Rhode Island lawmakers have attached a carrot to a bill that would enable Providence to issue pension obligation bonds in the face of a serious long-term liability.
A six-page House of Representatives
Payback would be over 25 years.
Mayor Jorge Elorza’s request two weeks ago amounted to $704 million. The city’s pension shortfall is $1.2 billion and its funding level is only 22%, even though it has made its full actuarially required contribution over the past 10 years.
“It seems pretty bad, given that the city has made its full pension payments for some time now and yet the pension system remains very underfunded,” said Providence College political science professor Adam Myers. “The city also has very limited options for raising revenue, which makes solving the problem more difficult.”
Senate Majority Whip Maryellen Goodwin and Rep. Scott Slater, both Providence Democrats, are the lead sponsors. The timeframe is tight, with lawmakers generally adjourning on Smith Hill at the end of June.
“This is a once-in-a-lifetime opportunity to do this,” Goodwin said. “We only have a short window. We have to move fast because I don’t think the General Assembly will be here forever.”
The bill, which does not involve a referendum, calls for the city’s Board of Investment Commissioners to develop an investment policy “with the assistance of a nationally recognized pension investment advisor.”
Gov. Dan McKee and House Speaker Joe Shekarchi, D-Warwick, have been quiet about the proposal. McKee became governor two months ago, succeeding Gina Raimondo who is now U.S. commerce secretary.
Myers raised the possibility of direct state aid, especially after the $1.13 billion Rhode Island stands to receive from Washington through the American Rescue Plan.
“Given that the state is going to be flush with cash this year, one wonders if state assistance -- in the form of a one-time transfer payment to help stabilize the city’s pensions -- should be part of a comprehensive solution that is hammered out in addition to the POB,” Myers said.
“Obviously the politics of this are difficult, but the state is in a better fiscal position at this point and the fiscal health of Providence is a matter of statewide concern.”
He added: “With the legislature drifting leftward and increasingly concerned with urban and racial justice issues, this year seems like an opportune time for leaders of the state’s capital city, with a majority-minority population, to make their case on the city’s behalf.”
