Weighing the costs of the unfunded pensions
This week we learned that Rhode Island is facing an overwhelming shortfall of $9.4 billion in unfunded pensions for public employees. Add that to the projected $2.4 billion in promised health benefits to public retirees and the numbers are truly staggering.
How will the state, cities and towns meet their obligations? It’s clear that the General Assembly must take action and there is no easy or quick fix. This will take more than a simple tax increase. The system is broken and it needs to be repaired now – not later.
According to Wednesday’s Providence Journal, Jamestown’s police pension is fully funded. But the general public employees pension fund, which falls under the Municipal Employee Retirement System (MERS), Jamestown is 67 percent funded, compared to the 80 percent recommended funding level.
These numbers are reported as of June 30, 2010. Town Administrator Bruce Keiser said that last year Jamestown’s MERS was 76 percent funded. The difference, he explained, comes from the previous five-year stock market performance evaluations. And it reflects the reduction in advance performance prediction from 8.25 to 7.5 percent.
Jamestown teachers are also part of a state plan. It is only 48 percent funded compared to the 80 percent funding recommendation.
Both the MERS and the teacher pensions are “in the hands of the General Assembly,” Keiser explained. Jamestown contributes what is required by the state.
That means – if there are no changes by the state lawmakers – Jamestown will contribute 11.43 percent of the public employees’ wages to MERS in the new budget under consideration. That contribution would increase in the fiscal year 2012-13 to 18.27 percent. Meaning, Jamestown would have to pay an additional $150,000 into MERS.
Consider that the entire island municipal expenditures only increased by $80,000 to $90,000 in the proposed budget. An additional $150,000 for retirement pensions will have a whopping impact on Jamestown spending and property taxes. That doesn’t include what islanders will have to pay for the teacher pensions shortfall or health benefits for retirees.
We still haven’t talked about how deeply the state employees pensions are going to hit the Jamestown taxpayers’ pocketbooks.
The situation is grim. There is no doubt that everyone involved is going to have to share the pain.
— Jeff McDonough