Municipal Pensions as Covenant
The principles underlying debate about Providence’s ability to suspend the cost of living adjustments (COLAs) of its public-sector retirees are fascinating. On one hand, we’re told that they’re contractual, unlike the state-level pensions, which are legislated:
Unlike state-level public employee pension benefits, which are set by state law, municipal retirement benefits are incorporated in collective-bargaining agreements. Courts in Rhode Island and across the country have ruled that contractual benefits are harder to cut.
On the other hand, Providence is facing legal difficulties because its COLAs are included in an ordinance, at least for most retirees:
In that long-running case, which the Rhode Island Supreme Court decision likened to the Dickens novel “Bleak House,” the court ruled that the city could not cut COLAs granted in the early 1990s. Because a 1991 city ordinance had awarded the 5-and 6-percent compounded COLAs, the court said, they were a vested contractual right and not a “gratuity” subject to change.
Now add in the fact that the contracts were negotiated with labor unions that no longer represent retirees, and which cannot negotiate on their behalf, leaving cities and towns to negotiate with retirees one-by-one. (But let’s conveniently put aside the fact that municipal contracts aren’t permitted to extend beyond three years, in Rhode Island.) One begins to get the sense that COLAs are a bit to RI law what light is to physics. When declaring them inviolable requires them to be particles (ordinances), then that’s what they are; when their inviolability requires them to be waves (contract rights), then they’re that, as well.
In short, the retirement benefits represent contracts that never expire and that no collective interest has the authority to renegotiate. No wonder “all but 300 to 400 of Providence’s current 2,900 pensioners retired prior to” a 1995 ordinance reining in COLAs. In doing so, they boarded an ark in which the covenant of their corrupt deals could not be touched.