Avedisian’s Pension Plan and Continuing Problems
I noted that Warwick Mayor Avedisian was offering up a pragmatic, if typical, pension reform plan in that it dealt with reforms for future pensions. Avedisian took to the pages of the Providence Journal to explain his plan, but, as Ted Nesi notes, Avedisian tries to get away with shoving the past pension problems aside.
In the 1950s, 1960s, and for most of the 1970s, the City of Warwick did not properly fund its pension plans and make the necessary annual contributions needed to keep them solvent. Some years the city would make proper contributions and in others there would be no contribution beyond the actual benefits paid out. To be exact, if pension payments totaled $500,000, the city leaders funded that amount to pay pensions….in Warwick, the biggest unresolved issue are the[se] original police and fire pension plans. Today, they are funded at only 27 percent of what is needed. So, while people can suggest that the city has failed to do what is right, they instead should be asking the original creators of the pension systems why there was no leadership when the plans were created. Had even a small amount been contributed annually in those years, the unfunded liability today would be very small.
Not so fast, says Nesi (check out his chart for reference):
The question, then, is what Warwick is going to do about the $200 million gap between its pre-1971 plan’s assets and liabilities. It’s plans like those which the Rhode Island League of Cities and Towns’ Dan Beardsley suggested to me the other day could be the source of litigation as cities unable to fund them move to take away benefits promised in the past….I suppose we could call up Raymond Stone or Horace Hobbs to ask why they failed to make pension contributions in the ’50s and ’60s. (Actually, we can’t; Hobbs died in 1999, Stone in 2004.) But that’s not going to yield a solution to Warwick’s $200 million pension gap.
Avedisian and his fellow mayors may have inherited this problem – but it’s still theirs now.
As I previously suggested, I don’t expect cities to go to court over this, but maybe I’m wrong. One thing that will help is for the public to support pension reform by showing up to city and town council meetings when those items are on the table.