Superior Court Ruling On Perpetual Blue Cross: Without It, Retirees Could Be Forced "to choose between other necessities and forgoing medical treatment"
Monique Chartier
So yesterday, Judge Sarah Taft-Carter issued a temporary injunction against the City of Providence rolling public retirees into Medicare once they hit 65. The trial to determine whether the injunction should be made permanent starts in May.
The city had to demonstrate a compelling public "emergency" in order to do so; the retirees had to show "irreparable harm" if it happened. The judged found the latter to be the case, saying
“The transition to Medicare is more than an entity change,” the judge wrote. “It is a unilateral alteration of a vested benefit…. Absent an injunction, the police and fire retirees stand to incur potentially thousands of dollars in new health-care costs to retain insurance — expenses that could force them to choose between other necessities and forgoing medical treatment.”
Really? Huh. In that case, I can't help but wonder about the plight of the balance of that demographic - the great unwashed private sector out there (count me, in due course, definitively in their ranks) at retirement age if not actually retired. Not only are we expected to incur the very same thousands of dollars in health-care costs to retain our own insurance, not only are we are expected to do so often without a generous pension, public or otherwise, from which to pay those costs, but on top of that, we are also expected to pick up the cost of someone else's Blue Cross premiums (not to mention pensions).
That decades of indifferent, duplicitous politicians reaffirmed those benefits, as the judge pointed out sans my derogatory, accurate adjectives
... Providence has been providing these costly health benefits for years, she said –– even as former state Auditor General Ernest Al-monte warned repeatedly against it.
“Despite this, the city continually entered into CBAs [collective bargaining agreements] wherein it expressly promised the retirees that it would provide them with health insurance from Blue Cross. The city, therefore, cannot claim to be taken by surprise at the present state in which it finds itself,” the judge said.
might confirm their legality but does not change the fiscal reality that they represent: whether pensions or Blue Cross, there is simply not enough money to pay these retirement benefits.
Accordingly, perhaps the most alarming aspect of this and prior court rulings is where they are driving municipalities and their retirees. By failing to recognize the very real prospect of bankruptcy as a compelling public “emergency", the only alternative will be to turn the prospect into a reality, with the corresponding decimation of both retirement benefits and property values. At that point, of course, the situation will be utterly beyond the retrieval of all the court orders in the world, however legally sound and well-intentioned.
We're supposed to feel bad for people who paid basically nothing for health insurance their entire lives compared to the private sector and Feds, retired between the ages of 40 and 50 with pension and medical benefits, had the option of working near unlimited overtime, had the opportunity to work a second career or consult while collecting, and most of whom retired on tax-free disability for injuries such as "torn shoulder" and "back pain"? Why, given all of the above outlandish opportunities, have they not been able to save for their retirement?
Reminds me of the exchange from Unforgiven:
Little Bill: You just shot an unarmed man!
William Munny: Well he should have armed himself...
"court orders in the world, however legally sound"
Deep breath time...Are you suggesting that we go outside the law to fix the pension problem? If so, it is not the retirees who, as Dan mistakenly refers to as being people who seek the public's pity, rather it is the public itself, state, municipal and federal employees included who would need that pity.
This is not a situation to be proud of, or consider oneself victorious or defeated over. This is a debacle caused by and the responsibility of most people, either through indifference or greed. If the road through the debris is to be paved with broken laws and promises, contracts scattered like yesterday's news and people's retirement plans the subject of scorn and ridicule then we truly are in the beginning of the fall of America.
It is a shameful time in history, and I hope it is recorded as such, no matter what happens.
"Are you suggesting that we go outside the law to fix the pension problem?"
No, Michael. What I'm saying is that, if we don't fix it, the law cannot save us all from the consequences.
By the way, I can easily see the case that first responders should get Blue Cross in retirement. The problem is a raft of other unaffordable practices, some of which were discontinued too late, some of which are still in effect. (Retire and start collecting after only twenty years, "base" pension amounts inflated by OT and spiking, a disability system that encouraged fraud.) These items have endangered everything, including reasonable benefits like Blue Cross in retirement.
Michael - The union contracts are unsustainable. This is not my opinion; this is undeniable economic reality. The money isn't there. The law has mechanisms for dealing with such contracts. The first is revision by the judiciary due to public exigency, which is what should have happened this week. You found a sympathetic Superior Court judge - congratulations on buying another few months. Your contract will end how all of these contracts inevitably end - in bankruptcy court, just like Central Falls, East Providence, and all the rest. Then you can commiserate with the airline workers, auto workers, steel workers, and all of the other unions that have bankrupted industries and municipalities over the years. They promised you the moon, well sorry, but reality has a way of catching up with us.
If you don't want pity, then perhaps you should tell your ubiquitous caped crusader, Tom Kenney, to tone it down a notch. I've read his ridiculous spiel all over the internet so many times that I can recite it by heart now. He's probably responsible for the backlash against firefighter benefits more than any other single person in Rhode Island.
You have some good points, Monique, but one of the most universally mistaken beliefs is that of spiking retirement with overtime. Our pension (retirement? what's that!) is 50% of base salary, no overtime or spiking allowed. It increases 2% a year after that maxing out at I think 65%. It might be 70% but I honestly don't know.
I know you and most people not in my shoes think of the big picture in terms of taxes, but in terms of personal finances think of only yourselves, as it should be. Please remember, twenty years ago twenty years seemed like a lifetime away. My employer promised the option of retiring after twenty years at 50% in return for honorable service. I looked at it like a military contract, didn't put much thought into the how's but contributed 9% of my salary, thinking the city was matching it, not using their supposed contribution, and then my own, in the "general fund." I was busy learning how to stay alive and keeping other people in the same category, did some quick math, (not my strong point) figured there would be a pool of about 500,000 in my pension fund when I left. I thought it would be close enough to enough for there not to be a problem, and figured the city could afford to keep me on the group health care plan.
That's it, no conspiracy, no union bosses twisting my arm, no cheat the man schemes, just a person doing the right thing thinking the right thing was being done in return.
Won't be the first time I was wrong, and I'm certain it won't be the last.
Michael - You live in a black and white fantasy land where everything turns out okay as long as everybody says within the law. The state cannot legislate reality. There are bad laws and bad contracts. How you looked at all of it ex ante is quaint but irrelevant. You need to start thinking like an economist. Ex post, we know that these contracts were not only overly generous, they were ludicrously so. The system you bought into was a ticking time bomb and that bomb has finally gone off.
We don't think you're a bad person for accepting the deal that was handed to you. It's not about blame. Ok, some *really* questionable stuff has gone on with disability in your department and you turned a blind eye to it like everyone else in your union all these years, but we understand how these things happen, and there are people far more responsible than you. Overall, you're a guy who was in the right place at the right time for 20 years and now you're in the right place at the wrong time. At the end of the day, you got your job with no educational qualifications and no debt. You paid a pitiful amount for health insurance. You got basically all the overtime you wanted. You can retire and start a new career or consult while collecting pension. So now that the house of cards is falling down, who is the one who should bear most of the cost? You, my friend. You.
Barnum said it best--you can't cheat an honest man.
Let's look at Michaels's numbers....
20 years work and retire at 50%.
Assume 80K salary, ~9% investment in pension with city matching. That's less than 18K for 20 years, with some % of interest. Lets be generous and agree that about 500K is in the fund after 20 years.
Michael invested 250K in his retirement after 20 years. He will withdraw his total matched investment at 40K a year in ~13 years. So, job at 21, retire at 41, exhaust invested funds by 54--and for the next 30 or so years mooch off the taxpayers.
Is this what many defend? The "right" to pay a token amount into retirement and expect the taxpayer to pay in perpetuity? This doesn't even account for medical benefit costs. Little wonder this State is in trouble.
Are you suggesting that we go outside the law to fix the pension problem?
Posted by michael at January 31, 2012 8:16 PM
Nope. Within the law. Chapter 9 of the Bankruptcy Code to be exact. Get ready baby cause the train is a rollin' along and all the bribes your corrupt union paid Democrats and all the "Firefighters For X" signs your union members carried for corrupt Democrats ain't going to mean she-it when Angel files in a couple of years.
I didn't invent the plan and didn't start until I was thirty. At the time 10% was the number being thrown around as a return on investments.
My parents, and many others lived well from a private pension and social security, it never occurred to me to consider them moochers.
"My parents, and many others lived well from a private pension and social security, it never occurred to me to consider them moochers."
There is good reason why private pensions are quickly going the way of the dodo and social security is being curtailed. Strange to defend one unsustainable system with another. Your parents' generation paid a pittance into social security and were in return lavishly taken care of by future generations for the rest of their lives. I do not fault them for playing the cards they were handed by New Deal Democrats, but my generation will not be able to go out to restaurants 4 times a week and hit the Florida Indian casinos every Saturday on government subsistence like so many of "The Greatest Generation" - let's just leave it at that. I am satisfied with my matching 401k-type retirement plan. It's nothing amazing, but it's honest, sustainable, and fair, which is all that I ask for.
If you don't fault them, what's all the fuss with me?
Michael - I explained at great length that I don't fault you for playing the cards you were dealt either. The cards should never have been dealt in the first place, but they were, and now the city must deal with the fallout. The simple fact is that these ponzi-scheme-like distribution systems, whether Federally or locally administered, benefit earlier entrants at the expense of later ones and therefore must, at some point, come crashing back down to economic reality under the weight of their own excess. It took around 30 years in this case, but collapse it did. The city doesn't have the money to shower you with gifts anymore. Would you prefer negotating terms of the new system and making some hard choices, or would you prefer having them dictated to you in bankruptcy court? Those are your only options. We know you want a bailout - not going to happen.
Its such simple math. All of these benefits will be cut - dramatically - no matter what some judge says.
Just watch it unfold.
Providence is so close to bankruptcy, it will be sooner than many think.
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We're supposed to feel bad for people who paid basically nothing for health insurance their entire lives compared to the private sector and Feds, retired between the ages of 40 and 50 with pension and medical benefits, had the option of working near unlimited overtime, had the opportunity to work a second career or consult while collecting, and most of whom retired on tax-free disability for injuries such as "torn shoulder" and "back pain"? Why, given all of the above outlandish opportunities, have they not been able to save for their retirement?
Reminds me of the exchange from Unforgiven:
Little Bill: You just shot an unarmed man!
Posted by: Dan at January 31, 2012 6:26 PMWilliam Munny: Well he should have armed himself...
"court orders in the world, however legally sound"
Deep breath time...Are you suggesting that we go outside the law to fix the pension problem? If so, it is not the retirees who, as Dan mistakenly refers to as being people who seek the public's pity, rather it is the public itself, state, municipal and federal employees included who would need that pity.
This is not a situation to be proud of, or consider oneself victorious or defeated over. This is a debacle caused by and the responsibility of most people, either through indifference or greed. If the road through the debris is to be paved with broken laws and promises, contracts scattered like yesterday's news and people's retirement plans the subject of scorn and ridicule then we truly are in the beginning of the fall of America.
It is a shameful time in history, and I hope it is recorded as such, no matter what happens.
Posted by: michael at January 31, 2012 8:16 PM"Are you suggesting that we go outside the law to fix the pension problem?"
No, Michael. What I'm saying is that, if we don't fix it, the law cannot save us all from the consequences.
By the way, I can easily see the case that first responders should get Blue Cross in retirement. The problem is a raft of other unaffordable practices, some of which were discontinued too late, some of which are still in effect. (Retire and start collecting after only twenty years, "base" pension amounts inflated by OT and spiking, a disability system that encouraged fraud.) These items have endangered everything, including reasonable benefits like Blue Cross in retirement.
Posted by: Monique at January 31, 2012 8:52 PMMichael - The union contracts are unsustainable. This is not my opinion; this is undeniable economic reality. The money isn't there. The law has mechanisms for dealing with such contracts. The first is revision by the judiciary due to public exigency, which is what should have happened this week. You found a sympathetic Superior Court judge - congratulations on buying another few months. Your contract will end how all of these contracts inevitably end - in bankruptcy court, just like Central Falls, East Providence, and all the rest. Then you can commiserate with the airline workers, auto workers, steel workers, and all of the other unions that have bankrupted industries and municipalities over the years. They promised you the moon, well sorry, but reality has a way of catching up with us.
If you don't want pity, then perhaps you should tell your ubiquitous caped crusader, Tom Kenney, to tone it down a notch. I've read his ridiculous spiel all over the internet so many times that I can recite it by heart now. He's probably responsible for the backlash against firefighter benefits more than any other single person in Rhode Island.
Posted by: Dan at January 31, 2012 9:22 PMYou have some good points, Monique, but one of the most universally mistaken beliefs is that of spiking retirement with overtime. Our pension (retirement? what's that!) is 50% of base salary, no overtime or spiking allowed. It increases 2% a year after that maxing out at I think 65%. It might be 70% but I honestly don't know.
I know you and most people not in my shoes think of the big picture in terms of taxes, but in terms of personal finances think of only yourselves, as it should be. Please remember, twenty years ago twenty years seemed like a lifetime away. My employer promised the option of retiring after twenty years at 50% in return for honorable service. I looked at it like a military contract, didn't put much thought into the how's but contributed 9% of my salary, thinking the city was matching it, not using their supposed contribution, and then my own, in the "general fund." I was busy learning how to stay alive and keeping other people in the same category, did some quick math, (not my strong point) figured there would be a pool of about 500,000 in my pension fund when I left. I thought it would be close enough to enough for there not to be a problem, and figured the city could afford to keep me on the group health care plan.
That's it, no conspiracy, no union bosses twisting my arm, no cheat the man schemes, just a person doing the right thing thinking the right thing was being done in return.
Won't be the first time I was wrong, and I'm certain it won't be the last.
Posted by: michael at February 1, 2012 8:40 AMMichael - You live in a black and white fantasy land where everything turns out okay as long as everybody says within the law. The state cannot legislate reality. There are bad laws and bad contracts. How you looked at all of it ex ante is quaint but irrelevant. You need to start thinking like an economist. Ex post, we know that these contracts were not only overly generous, they were ludicrously so. The system you bought into was a ticking time bomb and that bomb has finally gone off.
We don't think you're a bad person for accepting the deal that was handed to you. It's not about blame. Ok, some *really* questionable stuff has gone on with disability in your department and you turned a blind eye to it like everyone else in your union all these years, but we understand how these things happen, and there are people far more responsible than you. Overall, you're a guy who was in the right place at the right time for 20 years and now you're in the right place at the wrong time. At the end of the day, you got your job with no educational qualifications and no debt. You paid a pitiful amount for health insurance. You got basically all the overtime you wanted. You can retire and start a new career or consult while collecting pension. So now that the house of cards is falling down, who is the one who should bear most of the cost? You, my friend. You.
Posted by: Dan at February 1, 2012 9:08 AMBarnum said it best--you can't cheat an honest man.
Let's look at Michaels's numbers....
20 years work and retire at 50%.
Assume 80K salary, ~9% investment in pension with city matching. That's less than 18K for 20 years, with some % of interest. Lets be generous and agree that about 500K is in the fund after 20 years.
Michael invested 250K in his retirement after 20 years. He will withdraw his total matched investment at 40K a year in ~13 years. So, job at 21, retire at 41, exhaust invested funds by 54--and for the next 30 or so years mooch off the taxpayers.
Is this what many defend? The "right" to pay a token amount into retirement and expect the taxpayer to pay in perpetuity? This doesn't even account for medical benefit costs. Little wonder this State is in trouble.
Posted by: Mike678 at February 1, 2012 1:04 PMAre you suggesting that we go outside the law to fix the pension problem?
Posted by michael at January 31, 2012 8:16 PM
Nope. Within the law. Chapter 9 of the Bankruptcy Code to be exact. Get ready baby cause the train is a rollin' along and all the bribes your corrupt union paid Democrats and all the "Firefighters For X" signs your union members carried for corrupt Democrats ain't going to mean she-it when Angel files in a couple of years.
Posted by: Tommy Cranston at February 1, 2012 1:41 PMI didn't invent the plan and didn't start until I was thirty. At the time 10% was the number being thrown around as a return on investments.
My parents, and many others lived well from a private pension and social security, it never occurred to me to consider them moochers.
Posted by: michael at February 1, 2012 1:46 PM"My parents, and many others lived well from a private pension and social security, it never occurred to me to consider them moochers."
There is good reason why private pensions are quickly going the way of the dodo and social security is being curtailed. Strange to defend one unsustainable system with another. Your parents' generation paid a pittance into social security and were in return lavishly taken care of by future generations for the rest of their lives. I do not fault them for playing the cards they were handed by New Deal Democrats, but my generation will not be able to go out to restaurants 4 times a week and hit the Florida Indian casinos every Saturday on government subsistence like so many of "The Greatest Generation" - let's just leave it at that. I am satisfied with my matching 401k-type retirement plan. It's nothing amazing, but it's honest, sustainable, and fair, which is all that I ask for.
Posted by: Dan at February 1, 2012 2:19 PMIf you don't fault them, what's all the fuss with me?
Posted by: michael at February 1, 2012 3:20 PMMichael - I explained at great length that I don't fault you for playing the cards you were dealt either. The cards should never have been dealt in the first place, but they were, and now the city must deal with the fallout. The simple fact is that these ponzi-scheme-like distribution systems, whether Federally or locally administered, benefit earlier entrants at the expense of later ones and therefore must, at some point, come crashing back down to economic reality under the weight of their own excess. It took around 30 years in this case, but collapse it did. The city doesn't have the money to shower you with gifts anymore. Would you prefer negotating terms of the new system and making some hard choices, or would you prefer having them dictated to you in bankruptcy court? Those are your only options. We know you want a bailout - not going to happen.
Posted by: Dan at February 1, 2012 5:03 PMIts such simple math. All of these benefits will be cut - dramatically - no matter what some judge says.
Posted by: Mike Cappelli at February 1, 2012 9:52 PMJust watch it unfold.
Providence is so close to bankruptcy, it will be sooner than many think.