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Gov. Chafee pushes his relief package

April 13, 2012

PROVIDENCE – Gov. Lincoln Chafee made a rare appearance testifying before a Senate committee Thursday, pushing for passage of his package of municipal relief bills.
Joining him before the Senate Finance Committee were mayors of several communities supporting the legislation, including Pawtucket Mayor Donald Grebien, Woonsocket Mayor Leo Fontaine and Cumberland Mayor Daniel McKee.
Chafee gave the solons his now-familiar pitch about how cities and towns, and particularly the most fiscally distressed communities, lost tens of millions of dollars in the last four budget years. Providence alone lost just shy of $55 million in aid during that time. Pawtucket lost almost $20 million and Woonsocket took a $12.7 million hit. Now all three cities are struggling financially and striving to stay out from under state oversight of their budgets.
While Massachusetts increased its sales tax to address the lack of revenue in the down economy, Chafee said, Rhode Island cut state aid to all 39 of its communities. “In particular, the cuts in state aid adversely affected those who depended on state aid. They disproportionately affected those who could least afford it.
“Our most important task in reviving our economy,” Chafee told the committee, “is to keep certain cities out of bankruptcy. I really believe that more than anything we have in front of us today is making sure we do not have any more bankruptcies in Rhode Island. We just can’t be reading in the national news about more of our communities going through that process.”
At the same time, the governor said, those communities got “no relief from what a community can do. They have to educate the children, they have to pick up the trash, they have to plow the snow.
Chafee, a political Independent and a former Warwick mayor, defended the efforts of local communities to deal with the cuts.
“Any accusations toward mismanagement I vociferously beg to differ with,” he said, noting that the communities dealt with the reductions by making cuts of their own. “They also dealt with it with steep property tax increases.” For every 16 percent reduction in state aid, Chafee said, there was a 17 percent increase in property taxes. He said that is nearly a dollar-for-dollar correlation.
Pointing to Central Falls’ experience with the 2010 state law called the Fiscal Stability Act, which included receivership and bankruptcy, Chafee said, “I would like to avoid it, if at all possible, in any other community. A lot of lawyer’s fees; a lot of costs that I’d much rather be spending on reducing property taxes and helping residents in those communities.”
Among the provisions of the bills Chafee introduced are allowing communities with pension plans that are funded at 60 percent or less to suspend cost-of-living adjustments (COLAs). Once the plans are more than 60 percent funded, the COLAs could resume, but only at a rate equal to inflation. Also, capping the age of retirement and other pension provisions at the level of the state pension plan after last fall’s comprehensive reform legislation. Highly distressed communities could get relief from a dozen state mandates.
Chafee said many of these provisions are what the mayors of cities and towns asked him to do to help them out of their fiscal woes.
When his turn came, Grebien said, “Pawtucket has a $12 million structural problem that we are dealing with, an unfunded liability of $130 million and when you look at the OPEB (other post-employment benefits) it is $378 million.
The bill allowing communities to rais age limits and other pension benchmarks would save Pawtucket $4 million in the first year alone, the mayor said. In total, he said, the legislative package could save the city more than $7 million in savings.
“I think it is important that the enabling legislation gives the communities, the (city and town) councils the tools to do what we need to do,” Grebien said. “Nobody is trying to circumvent the contracts, all five contracts in the city of Pawtucket are up this year. We are starting negotiations over the last month. And you will see, everything we are talking about and asking for here are going to be in those contracts. We have to, we have to start taking some of the offsets.
“I get that the problem didn’t happen overnight and I understand we’re not going to be able to change it overnight. But some of these tools are going to be helpful for that.”
Woonsicket’s Fontaine said his city negotiated givebacks from unions and developed a five-year plan for fiscal stability, but a surprise school department deficit brought city officials back to the drawing board.
He said a 13 percent supplemental tax bill was “one of the only options we had available to us to meet the immediate cash crisis we have.”
Fontaine said he is once again asking for concessions from the union, but acknowledged “it is frustrating going back to them, because they have all given.”
He said Woonsocket’s crisis “may be a little more immediate and severe than some other communities, but I thinks we all face very similar trials and tribulations.”
“I think at this point in time,” Fontaine said, “if we do not find a solution to help save cities and towns, it will sink cities and towns.”
McKee said, “significant state cuts to our budgets could not be managed without either tax increases or pushing communities right to the edge of fiscal disaster.
An ongoing problem, McKee said is an “inequitable allocation of funds. We continue to not allocate funds equitably into communities and that is also putting communities at risk.” He pointed to the new school funding formula, which he says shortchanges communities like Cumberland, Woonsocket and East Greenwich by about $5 million a year and Providence by $38 million.
Paul Valletta of the RI Association of Firefighters took issue with Chafee’s statement that mismanagement by cities and towns was not a cause of the current problem.
“All of you know that is not true,” he said. He asserted that cities and towns mismanaged the pension plans because they did not fund them.
“I would like someone to say the mayors screwed up, the cities and towns screwed up,” Valletta told the panel.
He alleged that Grebien was offered $2 million in givebacks from employee unions but he did not accept it “because he wants you to do his dirty work.” Woonsocket, he added did not raise taxes for eight years under Mayor Susan Menard, “and now they have problems.” He said Cranston is not increasing taxes this year, but is only funding its pension plan at 85 percent, further aggravating the ongoing problem.
Many of the changes being proposed by Chafee, Valletta said, “are contract issues.”
If the changes are implemented, he warned, “We’ll file a grievance and we’ll win the grievance.” And if the cities challenge the grievances in court, he said, “we’ll win in court.”
George Nee, president of the RI AFL-CIO said, “there is a lot of language here, a lot of verbiage, but there is only one issue: what does a contract mean. Contracts are integral parts of our society and our economy. It’s a bond, it’s an agreement, can you just throw it out?”
Nee likened the situation to a homebuyer who enters into a mortgage with a bank during good times. “If he loses his job, can he go into the bank and say, I’ll pay half of that”?

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