When readers might become confused that a labor union president is actually the mayor’s spokesman in an article in the state’s major daily newspaper, that mayor should probably question whether he’s somehow gotten on the wrong track. The union president is firefighter Paul Valletta — he who claimed that then-treasurer Gina Raimondo “cooked the books” — and the mayor is Republican Allan Fung.
The new firefighter contract apparently has some raises (paid for, it seems, by reducing the number of firefighters), with which local taxpayers might not be happy, but the part of the deal that ought to make the contract a statewide scandal is the explicit declaration that 3% cost of living adjustments (COLAs) on pensions are explicitly a contractual right. As Gregory Smith reports in the Providence Journal:
In a grand bargain several years ago between the city and participants in a closed pension fund for firefighters and police, the public safety employees agreed to forgo some of their COLAs in order to save the fund from bankruptcy.
The arrangement expires in 2024, at which time the 3 percent compounded COLA inserted into the tentative agreement this year would become a figure the firefighters could rely on. As the tentative agreement says, that figure would be a “contractual obligation.”
The only book cooking Raimondo did on the pensions was to pretend that the state pension fund’s discount rate was reduced enough when it went down to 7.5%. (That is the expected investment return, which allows the fund to pretend it will have to contribute a lot less money than it probably will to pensions.) More realistically, the state should have cut it in half, to 4%, but that would have caused spontaneous combustion of elected officials in the State House. (Since the turn of the century, the state’s return has been 4.65%.) According to the state Dept. of Municipal Finance, Cranston’s pensions are only 21% funded, and its discount rate is 7.5%.
In short, the city has no business guaranteeing COLAs in the future. Doing so, the mayor is putting taxpayers and their property at significant financial risk, and taxpayers statewide should be concerned that Cranston’s bill will one day fall on them and that Mayor Fung has set a terrible precedent for their own local pensions.