rhode Island’s overhaul was “unprecedented.”

Lawmakers voted in November to suspend automatic cost-of-living pension increases for at least five years, adjust retirement ages and give most current employees a new retirement plan that mixes a traditional pension with a 401(k)-like account. The changes were designed to save billions in future years.

Revamping the state’s 36 locally administered pension plans may be more challenging. That’s because local plans are set through contract, not statute, making it legally more difficult for cities to go back on promised benefits.

Opposition is expected to be strongest in the Senate, where Democratic President Teresa Paiva Weed has warned against a “quick fix” to local pension plans. She has said she wants to see local governments attempt to negotiate concessions with unions before making unilateral changes.

Paiva Weed and Democratic House Speaker Gordon Fox opted not to comment directly on Chafee’s bill Thursday, releasing a statement saying only that “the Senate and House are committed to continue working with the administration to address the financial challenges the cities and towns face.”

Rep. Jon Brien, D-Woonsocket, was more direct. Brien chairs the House Municipal Government Committee.

“Being from a hyper-distressed community, any relief we can get is going to benefit us,” he said. “But this is a different animal, because you’re dealing with contracts. The zeal to take on pensions was there last year. But the wind is not at the governor’s back now.”

Providence Mayor Angel Taveras said his city must try to reduce pension costs whether Chafee’s proposal passes or not. But he said Chafee’s proposal would put the city on far firmer legal grounds for doing so. He has warned that Providence is facing an estimated $22 million budget gap and could be forced into bankruptcy.

“We certainly expect to be sued” by retirees and workers, Taveras said. “This would strengthen our case.”

Aside from his pension proposal, Chafee also wants to impose new limits on disability pensions if the disabled retiree can work another job. He’s also proposing to prohibit cities from offering pension plans that are more generous than the state-run plan.

Finally, Chafee wants to give special help to “highly distressed” cities and towns, a criteria-based distinction that currently applies to Woonsocket, Providence, Pawtucket and West Warwick.

Cities deemed “highly distressed” could ignore state laws that require schools to pay for private school busing, place safety monitors on elementary school buses and base teacher raises on seniority.

While mayors cheered Chafee’s proposals Thursday, they acknowledged that they won’t help with acute cash-flow problems that have threatened to delay worker paychecks, reduce city services or, in Woonsocket’s case, shutter schools. Woonsocket has about three weeks of cash left, Fontaine said.

“This still doesn’t answer where we’re going to get the money from,” he said.

 

 

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Article source: http://www2.turnto10.com/news/2012/mar/15/11/chafee-unveil-plan-cut-local-pension-costs-ar-965908/

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