Providence Council OKs $236M in Pension Cuts

Biggest union backs changes; fire union outraged

Updated: Friday, 27 Apr 2012, 6:08 AM EDT

Published : Thursday, 26 Apr 2012, 8:19 PM EDT

• By Ted Nesi, WPRI.com Reporter

PROVIDENCE, R.I. (WPRI) - The Providence City Council on Thursday night unanimously and quickly approved a far-reaching overhaul of the cash-strapped capital's pension system that would freeze the size of its retirees' pensions for about 24 years.

After a half-hour debate, the council voted 15-0 to approve an ordinance implementing six of the seven recommendations put forward a week ago by a special subcommittee on the pension system. City lawyers advised them not to include the seventh proposal because it related to retiree health care, not pensions. The rest of the changes would take effect July 1.

The all-Democratic council must hold a second vote on the pension ordinance, which will likely happen Monday and is expected to be a formality. The measure will then go to the desk of Mayor Angel Taveras, who has said he will sign the pension cuts into law and use $16 million in savings from them to balance next year's budget.

"I commend the Council for making the tough choices to move Providence forward," Taveras said in a statement. "The current pension system is unsustainable and driving the capital city toward a black hole." He called their action "a vote to support working families, small business owners, taxpayers and dedicated city workers."

Igliozzi wants further talks

Councilman David Salvatore, who chaired the pension panel, argued the changes will fix a system "that has been broken for quite some time" and is a major reason the city is facing bankruptcy. The changes will reduce the city's $901 million pension shortfall by at least $236 million.

Salvatore highlighted the endorsements of the plan by the Greater Providence Chamber of Commerce, the Rhode Island Statewide Coalition, the Providence Foundation and The Providence Journal's editorial board.

"These endorsements send a clear message that Providence cannot and will not move forward without comprehensive pension reform," he said, adding that "the sins of the past will never be repeated again in the city of Providence."

Councilman John Igliozzi suggested retirees, particularly those with 5% and 6% compounded cost-of-living adjustments (COLAs), should reach out to the mayor to negotiate an alternative compromise that eases the burden on other pensioners. He also suggested Taveras should immediately file suit to begin the process of getting a judgment on the law's legality.

Iannazzi, Doughty split on move

Union leaders were divided. Local 1033, the largest city union which represents municipal employees, supports the pension ordinance, its business manager Don Iannazzi told WPRI.com . "We hope it turns the page," he said. "It's tough medicine but it's the only thing that we can do to begin a step in the right direction."

Iannazzi echoed Igliozzi's suggestion that a compromise could be reached even after the ordinance passes. "I'm also hoping that the discussions that have taken place rather hot and heavy for the last two weeks continue, because this is a legislative process," he said. "The art of compromise is here."

Paul Doughty, president of the city firefighters union, lambasted city leaders for pushing the measure through rapidly and negotiating in bad faith. He called on Taveras to return to the negotiating table before the second council vote to reach a compromise or else risk poisoning the relationship between City Hall and its firemen.

"Today's a teachable moment for this union and any union that works with this city," Doughty said. "We stepped up [last year] and helped with a $110 million deficit. That will never happen again in a generation." He added: "The ink's not even dry on that. This is ridiculous."

"I've cautioned the city that this road is perilous, because if they lose in court - and they're certain to get sued - they're automatically going to end up in bankruptcy, because they won't be able to refund the money," Doughty said.

Nearly 3,000 of Providence's 4,300 retirees are in the city pension system, including former police officers and firefighters. Retired teachers get their pensions as part of the state-run system, but they receive health insurance benefits through the city.

People 'should be put in jail'

In addition to freezing COLAs, the ordinance would cap pension benefits at 150% of Rhode Island's median household income; reduce tax-free disability pensions from 66.6% to 50% of final salary; base pension benefits off a five-year average salary; and make employees contribute to the system for the duration of their careers.

More than one member of the council said Thursday night's vote was among the most difficult decisions any of the members had ever been asked to make. Councilman Luis Aponte said the city was forcing municipal, police and fire employees to take "a haircut and a shave" to stabilize Providence's finances.

"This is not a magic bullet," Aponte said. "This will not resolve the problems that our city faces. It is one step in the right direction. It is part of an ongoing conversation." He also noted Brown University has yet to agree to raise its voluntary payments to the city to the level proposed by Taveras.

"The entire city is in peril, and there's a question as to whether the city will remain solvent through the end of the fiscal year," Councilman Sam Zurier said. "The facts are that the cupboard is bare."

"There's people in the past who should be put in jail for what they did to our pension system," added Councilman Nicholas Narducci, a member of the state pension system, which last November suspended COLAs and switched to a hybrid pension plan.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi

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