PROVIDENCE, R.I. (WPRI) — As Providence continues to deal with a massive unfunded liability in its pension fund, the city is convening a new working group to come up with “comprehensive” recommendations to address the problem.
The working group will meet every other week starting Tuesday, Mayor Jorge Elorza said.
The city’s pension fund had a $370 million balance as of July 22, falling about $1.2 billion short of what the city is projected to need to pay current and future retirees their pensions. There’s an additional shortfall of roughly $1 billion for other post-employment benefits (OPEB) such as medical coverage, making the total liability well over $2 billion.
Elorza’s most recent proposal to address the problem was to borrow more than $700 million to pump into the pension fund, which would require approval from the General Assembly because of the size of the borrowing.
While Elorza argued the money should be borrowed quickly in order to take advantage of low interest rates, the legislation to authorize the bond did not pass before the regular Assembly session ended. The House and Senate may reconvene in the fall, but it’s unclear if they will consider the pension bond during the special session.
“That’s not an idea that we have abandoned,” Elorza told reporters Monday afternoon. “In fact, that’s something that we are going to actively look at.”
“The scope of our proceedings should not be limited to just that,” he added. “Let’s look truly comprehensively to what reform looks like.”
Providence has been directing an increasing amount of taxpayer dollars to the retirement fund each year, most recently sending $78 million from the general fund — 14% of the total city budget — to the pension account.
But the payments aren’t keeping up with the shortfall, and actuaries predict the payments will increase to $200 million per year in the next two decades.
“We’re in a much more stable and stronger position compared to where we were, but we still have a long way to go,” Elorza said.
The working group will include a slew of elected leaders and other stakeholders, including from the Providence Foundation, Greater Providence Chamber of Commerce and Rhode Island Public Expenditure Council (RIPEC).
Gov. Dan McKee, House Speaker Joe Shekarchi and Senate President Dominick Ruggerio or their designees are also part of the group, according to the mayor’s office, along with two city councilors to be named by Council President John Igliozzi, and several financial advisors.
Spokespeople for Shekarchi and Ruggerio said they would be sending designees in “observational roles.” Rep. Camille Vella-Wilkinson will represent the House, and the Senate will send a member of its fiscal staff.
Igliozzi said the pension liability is a “constant drag on the city’s growth and ability to move forward,” and noted that the underfunded pension has statewide implications.
“If the city can’t move forward, neither can the state,” Igliozzi said.
That sentiment was echoed by other leaders involved in the working group.
“Providence is the seat of government, it’s the seat of industry, it’s the seat of culture and academia,” said Laurie White of the Greater Providence Chamber of Commerce. “And as such it’s the physical, the symbolic and the psychic heart of our state and a place upon which the state’s reputation rests.”
While no one outright said the group might recommend allocating more state funds to Providence, it was implied as a possibility.
“There’s probably no greater fiscal challenge for our state than Providence’s finances,” said Michael DiBiase, the former R.I. director of administration who is now the president and CEO of RIPEC. “We need to think more broadly about the city’s finances in terms of state contributions and revenues.”
The Elorza administration earlier this year secured some pension reform from the city’s police union, negotiating for officers to contribute more to the pension fund in exchange for pay raises. But while leaders hope to get similar concession from the other municipal unions, no union representative is included in the new working group.
“There’s an opportunity for them to participate and be part of this,” Elorza said.
The public can watch the first meeting of the working group on Tuesday at 12:15 p.m. on Zoom.