WOONSOCKET – As the Budget Commission continued to tie up the loose ends of its five-year solvency plan, a legal challenge has surfaced to a central component involving cuts in retiree health benefits.
A hearing is scheduled for this morning in Superior Court on former policeman Glen Hebert’s request to enjoin the commission from altering his health care benefits, said his lawyer Edward C. Roy Jr.
Roy said Hebert, who retired in 2005, is a member of the state retirement system but the city pays for his health care benefits. The commission adopted a series of “enactments” imposing changes in health benefits on certain retirees, effective July 1, even if they didn’t agree to them in collective bargaining, as many other employee groups did.
At the moment, said Roy, Hebert is the only named plaintiff in the case, but others are expected to join. Finance Director Thomas M. Bruce said the potential pool of litigants is about 60 former police officers, but Roy says retirees from other employee classes could also be affected, depending on the outcome.
“There could be a ton of litigants,” he said.
Papers filed in the case say Hebert contends the commission acted illegally in altering his health insurance benefits by legislative fiat instead of collective bargaining.
“The City, including the Woonsocket Budget Commission, lack the authority to unilaterally change the provisions of a retiree’s health care benefits, as those benefits are provided for in a collective bargaining agreement,” the suit says. “The decision of the City, and that of the Woonsocket Budget Commission, to unilaterally change the provisions of the plaintiff’s health care benefits violates the plaintiff’s rights under the Contract Clause of the United States Constitution.”
Speaking after a meeting of the Budget Commission yesterday, the panel’s labor lawyer, Daniel Kinder, said it’s too soon to tell where the litigation will lead. He said there is a body of case law addressing cuts in contractually negotiated health benefits, but few cases are a perfect match for the situation at hand.
“It’s not unheard of, but it’s rare to find a case that is exactly alike,” said Kinder.
He said his colleague, Sara Rapport, was preparing a response to the suit. Hebert is seeking a type of relief known as a temporary restraining order, which essentially asks a judge to preliminarily decide whether the merits of the case are strong enough to declare a halt to the commission’s actions pending a full-blown hearing sometime in the future. Generally, to win a TRO, the plaintiff must show that he or she is facing imminent harm as a result of the defendants’ actions.
The defendants in the suit are identified as “The City of Woonsocket, by and through its Mayor, Leo Fontaine; and the Woonsocket Budget Commission, through William Sequino, its Chair...” Actually, Sequino stepped down last week. The state hasn’t named his successor yet, though Revenue Director Rosemary Booth Gallogly said she expects to appoint one in a few days.
Fontaine said he was not surprised by the lawsuit. He said the commission’s actions have affected so many employee groups that some legal repercussions were almost inevitable.
“I think everyone has expected some challenges along the way,” said Fontaine. “We’ll just have to wait and see what the courts have to say.”
It’s unclear how devastating the blow to the five-year plan would be if Hebert were successful. Fontaine said much of the savings from the five-year plan are achieved by shifting age-eligible retirees to Medicare, a threshold that Hebert and all retirees like him, who are under 65, will eventually reach regardless of the outcome of the suit. But other officials thought the suit could have a domino effect that could seriously undermine the five-year plan.
News of the suit came amid a flurry of fast-breaking developments for the five-year plan, including the governor’s signing of a major piece of legislation involving the locally administered pension plan for police and fire retirees. That’s a different retirement plan than the one that Hebert belongs to. And so far its members – about 252 in all – have not sued the city, even though cuts in benefits were essentially forced upon them as well.
Gov. Chafee announced yesterday that he’d signed a law granting the commission the leeway to take as long as 25 years to pay off the roughly $42 million unfunded liability of the local pension plan instead of the previously mandated five. The commission is actually planning on paying off the debt in 16.
In combination with the indefinite suspension of 3 percent annual COLAS for the retirees, the so-called ARC, or annual required contribution to the pension system from the city, will drop from about $11 million to $3.5 million, according to Bruce.
Without the five-year plan, the city would be on track to rack up a deficit of about $105 million by 2017, most of it in the form of post-retirement benefits, including health care and pension stipends. The city projects ending fiscal 2014 with a deficit in operating revenues of about $8 million, assuming all the components of the five-year solvency plan fall into place – which they haven’t, at least not yet.
On Friday, the commission made a great leap forward, however, when it ratified negotiated settlements with five of the city’s seven employees unions, including public works crews, City Hall workers, teachers, educational support staff and others. In general, the settlements shift all workers to one common health plan that is more costly for employees and cheaper for the city, saving more than $5 million through 2017. Age-eligible retirees are also being shifted from private plans to Medicare, effective July 1.
The chief purpose of yesterday’s commission meeting was to hold yet another ratification vote on similar changes for members of the International Brotherhood of Police Officers Local 404. With three members present, including Fontaine, Council President John Ward and Acting Chairwoman Dina Dutremble, the commission unanimously tabled the matter.
Kinder said the police union began voting on the proposal yesterday morning. But under the union’s bylaws, the polls must remain open for 48 hours, which means the commission won’t know before Wednesday whether the IBPO is on board. The panel scheduled a possible ratification vote for July 8.
It’s unclear how the unresolved issues surrounding the IBPO will affect the commission’s request for a $2.5 million supplemental tax bill from state lawmakers, who will probably be out of session for the year before the picture sharpens. Though lawmakers have said they would allow the governor the opportunity to sign some version of a supplemental tax bill if the commission achieved the hoped-for concessions from labor, they hadn’t done so as of press time.
Fontaine says he’s hopeful lawmakers will see that the commission made substantial progress in spreading the financial burden of clearing up the city’s massive deficits and move the supplemental forward.
“I think we have shown our whole effort was to protect the taxpayers, that they weren’t going to be left holding the bag on this,” said Fontaine. “We have shown we’re not going to do that.”
In other business, the commission Monday endorsed the House version of the proposed supplemental tax bill. It would draw an additional 18 percent in taxes from motor vehicle owners to raise $1.5 million and make up the different with an added tax of 4.8 percent on real estate, exempting, however, owner-occupied single-family homes and condos. A Senate version would upend the formula, raising $1.5 from all classes of property owners and $1 million from motor vehicles.