Fung: Penion Deal is "Outrageous"

After months of closed door negotiations, the Governor and General Treasurer have agreed to a settlement that favors the unions and retirees at the expense of the taxpayer, Fung said.

The following is an op-ed by Cranston Mayor and gubernatorial candidate Allan W. Fung.


Enough is enough.  Over the past several legislative sessions, our leaders at the State House have inflicted significant financial pain on the local taxpayers. First, they eliminated general revenue sharing monies to local municipalities. Next, they eliminated the funding to phase out the burdensome car tax. And now, the taxpayers of Rhode Island are getting hit with another bill due to a closed door, behind the scenes deal.

Cities and towns have worked hard to withstand the loss of hundreds of millions of dollars in state aid. Services have been cut, employees have agreed to concessions, and property taxes have been increased.  In 2011, the Governor and the General Treasurer convinced the General Assembly to enact the Rhode Island Retirement Security Act (“Act”) in order to avoid the huge employer contribution requirements resulting from changes to the investment rate of return and other actuarial assumptions, as well as the realization of investment losses.

Cities and towns, recognizing the importance of needed pension reform, sought to expand these efforts to include the even more troubled locally administered pension plans, many of which had benefits tied in contracts.  Unfortunately, local municipalities were again left to fend for themselves as state officials ignored our pleas to address problems festering within our locally administered pension plans. 

However, we still supported the passage of the Act because it was the right thing to do for the state pension system and the taxpayers.  As expected, the unions and retirees sued the state over the passage of the Act. After mediation was ordered, cities and towns, who were not at the negotiating table as part of the suit, urged our state officials to proceed with extreme caution in their consideration of any potential mediated benefit changes to the enacted law. We felt it would be irresponsible for the parties involved in the mediation process to reach any type of agreement which would increase the employer contribution rate paid by local governments. The implications of higher pension contributions would be disastrous to many cities and towns, some of whom are still teetering on the brink of fiscal collapse.

After months of closed door negotiations, the Governor and General Treasurer have agreed to a settlement that favors the unions and retirees at the expense of the taxpayer. This is a major step backward for the taxpayers of the State of Rhode Island. Beginning in 2016, taxpayers will have an annual bill of $24 million, and the State’s unfunded liability will be increased by nearly a quarter of a billion dollars. The bill to Cranston alone will be almost $1 million. These costs cannot be dismissed by suggesting that 95% of the original package stays intact. Regardless of the percentage of the original savings, this is a significant amount of monies for struggling cities and towns. These municipalities will only have one place to turn for additional revenues; raising property taxes. According to the Tax Foundation, Rhode Island’s property tax burden currently ranks as the 7th highest nationally, far above the national average. Once again, if the General Assembly were to approve this settlement, the taxpayers will have to foot the bill.

Interestingly enough, risk avoidance was given as a justification for the State pursuing a deal with the public sector unions and retirees. Yet the General Treasurer has for years stated that the pension reforms instituted are constitutional, and even  the Governor’s Director of Administration, who is also a lawyer, was recently quoted in the Providence Journal saying “we would ultimately win the case.”

If the Governor and General Treasurer believe the state would be successful in litigation, then why settle for an additional quarter of billion dollars in new unfunded liabilities and $24 million in increased operating costs to the taxpayers? Why not fight for the taxpayers and the cities and towns?  This is simply outrageous. 

In 2011, after an in-depth public debate on the issue, the Act was enacted with overwhelming and bipartisan support in the legislature. The members of the General Assembly must again show courage and leadership to reject this deal. Our state and local budgets have no room for increased spending on pension benefits, whether it is in the short or long term. Let’s permit the court to rule once and for all on the constitutionality of the Act. I’m asking the taxpayers of Rhode Island to stand with me in rejecting this closed door, behind the scenes deal. Enough is enough. Together we can move Rhode Island forward.

Chris12 February 26, 2014 at 08:13 AM
Colleen- what were union leaders doing for the past decade while the worker pensions were NOT being funded? I'm surprised they were so blind-sided by this unfunded issue.
Seamus February 26, 2014 at 11:59 AM
....employees have agreed to concessions, and property taxes have been increased. Does it occur to anybody else that employees that live in the city are getting the triple screw. 1.They have been agreeing to concessions and haven't seen raises for years and years in order to "help the city", but without research, some of you still wail about "greedy unions" 2.They have seen their taxes go up, but their income go down due to increases in co-pays and changes in their contracts. (damn those greedy unions) 3.They took the job based on promises made by the state, and now the state just decides it can say "never mind" and hand the burden back to the cities, which will, in turn, raise the taxes, decrease the salaries of the employees, and prolong the careers of some employees into their 70's in order to collect a half-adequate pension. (although when I say employees, some of you automatically ready "greedy union members") Some of you are angry because the "greedy unions" want the state to honor a promise it made. I guess they shouldn't expect that. Based on the Curt Schilling debacle, this state often decides that promises don't mean anything. Essentially Fung says that he wants to protect his taxpayers, but continue to screw his pensioneers. (it's not an increase Mayor, it's a restoration) Sounds like he is talking out of both sides of his (higher office seeking) mouth. Focus on the RATS Mayor, a topic in which you have much more credibility.
Tom Nichols February 26, 2014 at 12:00 PM
Chris 12;Union leaders took the cities to court for not funding the pensions and they lost.End of sentence.So cities and towns just kept underfunding or not funding.So whose fault is it.Not the people who paid into the system every pay check and saw that a contribution go to every day city expenses.Now they want to replenish the fund on the backs of the people that got the shaft in the first place.You want to hold someone responsible try the pols and the judiciary.
Chris12 February 26, 2014 at 12:50 PM
Tom Nichols-"Union leaders took the cities to court for not funding the pensions and they lost..." They lost??? If they lost then give the workers back all their money. What the heck kind of contract/pension is that if it does not have to be recognized/ honored? Are you saying that workers contributed weekly and "hoped for the best?" What a bizarre way to set up a pension fund...on hope??
PMarandola March 01, 2014 at 10:25 AM
BLOCK for governor!


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