The Meaning of “Legislation Last” in Pension Reform

A concept has come up in several venues related to municipal pension reform, in Rhode island, and it appears that the players are talking past each other a bit. Here’s Gary Sasse, fiscal adviser to the Providence City Council Subcommittee on Pension Sustainability:

Mr. Sasse said that, “The Treasurer’s suggestion that legislation be a last resort is unrealistic given the financial challenges the City of Providence is facing. The wolf is at the door; turning our backs on it and pretending it is not there, is not a practical alternative.”

Not surprisingly, similar points came up at last night’s Senate Finance Committee hearing on just such legislation, submitted by Governor Chafee.  If the source of the “legislation last” citation is the workshop on municipal pension reform, however, the phrase wasn’t introduced by General Treasurer Gina Raimondo, but her legal counsel, Mark Dingley.

More importantly, the point wasn’t that other methods of addressing financial difficulties are preferable in some aesthetic way.  Rather, it was that changes to pension benefits that are based in legislation (or ordinances) will not stand up to the inevitable legal challenge if municipalities haven’t taken a number of steps first.

Those steps are, in two words, research and prodding.  Regarding the first, the municipality has to be able to show in numbers that (1) there is a problem, and (2) certain resolutions aren’t reasonable.  For example, if the pension liability is threatening a town with insolvency, then it is clearly a problem, and if data shows that the local demographics indicate a relatively poor community that is already paying a relatively high rate of property taxes, then raising taxes isn’t a reasonable response.

Regarding the second step, prodding, municipalities have to be able to show the courts that they took every possible step to ask and negotiate for concessions, reduce expenditures, and efficiently order their finances.  This is undoubtedly what Providence Mayor Angel Taveras as doing when his administration sent letters to all retirees asking for give-backs.  Surely, he didn’t expect an overwhelming (or even satisfactory) response, but he can now document that solution as attempted.

It probably won’t hurt communities to have some legislated recourse available to them, but it does create the risk that they’ll reach for its rewards too quickly and fail to build their legal case.