Providence didn’t budget for $2M it owes retirees by January

PROVIDENCE, R.I. (WPRI) – Providence officials will need to come up with nearly $2 million for stipends due to about 1,300 retirees by Jan. 31 after not including the funds in the city’s new budget that took effect July 1.

Emily Crowell, a spokesperson for the mayor, confirmed Tuesday the city did not budget for the $1,500 stipends that are guaranteed to most retried police officers and firefighters through a pension settlement agreement approved in 2013. She said the city estimates about 1,300 retirees or their beneficiaries are eligible for the payments.

Crowell said the city is treating the stipends like a “claim or settlement, which are not typically budgeted for within the general fund, especially when variables are unknown.” But unlike hypothetical claims or settlements, Crowell acknowledged the stipends “are not up for debate.”

“The city of Providence is confident they can fund this payment and will be continuing to track its impact,” Crowell said.

The 2013 agreement between the city and its public safety unions and retirees over pension changes implemented under former Mayor Angel Taveras guaranteed that any former police officer or firefighter whose annual pension was less than $100,000 a year would receive a $1,500 stipend by Jan. 31, 2018. (As of April, 33 former city employees were earning more than $100,000 a year from their pension.)

The stipends, which cannot come out of the city’s retirement fund, were part of a deal that froze cost-of-living adjustments (COLAs) for city retirees between 2013 and 2022, eliminated 5% and 6% COLAs forever and shifted how pensions are calculated. The deal also moved retirees over the age of 65 to Medicare.

Retirees are also eligible for another $1,500 stipend by Jan. 31, 2020.

The failure to budget for the stipends was first brought to the city finance department’s attention last week. The stipends were never discussed during any of the budget hearings held by the City Council Finance Committee earlier this year. Councilman John Igliozzi, who chairs the committee, said the council will discuss the stipends with the Elorza administration.

“It’s an issue we’re going to have to address,” Igliozzi said.

The settlement agreement between the city and its public safety unions and retirees was hailed as a landmark deal that would reduce Providence’s unfunded pension liability by $170 million. Supporters argued that it saved the city from bankruptcy, but critics have said the city should have followed the state’s lead in suspending COLAs until the pension system is healthy, rather than just 10 years.

The vast majority of city retirees were included in the agreement, but more than 60 former public employees opted out and challenged the changes in court. A Superior Court judge dismissed their lawsuit earlier this year, but they have appealed to the Rhode Island Supreme Court.

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Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan