Poli-ticks

Pension liabilities will swamp Rhode Island

By Arlene Violet
Posted 5/13/19

A recent report issued by an advisory panel to General Treasurer, Seth Magaziner, should concern every Rhode Island taxpayer. This study concluded that almost two-thirds of locally run pensions are …

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Poli-ticks

Pension liabilities will swamp Rhode Island

Posted

A recent report issued by an advisory panel to General Treasurer, Seth Magaziner, should concern every Rhode Island taxpayer. This study concluded that almost two-thirds of locally run pensions are in “critical status” i.e. plans that have less than 60 percent of what they need to cover their pension liabilities. (The security ratio is supposed to be a 4-5 proposition with $4 in for every $5 to be paid out over the long term.) At first blush a taxpayer in a place like Barrington might not think it concerns him. It does. The piper will have to be paid by everyone, so widespread is the problem.

Anyone who is a new employee in these jurisdictions should wise up. Without reform it is highly unlikely that the “promise” of the gold at the end of their rainbow will be there for them. Particularly worrisome is the promise of workers’ future pensions in Providence, which is only about 26 percent funded. Further, the pension shortfall is actually greater than the report says. Providence’s deficit is predicated on an 8 percent investment return and payroll growth assumptions which are myths. By using a high return, the capital city is exaggerating its performance and hiding millions of additional dollars of accrued liabilities.

When one folds into the dismal funding of accrued liabilities in the pensions in Central Falls and fire (26.5 percent), Coventry police (20.2 percent), West Warwick Town plan (23.3 percent), Cranston police and Fire (21.9 percent), and Warwick Police and Fire (24 percent) and the other woeful underfunded pensions, a catastrophe is around the corner.
Taxpayers have to get with the program and realize that the pension liabilities are cannibalizing services in their city/towns. Providence pays 21.8 percent and Johnston 21.26 percent of its tax levies for pension obligations, leaving little discretionary funds for present needs.

So, what has been the response of the legislators and the governor to this bad news? More nonsense. Just like the politicians as then-Providence Mayor Buddy Cianci who mortgaged the future of the city in exchange for public union votes, they, too, are playing the same game. They fully expect to continue the problem for votes until they get out of office and the collapse happens on somebody else’s watch.

There can be no other conclusion other than they are guilty of dereliction of duty. The legislature is hell-bent on passing legislation that boosts firefighters' pensions into the stratosphere. The Governors veto pen is stuck in her pocket since she is signaling her support of this legislation along with the bill that continues existing contracts in municipalities despite protests of mayors and town administrators.

Beneath the surface of these burgeoning pension liabilities is another time bomb, i.e. the cost of health care obligations in the cities and towns. Together these liabilities will turn Rhode Island into a third world country. Property taxes will skyrocket.

The ultimate irony here is the collaboration of the very unions that purport to represent all of its members. They are not doing so. To keep their elected positions of power they go for short term fixes for their members while mortgaging the future of its younger workforce. No person of good will and fundamental math skills can possibly conclude otherwise. The “brotherhood” of union workers is R.I.P. as is the ultimate commonweal of Rhode Island.

Arlene Violet is an attorney and former Rhode Island Attorney General.

Arlene Violet

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A lifelong Portsmouth resident, Jim graduated from Portsmouth High School in 1982 and earned a journalism degree from the University of Rhode Island in 1986. He's worked two different stints at East Bay Newspapers, for a total of 18 years with the company so far. When not running all over town bringing you the news from Portsmouth, Jim listens to lots and lots and lots of music, watches obscure silent films from the '20s and usually has three books going at once. He also loves to cook crazy New Orleans dishes for his wife of 25 years, Michelle, and their two sons, Jake and Max.