Scott MacKay Commentary: Rhode Island's Local Public Pension Mess

Nov 3, 2017

Rhode Island state government tackled public employee pensions in a landmark 2011 retirement system overhaul. But RIPR political analyst Scott MacKay says that law didn’t end the local pension obligations that still haunt many communities.


The ancient adage is that nothing in life is certain except death and taxes. To that we should add pensions.

People who have worked all their lives and were promised a decent retirement nest egg ought to be able to collect. It’s supremely unfair that people who made financial decisions based on what they were promised are told in their twilight years to take a hike. In southern New England we have Exhibit A: The retirees of  St. Joseph’s Hospital system in Rhode Island who face a bleak future because their pension fund doesn’t have enough money to pay the plan’s almost 3,000 members without big cuts.

It’s terrible when a private pension fund slides into insolvency. Yet a public pension crash would be even worse because a town or city could be thrown into receivership or taxpayers could be called upon for a bailout. If you think any business wants to move to a city in bankruptcy you believe in astrology.

And if you think Rhode Island’s much ballyhooed pension overhaul solved the state’s public pension red ink, you’re mistaken. The pension changes pushed by then-General Treasurer Gina Raimondo and approved by the General Assembly were aimed only at pension systems run by the state, not those under control of cities and towns. That helps teachers and state workers, but its bad for cops and firefighters with local pensions.

A recent survey by General Treasurer Seth Magaziner found many local pension funds in deep trouble. Systems in West Warwick, Coventry, Central Falls, Cranston, Johnston, Woonsocket and Providence are in critical condition. The Providence issue is particularly problematic because receivership in the state’s capital would resonate across the nation in media reports, dampening  attempts to forge a stronger economy.

A stunning tale of two cities plays out by comparing Warwick to Providence. Back in the 1970s, Warwick’s finances were a mess and pension systems seriously underfunded. At the time, the mayor, Joseph Walsh,  put together a long-term plan to shore up the funds. Every mayor and city council since has properly financed the pensions. In  about a dozen years,the current mayor, Scott Avedisian, predicts the city won’t have any unfunded pension liability.

Providence took a different route. The mayor for more than two decades was Rhode Island’s rascal king, Buddy Cianci. Recent disclosures by WPRI reporter Dan McGowan show that Cianci was made aware of a  coming pension tsunami in 1996. He was warned by pension officials that the city’s pension contributions would have to increase from a $19 million to $42 million annually.

Cianci was caught saying, “the city will no longer exist if we have to come up with this kind of money.”

But Cianci was more interested in spectacles and cheerleading.  He attended  every WaterFire, ribbon cutting and garage door opening. The records show that the city failed to contribute more than $88 million it owed the pension system from 1995 to 2002, during his second tenure as mayor. Is it any wonder that a cloud of pension liabilities now jeopardize city finances and may send the city into receivership?

More than two of every ten dollars in Providence’s  tax levy now go towards pensions. Since 2005, the city has contributed $723 million to the fund, but hundreds of millions more have been paid, for a decline of more than $200 million. That isn’t sustainable.

Elorza has floated a plan to leverage the city’s water supply system, which owns the Scituate Reservoir, to prop up pensions. That proposal went nowhere at the General Assembly.  And one has to wonder if a sale or lease arrangement to a fine water system that supplies more 60 percent of the state is good public policy.

Would it really be fair, for example, to charge Warwick taxpayers, who have contributed to making their city’s pensions solvent, higher water rates to pay for Providence’s wastrel ways?

Rhode Island’s state and city governments too often practice muddle-through financing replete with accounting gimmicks and ignoring long-term challenges. We shouldn’t let the pols get away with booting the pension can down the sidewalk any longer.

Scott MacKay’s commentary can be heard at 6:45 and 8:45 every Monday on Morning Edition and at 5:44 on All Things Considered. You can also follow his political analysis and reporting at our ‘On Politics’ blog at ripr.org