The Banana Peel In Gov Chafee’s Municipal Pension Reform Plan
Governor Chafee will unveil his “Critical Plan Empowerment Act-Municipal Pensions” today in Pawtucket.
Ian Donnis got an early look at it. As I read through his article, my hands rose to applaud the Governor’s initiative.
Governor Lincoln Chafee’s bill to aid struggling cities and towns — slated to be unveiled later this week – would allow communities to suspend “benefit adjustments,” according to a copy of the legislation obtained by RIPR. …
“In order to mantain the sovereignty and fiscal stability of as many municipalities as possible, as well as to safeguard the well-being, public safety, and welfare of the citizens of the state and their property, it is essential that the state take immediate and proactive steps.”
Then I got to the last sentence of Ian’s article.
The bill calls for steering at least 50 percent of money resulting from COLA suspensions to be “reinvested exclusively” to increase a plan’s funded percentage.
And my ovation was terminated before it began.
Many cities and towns do not have the revenue to properly fund their pension plans. Some cities and towns do not have the revenue to maintain day to day operations, much less try to make up underfunded and very generous pensions. Accordingly, how could they have the money to reinvest, exclusively or otherwise, into their pension systems?
50% of something could be a lot unless it’s 50% of an empty coffer, in which case, it’s zero. An adjustment, modest or substantial, of pensions will not magically make money appear where there is none now. How is this component of the governor’s proposal at all feasible?