Fiscal Oversight as a Path to MERS, Central Falls and Beyond

With the General Assembly moving quickly toward its rule-suspending and budget-passing close, most major legislation has been submitted and has received committee hearings. Many linger in the limbo of “held for further study,” having the potential for quick action as final legislative negotiations slip them through.

It is therefore noteworthy when new bills appear at this time of year, and Senator Elizabeth Crowley (D, Central Falls, Cumberland, Pawtucket) provided an excellent example, introducing S2955 this past Thursday. The bill bears the long title, “The Transition of Locally-Administered Municipal Employee Retirement Plans of Municipalities Placed Under State Oversight Pursuant to the Fiscal Stability Act to the State-Administered Municipal Employees Retirement System” (MERS).

The legislation actually has two parts, the first applying to all Rhode Island cities and towns, the second targeting Central Falls.

Regarding the former, the S2955 would allow any municipality that has entered into the state’s fiscal oversight process to move its existing employees into the state-run retirement system. The three stages of the Fiscal Stability Act are the fiscal overseer stage, the budget commission stage, and the receivership stage, each of which gives the state additional control over the city or town. Crowley’s legislation does not specify which stage brings this new capability.

If a struggling city or town receives state oversight, it can move its retirees into MERS by passing a local ordinance.  The legislation also allows the director of the state department of revenue to approve an agreement between the city or town and its retirees that modifies benefits as part of the transition.

That provision of the bill relates to its second part, dealing with the City of Central Falls, which is currently under receivership. In response to inquiry from the Current, Sen. Crowley explained that “the original author of this legislation is the Dept. of Revenue, which has been working with the retirees” of Central Falls.  She also emphasized that it would return their pensions to 75% of the payments that they had been receiving before the receiver and a bankruptcy judge reduced them to as low as 45% of their prior amounts.

However, S2955 contains no specific statement modifying Central Falls pension payments.  But House bill 7967, submitted in March by Rep. James McLaughlin (D, Central Falls, Cumberland), does.  That bill has yet to be scheduled for hearing.

H7967 deals only with the Central Falls retirees, and it states that their “retirement allowance” will be the amount described in appendices A and D-A in their settlement agreement with the city.  Upon expiration of that agreement, it would increase to 75% of the payments received before the reduction.

In place of that language, Crowley’s bill makes no reference to expiration of the agreement and provides no percentages.  Instead, it points additionally to appendix E-A of the agreement, which McLaughlin’s bill does not mention. It also allows for that agreement to be further amended.  The Current is seeking a copy of the settlement agreement to determine whether it has been modified to increase pension payments.

Both bills would create a non-compounding cost of living adjustment for Central Falls retirees of 2% or inflation, whichever is less.  Both would also allow the state to withhold aid to any city or town that fell short on its payments.

Another curious aspect of S2955 is that it holds a section of the law, 45-21.4-5, as “reserved,” presumably for future provisions.  It is noteworthy that this same number appears in H7967 as “retirement allowances for existing retirees” and contains the language returning Central Falls retirees to 75% of their prior payments.  Whether it is the intent to set limits on changes that other municipalities moving into MERS can impose on retirees could not be determined at the time of writing.  The Current has sent inquiries to the Dept. of Revenue, the Receiver of Central Falls, and the state General Treasurer.

The General Assembly’s Web site has been inaccessible at least since Sunday evening, so specific information is not available, but on last review, S2955 was scheduled for a hearing some time this week.

Disclaimer: The views and opinions expressed in The Ocean State Current, including text, graphics, images, and information are solely those of the authors. They do not purport to reflect the views and opinions of The Current, the RI Center for Freedom & Prosperity, or its members or staff. The Current cannot be held responsible for information posted or provided by third-party sources. Readers are encouraged to fact check any information on this web site with other sources.

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