Waiting For The Pension-Fund Shoe To Drop
Town officials say the problem must be solved at the state level
Over the years the town of East Greenwich, as well as the Fire District, have diligently paid in full bills received for town employees in the state’s Municipal Employees Retirement System (MERS) and the separate statewide teachers system.
When actuarial assumptions for the plans changed, the town was informed their payment for the next fiscal year would increase by some $2.3 million, bringing the total line item in the budget to just under $5 million annually.
In July a summary of accounts in the system showed the municipal employee’s account 100 percent funded, the police account 69 percent funded and the Housing Authority 71 percent funded. The independent Fire District’s account showed as 61 percent funded. The teacher’s statewide account, however, is only 48 percent funded. Because the teachers system is statewide a local breakout is not available.
With the pension reform discussion going full blast, and a special session of the Legislature scheduled for next month, Town Manager Bill Sequino and Town Council President Mike Isaacs think there is some chance the current numbers will not hold up and a possibility the payment might actually stay where it is.
Isaacs said it would be almost unconscionable for the state to expect an 87 percent increase. If that happened, it would require what Isaacs described as an increase in taxes to an unacceptable level or a cut in spending to an unacceptable level.
However, he said, there is so much up in the air it is premature and would be unproductive to talk about increasing taxes or cutting spending right now.
Leading up to the October session of the General Assembly, town officials have been very active in working with a group of cities and towns as well as a group of municipal officials. In addition, there have been meetings with the state treasurer and a lobbying effort is planned.
Isaacs said one point made over and over again is that the proposed increases are absolutely unacceptable and unaffordable by any community in the state. He says the solution must take place at the state level, because the state legislature created the plan and funding formula.
East Greenwich may be fortunate that it participates in the state plan, as some cities and towns with their own plans are in even worse financial condition.
Benefits in MERS are not negotiable, however there are some options such as a choice in the cost-of-living-adjustment (COLA) plan.
Some possible changes that could lower the numbers include raising the retirement age, re-amortizing (recalculating payments), and doing away with COLAs. Doing away with COLAs reportedly could save 1 billion dollars of the reported 7-billion-dollar pension-fund shortfall.
For now Isaacs said he felt that because of the magnitude of the problem the energy of the Town Council is best expended on working for reform in the upcoming special session of the legislature. He said that every citizen should support that effort.