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Wednesday, April 11, 2012

Councilman Salvatore, Council Fiscal Adviser Respond to General Treasurer’s ‘Legislation Last’ Recommendations; Say Pension Legislation is Necessary for Providence to Avoid Bankruptcy

Councilman David A. Salvatore, who serves as Chairman of the Subcommittee on Pension Sustainability, and Gary Sasse, the Council’s fiscal adviser, responded today to comments from the General Treasurer’s office regarding pension reform legislation.

“The General Treasurer’s advice that cities and towns get their facts in order, crunch the numbers, and think long-term about pension reform before considering legislative action is exactly the approach that the Providence City Council has taken,” stated Councilman Salvatore. “The Council has been addressing the issue of pension reform in earnest since last fall. We have solicited input from employees’ unions, taxpayers, and other stakeholders who will be impacted by the City’s pension reform efforts, compiled numbers, and examined the system’s viability,” Salvatore explained. “As a result of this review, the Council has concluded that in order to avoid the potential of bankruptcy, the General Assembly should immediately enact legislation enabling cities and towns to suspend COLAs (cost of living adjustments) for retirees.”

Mr. Sasse said that, “The Treasurer’s suggestion that legislation be a last resort is unrealistic given the financial challenges the City of Providence is facing. The wolf is at the door; turning our backs on it and pretending it is not there, is not a practical alternative.”

The Governor’s Critical Plan Empowerment Act would allow municipalities with severely underfunded locally administered pension plans to suspend COLAs. The legislation requires that before a city or town suspend COLA payments, its council must adopt an ordinance identifying what the property tax rate would be with and without the COLAs included. Additionally, the council must demonstrate that alternatives to suspending cost of living adjustments were considered, and that suspension is both reasonable and necessary to achieve financial stability.

“The Governor is spot-on in his call for the House and Senate to move quickly to enact this pension cost containment plan, especially considering the fact that an alternative proposal has not been put forward,” Salvatore said.

Mr. Sasse added that, “Time is of the essence for Providence, and for other highly distressed communities whose municipal pension plans are less than 60 percent funded. Legislation is pragmatic for several Rhode Island cities and towns—including Providence—that have no other options left.”