Finlay: Start saving now for pension settlement impact

Finlay: Start saving now for pension settlement impact

SMITHFIELD - If an out-of-court settlement is approved modifying the 2011 state pension overhaul - an agreement that would increase municipal costs beginning in 2015 - Smithfield might be wise to begin earmarking some of the money beginning in the fiscal year that begins this coming July, according to Town Manager Dennis Finlay.

If the proposal to restore about 5 percent of the benefits reduction - made after negotiations between state officials and public employee unions who challenged the legality of pension overhaul- is approved, the first-year additional cost to Smithfield would be $238,551. The town's current contribution is $4.03 million.

The settlement, affecting state-run municipal and teacher pensions, needs approval from union members and the General Assembly.

Effective July 1, 2015, it would raise the state's pension contribution from $280 million to $293 million and the total contributions from municipalities from $206 million to $217 million.

Finlay has so far taken no public position on the proposal, but he told The Valley Breeze & Observer that he agrees with a complaint by Daniel Beardsley, executive director of the Rhode Island League of Cities and Towns, that municipalities would be asked to make additional payments for a settlement even though they had no seat at the bargaining table.

Nearly all of Smithfield's unionized employees and educators are members of the state pension system. Finlay said the town has kept its contributions into the plan at near 100 percent levels.

As for a possible plan to re-amortize the state pension liability, adding some years for it to reach full funding to lessen the immediate impact on taxpayers, Finlay said that would help in the short run, "but it only puts off the inevitable."

He said it's impossible to know immediately exactly when the increased payments might become due, in view of the approvals the proposed settlement needs and the additional possibility that if it is rejected, the union court challenge could proceed, adding still more time to the mix.

In a joint statement issued Feb. 17, Governor Chafee, General Treasurer Gina Raimondo and the union challengers said the proposed settlement "provides certainty and predictability for our public servants and municipalities to appropriately prepare for the future."

They said the plan would resolve six pending lawsuits and "We believe this proposal is fair for our public employees, retirees, taxpayers and cities and towns."

The League of Cities and Towns is expected to take up the issue of whether to support the proposal March 10.