PROVIDENCE, R.I. (WPRI) – Rhode Island’s 34 independent municipal pension plans have accumulated a combined shortfall of more than $2.4 billion, led by a billion-dollar gap in the city of Providence, a newly released study shows.
The annual report by General Treasurer Seth Magaziner’s office found more than a third of the local pension plans are in “critical status,” meaning the amount of assets they have saved will cover less than 60% of their retirement liabilities. The study offers a “report card” – though no letter grade – for many of the plans.
“While Rhode Island has made progress in improving the visibility and transparency around local pension plans, more work remains to make our locally administered pension plans sustainable,” the report found. “In some communities, the condition of municipal pension plans has reached such a critical state that the outlook for those systems is uncertain in the absence of corrective action.”
The health of the independent municipal plans – which are not part of the state-run Municipal Employees Retirement System – has been a growing concern in recent years, particularly after Central Falls filed for bankruptcy in 2011. The annual study was mandated by lawmakers two years ago to keep tabs on the plans.
On the plus side, the report finds municipalities are getting better at tracking and providing key data, which was a problem with the first edition last year. Half the plans improved their funded levels from the prior year, and most have been making their full annual required contributions of money into the plans.
Yet 17 of Rhode Island’s 39 cities and towns have at least one pension plan in critical status, according to the report: Bristol, Central Falls, Coventry, Cranston, Cumberland, East Providence, Johnston, Narragansett, Newport, Pawtucket, Portsmouth, Providence, Scituate, Smithfield, Warwick, West Warwick and Woonsocket.
The healthiest plan is Jamestown’s police pension plan, which is more than fully funded; the unhealthiest plan is Coventry’s police plan, which is just 16% funded. Very low funding levels were also reported for plans in Central Falls (24%), Cranston (24%), Johnston (24% and 19%), Providence (26%), Warwick (24%) and West Warwick (20%).
Nine municipalities shorted their required contribution to a pension fund in one or more of the last four years: Central Falls, Coventry, East Providence, Jamestown, Johnston, Narragansett, Portsmouth, Smithfield and West Warwick. (Johnston and Smithfield failed to make a full contribution in any of those four years.)
The report expressed concern about how much of some communities’ tax revenue is being eaten up by payments for its independent pension plans. Providence’s annual deposit now eats up 20% of its annual tax levy, and Johnston is also supposed to be putting that much in. And those numbers do not include other pension plans the communities pay into, such as the state-run system for teachers.
The plans’ investment performances are also all over the map. In the 2017 fiscal year, their returns ranged from a high of 21% for Smithfield to less than 7% for Jamestown and Woonsocket. (The state-run system earned 11.6% over the same period.) Their spending on investment consultants also varied widely. Providence’s large plan spent the most at $2.15 million, but Smithfield spent $442,000 and East Providence spent $350,000, ranking second and third.
The study argued Rhode Islanders should be paying close attention to the plans, saying the issue is “vitally important to the first responders and other municipal public servants who rely on pensions for retirement security, the taxpayers who are responsible for funding pension shortfalls, and policy makers seeking the appropriate balance between maintaining strong public retirement systems and investing in other critical priorities.”
The entire study, including information on all 34 plans, is available here.