LINCOLN — Holding his finger and thumb less than an inch apart, Gov. Lincoln Chafee told the Northern Rhode Island Chamber of Commerce Thursday that the state is “this close” to intervening in the financial affairs of East Providence, at least in part due to pension obligations.
“Nobody wants to hear the word Central Falls, but — trust me, it’s not just in Rhode Island, all across the country — municipalities are really under stress. And here in Rhode Island, this is our time to help these municipalities.
The governor was making his pitch for the businessmen and women to lobby their state legislators to make sure that his proposal to help the independent pension plans run by cities and towns — called non-MERS plans because they are not part of the state-operated Municipal Employees Retirement System — isn’t carved out of the comprehensive state pension reform bill now being considered by the General Assembly in a special fall session.
Chafee called helping the municipal plans “the most important thing if we are going to have one-time, comprehensive pension reform.”
The governor likens some of those woefully underfunded local plans — Providence’s local pension plan is only 32 percent funded, Cranston’s has only 15.8 percent of the money on hand that it should have, and communities such as Coventry and Pawtucket have underfunded plans — to “icebergs” that threaten to sink the finances of those municipalities and perhaps the entire state.
“This is the biggest iceberg we face out there,” Chafee said, “and there has been some reluctance by some to include these non-MERS plans in what is being billed as comprehensive pension reform. It’s not honest to call it comprehensive reform if we don’t include these no-MERS plans, especially the big ones.”
“These plans will not fix themselves, trust me,” the governor asserted. “The pressure on these municipalities not to raise property taxes and to just start skimming from their pension funds is just too great. They do need help from the state.”
One problem for the first-term, Independent governor is that mayors and town administrators for the most part do not like the way the pension reform bill handles the local plans. At least some of the local leaders were hoping the state would take over the local plans and make them part of the MERS system. Instead, the proposal is that each local plan must get an actuarial experience study by April 1 of next year. For each plan that is less than 60 percent funded, the municipality will have to present a remediation proposal to a “solvency review team” of state officials appointed by the administration. If that remediation is not approved by the review team, then at the expiration of each collective bargaining agreement COLAs will be suspended and state aid could possibly be withheld from the communities and diverted to the pension funds.
He acknowledged the opposition from the local leaders. “In order to get it in – to get some part of the non-MERS plan into the bill that was proposed, frankly it was watered down. My argument to the mayors and town managers is “get your amendments and get into the process. So they are doing that.
“There is a lot talk about getting these non-MERS plans out” of the larger bill. “I need your help here to advocate with your state reps and state senators,” Chafee told the chamber members at a breakfast meeting at Kirkbrae Country Club.
Chafee dismissed the notion that the legalities of interfering with the collective bargaining agreements the communities have with their employee unions would be a bar to addressing the troubled pension plans. “Our proposal is to mirror what the state is doing – the suspension of COLAs (Cost of Living Adjustments), that’s the big one. If it is going to be legal for the state to tell a retiree we are going to suspend your COLA until the fund reaches a certain threshold of solvency, why is it not legal to do it to a retiree of the Cranston Fire Department, for instance.”
The governor opposes the idea of the General Assembly returning in the spring to address the local plans, rather than doing it during the special session. “Who wants to come back and do this again?” he asked rhetorically. “When we are doing budgets? When we are doing every legislator’s pet issue? Plus it’s an election year? It’s not going to happen.”
Chafee rejects the idea that the non-MERS provision is a “poison pill” that is going to kill the entire bill. “I say that’s defeatist. Before you even start, you are going to say no, we’re not going to address the biggest icebergs out there? No! Let’s give it our best effort. Now is the time. This is really critical to the health of the cities and towns.”
Northern Rhode Island Chamber President John Gregory also urged the chamber members to become involved with the pension reform effort.
“One thing that labor does so much better than the business community is to rally rank-and-file troops,” Gregory said, suggesting that the business owners “take it out onto the shop floor. Let Sue know, who lives in Burrillville how much it’s going to cost the town of Burrillville if there’s no pension reform. Let Billy, who lives down in Cranston, know what’s going to happen in Cranston from a property tax perspective if there’s no pension reform.
“We’ve got to get the members of the General Assembly to get the message,” he said. “The labor community is doing that, as they always do. This is our opportunity.”