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Fri December 14, 2012
Providence police overwhelmingly approve settlement on benefit cuts
Providence police on Thursday approved, by an 89 percent margin, a settlement with the City of Providence that, the city says, saves $18.5 million in the current budget year and cuts the pension plan’s unfunded liability by at least $170 million. The vote, word which came in via mobile phones as city officials joined reporters for a holiday party at the home of David Ortiz, Mayor Angel Taveras’ press secretary, is the latest in a string of negotiated settlements in Providence.
The agreements stand in contrast to the state pension overhaul — approved last year by the General Assembly and signed into law by Governor Lincoln Chafee — now being litigated in Superior Court. A news release from City Hall pointed out how the agreement ”spares the City from costly court challenges aimed to block earlier reforms made through ordinance.”
“I thank the Providence Police for their important vote to save our pension system and protect the hard-earned retirements of our current and future retirees. They join our Laborers, retirees and firefighters in the difficult work to position Providence on stronger fiscal ground,” said Mayor Angel Taveras. “Through collaboration, we have pulled Rhode Island’s capital city back from the brink of bankruptcy while sparing taxpayers the unnecessary expense of a long, costly legal challenge that threatened our future. Having reached agreement on these structural, necessary and progressive reforms, we can sharpen our focus on the important work to grow our economy, expand opportunity and cultivate the common good for every Providence family.”
The city called the negoiated settlement among the first of its kind in the country. It said the agreement will eliminate the 5 and 6 percent compounded, guaranteed annual so-called Cost of Living Adjustments (COLAs) “that resulted in a small but significant number of retirees collecting over $100,000.”
City Hall provided these details on the pension agreement:
• COLA SUSPENSION: All COLAs suspended for 10 years. (Families of city employees killed in the line of duty will continue to receive annual COLA.)
• ELIMINATION OF HIGH END COLAs: All 5 and 6 percent compounded COLAs are permanently eliminated.
• PENSIONS CAPPED: In FY2023, COLAs will be reinstated only for retirees with pensions less than 150 percent the state median income OR less than the salary of an incumbent employee of the same rank as the retiree at the time of retirement (police and fire retirees only), whichever is lower.
• FUTURE COLAs LIMITED: Retirees whose COLAs are reinstated in FY2023 will receive annual raises of 3 percent compounded or what is called for in their contract, whichever is less.
• ONE-TIME STIPEND IN FY2017: In FY2017 (Year 5 of the agreement), retirees collecting pensions of less than $100,000 will receive a stipend of $1,500. This one-time payment will not change their future pension calculations.
• CONTINGENT STIPEND IN FY2020: In FY2020 (Year 8 of the agreement), retirees collecting pensions of less than $100,000 may receive a separate one-time stipend of up to $1,500 if the city achieves savings through the creation of a self-insured dental plan. The potential payment would not change future pension calculations.
• SUSTAINABLE REFORMS TO PENSION CALCULATIONS: Future pensions will be calculated based on the four highest years of service. The current system calculates pensions based on the highest three years.
• CONTINUED PENSION CONTRIBUTIONS: Employees will be required to contribute to the pension system for as long as they earn credit toward a pension
.• ACCIDENTAL DISABILITY: Accidental disability pension calculations will be based on 66 2/3 of the employee’s final salary.
Taveras faced a $110 million structural deficit — something he likened to an unexpected Category 5 hurricane — when he took office in January 2011. The administration has made substantial progress toward closing that gap since then, although the deficit has defied attempts to entirely wipe it out. City Hall nonetheless trumpeted the police agreement as the end of a chapter in pension reform in Providence, one that, it says, positions the city to focus on creating jobs and other needs.
The reforms depend on “a number of procedural and technical steps that must be completed before April 1,
2013,” the city says:
The City Solicitor’s office is working on those measures with counsel from the unions and retirees and Judge Taft-Carter. The Firefighters Union will also hold a procedural vote on the technical changes the police union agreed to. The Laborers Local 1033 supported the City’s initial ordinance reforms and agreed to the settlement’s reforms in May. However, because the agreement does not affect members or retirees from Local 1033 and retired Laborers over 65 already enroll in Medicare, they do not need to vote on the agreement.