Fung stands by pension reform as trial unfolds

By Daniel Kittredge
Posted 11/18/15

As a legal challenge mounted by a group of retired fire and police personnel in response to significant local pension changes unfolds in Providence Superior Court, Mayor Allan Fung said he has been …

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Fung stands by pension reform as trial unfolds

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As a legal challenge mounted by a group of retired fire and police personnel in response to significant local pension changes unfolds in Providence Superior Court, Mayor Allan Fung said he has been actively involved in the case and stands by the reform agreement.

“We put on the best case that we can,” he said Monday. “I’m sitting every single day. It’s that important of a case.”

The agreement was negotiated in 2013 and won unanimous support from the city’s police and fire unions. It received judicial approval in January of last year.

The agreement caps and otherwise controls cost-of-living adjustments (COLA) over a period of 30 years, including freezing the adjustments every other year for the first 10 years and capping increases at 3 percent. In the 11th and 12th years, COLAs are capped at 1.5 percent, while the cap rises to 3 percent in year 13 and remains there through year 30.

Fung said the local pension plan includes 459 personnel, including 33 active employees. Seventy-six retirees opted out of the pact and subsequently filed suit challenging the changes.

Those who opted out became subject to a pair of ordinances freezing COLAs for a full 10-year period.

The plaintiffs argue the COLA alterations and reductions were unwarranted and violate existing obligations, and that other cost-saving avenues were available to the city. During the trial – which began last week – the plaintiffs have also zeroed in on the city’s under-funding of its pension liability in past years.

Fung, who has testified at the proceedings, along with Finance Director Robert Strom and others, said the city maintains its dire fiscal situation in the years following the 2008 financial crisis necessitated action.

He said the reform agreement was pursued as a means of ensuring the security of pensions for retirees while improving the community’s fiscal position.

“My goal going into this was to basically save the plan,” he said, and “also be fair to the taxpayers.”

The mayor pointed to a savings of more than $6 million in the annual required contribution for the pension plan under the first year under the agreement, and to the degree of certainty it provides going forward. While the plan’s funded ration remains critical, he said, it has increased from 16 percent to nearly 23 percent, and the city has been able to make – and exceed – its full annual contributions.

“The reform plan that we put into place is working,” he said.

Fung said he is optimistic – “The case has been going well so far” – but acknowledged that a loss in court would have “significant financial impact” that he estimated at “millions of dollars over time.”

The mayor also said the case has “statewide implications,” and could end up setting a legal precedent regarding similar situations.

The trial was expected to continue this week.

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