PROVIDENCE, R.I. (WPRI) – Rhode Island cities and towns owe their current and former workers more than $5 billion in retirement benefits with no money set aside to pay for them, a new state study has found.
In a report issued this week, the Local Pensions and OPEB Study Commission found that 52 local jurisdictions – 39 cities and towns, nine local school departments, and four regional school districts – have accumulated unfunded liabilities of more than $2 billion for pension benefits and $3 billion for other post-employment benefits, or OPEB, which is primarily retiree health care.
“The problems are in some instances both severe and urgent, and continued oversight and work with the municipalities is needed to ensure both fiscal stability for the municipalities, and pension and healthcare security for municipal employees and retirees,” the report said.
The commission was created as part of the 2011 state pension law to examine the financial health of the 34 independent pension plans that are managed by cities and towns outside the state-run Municipal Employees Retirement System (MERS). The independent plans were left untouched by the 2011 state overhaul.
The report said 22 of the 34 pension plans are currently in “critical status,” meaning the plans’ assets will cover less than 60% of their liabilities. The officials in charge of those plans were required to submit blueprints to the commission for getting them funded, and most of those would get the plans out of critical status by 2033, the report said.
The worst-funded local pension plans were Narragansett’s police plan (0% funded), Coventry’s police plan (10%), West Warwick’s town plan (17%), Central Falls’ city plan (18%), Smithfield’s police plan (19%) and plans in Cranston and Warwick (20%) each.
On the OPEB side, more than one-third of the $3-billion unfunded liability is in one municipality: Providence, which has a retiree-health shortfall of nearly $1.2 billion. Most communities continue to cover retirees’ health claims on a pay-as-you-go basis, without saving money to cover the projected costs in the future.
In its report, the 14-member commission – which was chaired by Department of Revenue Director Rosemary Booth Gallogly, and whose members included former Providence Mayor Angel Taveras and Cranston Mayor Allan Fung – offered recommendations to Gov. Gina Raimondo and General Assembly leaders about what to do next.
“The answer was a resounding no to a one-size-fits-all approach even as it became clear that oversight was a necessary component in restoring vitality to plans in critical status,” the report said. Commission members were not in favor of setting up an agency in Rhode Island along the lines of the Public Employee Retirement Administration Commission, which oversees 106 retirement boards in Massachusetts.
The suggestions the commission did come up with included to create a permanent oversight body to keep an eye on local pension and OPEB liabilities; to require stepped-up financial disclosures by local governments; to create a voluntary, optional process for independent plans to join MERS, the state-run system; and to consider creating a central investment pool for OPEB reserves.
The roughly $5-billion unfunded liability calculated by the commission for the local pension and OPEB plans is separate from the unfunded liability for the state-run pension and OPEB plans, which totals $4.6 billion for pensions and $714 million for OPEB, according to the most recent audits.
The state’s pension liability would be about $4 billion higher without the cuts made by the 2011 pension overhaul, which is currently being challenged in court by unions and retirees.Ted Nesi ( email@example.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi