Johnston still without plan for fixing pensions
Rhode Island cities and towns with locally administered pension plans in critical status were asked to submit funding improvement plans to the state by Nov. 11. With a roughly $96 million unfunded pension liability and another $229 million unfunded liability for Other Post Employment Benefits (OPEB), Johnston’s situation is indeed critical.
But that deadline has come and gone, and Johnston remains without a proposal.
Mayor Joseph Polisena estimates it will be another two to three weeks before a plan is ready. Only then can the town sit down with active and retired police and fire employees.
“We want to make sure we have the right numbers. The town system is in rough shape,” Polisena said.
Once a plan is on the table, the mayor hopes to move quickly into negotiations. Union representative from Local 1950 and IBPO could not be reached for comment yesterday.
“I’m not going to sit and wait and let them go back and forth for six months,” he said. “If people don’t come to a consensus, then the money’s going to run out.”
The actual unfunded liability for 2011 is $90 million, but Finance Director Joe Chiodo estimates it will rise to $96 million for 2012. Even more crippling are the OPEB numbers, which cover health care costs for retirees.
According to state law, cities and towns should be funding pensions to at least 60 percent. Currently, Johnston’s police and fire pension plans are both funded around 30 percent – far from where the town needs to be.
The numbers are alarming, but Polisena notes that they are not atypical. In neighboring Cranston, the unfunded liability is nearly $256 million. Warwick’s projected liability is $242 million.
“These are all legacy costs. It’s not only this town; it’s all the cities and towns. This is probably the biggest hurdle any mayor, town administrator or council will ever face,” he said.
New hires for the police and fire departments automatically go into the state system and therefore were included in General Treasurer Gina Raimondo’s pension reform plan, the fate of which lies with the courts. If local pension negotiations end up in litigation, Polisena says union employees will end up shooting themselves in the foot.
“If the union wins, they lose. The state will just have to pull the plug,” he said, adding that the town does not have the money to fund the pension system without reform.
Chiodo says the end of the road is not as far off as some might think.
“Our approximation is anywhere from five to seven years,” he said of the lifespan until local pension plans are bankrupt.
Polisena, who receives a pension for his 20 years on the fire department, does not believe tax increases are an option either, especially because to cover costs it would well exceed the state cap on how much taxes can be increased in a single year.
“There’s no way there will be a taxpayer bailout to pay for pensions – that’s not the legacy I want to have,” he said. “The system is broken and it can’t be fixed with money.”
Roughly half of the fire department are in the state system, having directed new hires there starting in 1999. The police department began following the same procedure just last year, though, so Polisena said only three or four officers are in the state system. With more people left in the local system, and no new hires paying in, that puts the Police Union in an especially precarious situation.
As far as what Johnston’s reform plan would look like, Polisena is playing his hand close to the vest. He said he does not want to reveal too much but conceded that some elements of the state plan are unavoidable.
“The COLAs, obviously, are an issue,” he said.
Overall, the mayor says he is cautiously optimistic of the negotiations that are to come.
“I want to fix it once and for all; it’s got to be fixed with negotiations on both sides and cooperation,” he said. “I have faith in the retirees. Most of them know that the pensions are in serious trouble.”
“I’m not playing chicken little saying the sky is falling,” he added, “because the sky is falling.”