City pay pacts ease burden on taxpayers
After weeks of quiet negotiations, the city administration has reached contract agreements with police and fire and a tentative agreement with municipal employees that will implement a co-payment of about 20 percent on health insurance; maintains pay at the current level for the next three years; and reduces the unfunded liability of city pension systems by $30 million over the life of the agreements.
As no wage increases were calculated for the fiscal year starting the first of this month and health care costs had been projected on a 20 percent co-payment, the agreements are not expected to affect the city budget.
Down the road, the fact that police and fire will not receive wage increases has a tremendous impact on the future costs of pensions. Similar to a cost of living adjustment, or COLA, payments to retirees under the Fire and Police 1 plan are boosted by whatever percentage awarded active members of both departments. Increases in municipal pensions are decided by the retirement board and based on the performance of the pension fund.
The memberships of the Firefighters Union, voting June 22, and the Fraternal Order of Police, voting a week later, approved the agreements by a 3-1 plurality. Municipal employees represented by Council 94 of the American Federation of State County and Municipal Employees are slated to vote this Friday.
Police and fire union leaders and Mayor Scott Avedisian jointly announced the agreements yesterday afternoon. The mayor said, between what the city will save on health care co-payments and what it will give in the form of health savings accounts and other adjustments, city costs are reduced by $1 million.
When questioned about the 3-year pay freeze, Peter G. Johnston, president of the Fraternal Order of Police said, “We would have liked to get raises, but the economy doesn’t allow for it.”
Evidently paying a role in negotiations has been the recent statewide focus on state and municipal pensions. Johnston, who pointed out that he lives in the city, said he wants to see pension systems remain viable going forward. Avedisian added that, as employees contribute to their pensions, it is also up to the city “to make good on the promises.” Further, he pointed out, the city and unions should maintain control of the destiny of the pensions system, which would not be the case if taken over by another entity.
“This is a tremendous saving to the city,” Council President Bruce Place said yesterday. “Everyone stepped up to the plate.”
Place, along with Ward 1 Councilman Steven A. Colantuono, have docketed the agreements for consideration on July 9.
“Zero, zero, zero is just amazing in these times,” Place said of the agreements. He called the agreements “a tribute to the city and the unions” and couldn’t imagine the council not approving them.
“These negotiations were not always easy, and required a great deal of time and effort from all who were involved in the process,” said Avedisian. “I thank the union leadership for recognizing the extraordinary financial circumstances the city and state face and applaud our public safety employees for approving agreements that require sacrifices that ultimately help the taxpayers and our present and future retirees.”
The mayor also recognized the city’s negotiating team, led by Chief of Staff Mark Carruolo, City Solicitor Peter Ruggiero and Assistant City Solicitor Diana Pearson:
“This was a cooperative agreement, and mutually beneficial for the unions involved and the city of Warwick.”
Although firefighters were among the first of the city’s unions to agree to a health care co-payment some years ago – an agreement that set the standard for other city unions, including teachers – the fixed rate of $11 a week has fallen behind many other municipal agreements that are based on a percentage of cost. The School Committee unilaterally imposed a 20 percent co-payment when faced with a deficit two years ago. The teachers challenged that action in court and, after the committee learned it would actually end the year with a surplus, went back to the $11-a-week co-payment. However, as part of an extension to the teacher contract expiring last August, the union went to a 20 percent co-payment for an annual savings of $2 million to the department.
Avedisian said that the co-payment works out to about 20 percent [it varies on single and family plans and between the police and fire agreements]. He said the amount is fixed and that police also have a health savings account. Under the plan, $2,000 is set aside for those on a single plan and $4,000 for those on a family plan. The funds are banked by employee and are to be used to cover medical costs in a catastrophic situation.
Offering relief to taxpayers is the fact that firefighters and police won’t receive pay increases for the next three years. As members of the Police/Fire I pension plan won’t receive increases either, the city projects that’s $22 million it wouldn’t pay in the life of the plan. Provisions in the police and fire contracts also reduce the unfunded liability of the Police and Fire II plans by $8 million.
Should municipal employees approve their tentative agreement, Avedisian estimates it will reduce the unfunded liability of that plan by an added $2 million.
According to actuarial studies, the Police/Fire I plan, which is now closed, is 22.3 percent funded. However, 18 years ago the city adopted a 40-year funding plan, which it has not deviated from, that actuaries say is effective.
The funding ratios for the other plans – Municipal, 70.9 percent; Fire II, 78 percent; and Police II, 86.5 percent – are all within acceptable ranges according to standards set under pension reform introduced by the general treasurer and approved by the General Assembly last fall.
With approval of the contracts, Avedisian said, actuaries would recalculate the unfunded liability of the plans.
Avedisian praised the leadership of the Fire union – President Bill Lloyd and Executive Board members – for their “tenacious representation of their fellow union members and of the best interests of the city.” Likewise, Avedisian credited Sgt. Peter Johnston and Sgt. Eric Falcofsky for their dedicated work on the FOP agreement.