Yet Another Prod for Pension Reform: Fitch Cites West Warwick’s High Unfunded Pension Liability
Andrew pointed out yesterday that Speaker Fox is leaning against taking up binding arbitration in the special legislative session this fall. That would be a good thing because, last week, a Fitch rating emphasized the need for the focus to be on pension reform.
–[West Warwick] has managed its operating expenses and achieved positive results in fiscal 2010, helping to increase its reserve levels but pension contributions remain well below actuarially required levels.
—Unfunded pension and other post employment benefit (OPEB) liabilities are very high.
West Warwick, of course, is not the only municipality facing this situation; in fact, the unfunded pension liability for Rhode Island cities and towns totals $2 billion. This is in addition to a $3.6 billion shortfall for promised-but-not-funded post-retirement health care coverage also referenced by Fitch and excludes the multi-billion dollar shortfall on the state level.
All of these shortfalls have been exacerbated by the absurdly early age at which public employees have been permitted to retire. Neither a pension nor “lifetime health care coverage” is remotely sustainable when the amount of time that an employee works is equalled or exceeded by the length of his or her retirement.
Cranston Mayor Allan Fung warned this week that, in the absence of pension reform, Cranston would have to choose between city services and pension payments; i.e., between the present and the overburdened past. Indeed, as Donna Perry points out, Cranston will not be the only municipality compelled to make such harsh choices.
Fung spoke for city and town leaders across the state when he urged the panel to understand that community budgets will break if modifications to benefits for existing retirees are not recommended.