John Ward: Pension Costs Must Be Reduced

(Following are the prepared remarks of Mr. Ward at the Publick Occurrences Forum, "Pension Puzzle: What Can We Afford?" of this evening.)

My thanks to the Providence Journal, Leadership Rhode Island and Rhode Island College for allowing me the honor of participating in this forum.

There was an advertisement in yesterday’s Providence Journal placed by a new group named Engage Rhode Island. In their ad, they say, “Without reform, our taxes will rise, school funding will be slashed, social services will be dropped and more jobs will be lost.” What an understatement!

I can’t speak for the rest of Rhode Island, but in Woonsocket, as a result of the state budget cuts, we have already seen our taxes rise by 29% in the last four years as a direct result of the elimination of $3.3 million of general revenue sharing, the reversal of the motor vehicle excise tax phase-out to the tune of $5 million and $4.4 million in reduced education aid. That’s a revenue loss of $12.7 million. Our levy increases have now completely offset the lost state aid, but we are in no way out of the woods. The additional burden of $3.6 million for municipal, police and fire pensions as has been projected will push us over the fiscal cliff! Period, not debatable!

As for the other points in the ad, you have already heard about how state cuts will affect social services? In Woonsocket, our local support for social services vanished long ago. The local operating budget doesn’t include any social service funding worthy of note. Three years ago, we had to eliminate our summer parks programs entirely! We simply couldn’t afford it. But more than that, we have had to charge each household $96 per year to offset the rising cost of trash collection and half of our street lights are out! That’s what I call cuts in services.
They say jobs will be lost? Our public safety staffing has been reduced by 10% since 2008 and the rest of the city staffing has been cut by 24%, yet our savings have been offset by deficits resulting from mid-year state aid cuts and suffocating increases in health care and pension costs. The jobs left to be lost are in the private sector because the state is driving up our property tax burden.

Finally, they say school spending will be slashed. It should say school spending will be slashed again!

Since FY2003, Woonsocket has seen the cost of teacher retirements increase by 138%. Now we are told that unless we reform the pension system, we can expect to have to pay an additional $2.3 million. That would put the ten year increase at triple what it was back then.

Since 2003, Woonsocket’s student population has decreased by about 10.5%, not unlike most other communities in Rhode Island. However, for Woonsocket, the number of teachers has been cut by over 20%, teacher aides more than 38%, facilities and clerical staff by 17% due to the lack of funding from the state. You see, contrary to the misinformation around the state house, the local funding for education in Woonsocket has increased by 16 ¼% over that time while state education aid has risen and then been reduced to the same level as it was back in 2003. When the city issued $10.5 million of deficit bonds last year, $6.5 million was due to school department deficits caused by mid-year state aid cuts and the extreme increases in pension and health care costs.

So what we have done without? All day kindergarten has been eliminated, making Woonsocket the only urban school district without all-day K. There has been almost no capital spending, much of our technology has become obsolete; there has been almost no spending on textbooks or their equivalent. Our class sizes throughout the district are at, or beyond, the maximum allowed by the contract. Quite frankly, I think a careful assessment of our current offerings would find Woonsocket in violation of the new BEP.

To allow the pension system to remain largely unchanged will make it impossible for Woonsocket, and every other urban community to survive. We have no time for half measures. We need a complete, permanent pension reform that will not only eliminate the projected increase in our pension burden, but it must reduce pension costs so our extremely limited resources can be used to bring back critically important municipal services and educational programs for our children.

And yes, the employees deserve a fair and affordable retirement benefit, but that’s not what we have now. Don’t start thinking this is the solution that will solve our financial problems. If this pension reform is done right, it will only be the first step in a process that will require much more “shared sacrifice” if Rhode Island is to survive and prosper.
I am a new grandfather. My beautiful little granddaughter lives in Virginia with my son and his wife. They left Rhode Island, as so many of their friends have, moving to Virginia after graduating from college to follow great job opportunities. He is a computer engineering graduate and she is a high school science teacher in, you might guess, the Fairfax County school district. He is in a 401(k) defined contribution retirement plan and she is in a blended retirement plan that combines components of social security, a defined benefit plan, and the additional savings she may choose to contribute to her 403(b) plan, all designed to provide a fair retirement benefit in an affordable way.

So, my challenge to the General Assembly as they consider pension reform is this. What will you do to convince my son and his wife to move back to Rhode Island with their family and skills? When they ask me why they should shoulder the burden of Rhode Island’s past mistakes and deprive themselves and my granddaughter of a rich and full life with all that their labors can offer her, how shall I answer them?

John Ward is the President of the Woonsocket City Council.