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Now add in the fact that the contracts were negotiated with labor unions that no longer represent retirees, and which cannot negotiate on their behalf, leaving cities and towns to negotiate with retirees one-by-one.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.

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Warrington Faust
Warrington Faust
10 years ago

One supposes that wisdom is where you find it. I am reading an autobiography by one of Quantrell’s Raiders “Had the Confederate forces succeeded in the field there would have been ….a Confederate States of America with fewer pension parasites to suck life’s blood from the heart of labor. But they failed, and a hundred years hence will continue to pay indemnity to the conqueror by an ever increasing pension roll”.
That was 150 years ago, but I imagine that the rules of arithmetic were well established.

Monique
Editor
10 years ago

“But let’s conveniently put aside the fact that municipal contracts aren’t permitted to extend beyond three years, in Rhode Island.”
Let’s not. That’s one of the huge legal complications with pension COLA’s and perpetual Blue Cross. The contract ended but the unaffordable benefits inexplicably go on forever.

Dan
Dan
10 years ago

Rest assured that one of Rhode Island’s fine 4th-tier law school judges, appointed to the bench with maxed-out campaign contributions to the RI Democratic Party, will render a sage and studied decision to sort out these complex legal matters in a principled and judicious way. If they should require any assistance with this task, further rest assured that there will be no shortage of eager young Roger Williams Law clerks and interns with strikingly familiar last names standing by to aid them in their research and legal reasoning.

Tommy Cranston
Tommy Cranston
10 years ago

“they boarded an ark in which the covenant of their corrupt deals could not be touched.”
Unfortunately for the unions that ark can sail down to the Bankruptcy Court.
Watch the wailing and the gnashing of teeth ten…

Warrigton Faust
Warrigton Faust
10 years ago

Posted by Tommy Cranston
“Unfortunately for the unions that ark can sail down to the Bankruptcy Court.”
Union contracts are the main reason that airlines seem to be constantly filing bankruptcy.

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