Letter: The Future of Coventry and Our Pension Problem

By A Coventry Resident


The town of Coventry has reached a pivotal point in its history. We are faced with a major fiscal hurdle that will define who we are as a town. We face the same challenges here as many other cities across the state, and much of it has to do with pensions unfortunately. What are we to do, raise taxes on the hard working families, or renege on promises made to municipal workers and police officers?

For far too long, some in the town have kicked the can down the road, telling taxpayers their tax levy wont increase on one hand, while granting additional benefits to pensioners, further indebting taxpayers on the other hand. We cannot have it both ways. This is not an attack on anyone, the point of this letter is to simply point out the facts. We have two options; we can do nothing and file for bankruptcy, which would destroy our credit and force us to cut pensions in half like Central Falls, or we can find a solution; together.

Before we discuss potential solutions, it is critical for all to understand how big our issues truly are and how we got here. The General Assembly passed landmark legislation last October in an effort to solve the state pension crisis. Pensions at the state level were only 48% funded, so a new hybrid pension/401(k) plan was introduced, which extended the required years of service for eligibility, froze COLA’s, and reduced the interest return on assets. As a result of the Rhode Island Retirement Securities Act passed by the General Assembly in 2011, all towns who issue independent pension plans were required to perform an actuarial experience study on their various plans in an effort to determine if any of these plans were in “critical status.”  The Rhode Island State Pension Plan Commission determined that any plans that are less than 60% funded be officially deemed in “critical status.”

Unfortunately, Coventry is in much worse shape then the state was last year, which was one of the reasons why our credit rating was downgraded twice last year by internationally recognized Moody’s. The 2011 experience study performed by actuaries revealed that our town municipal pension is only 25.3% funded and the police pension is even worse with only 11.3% of its promises actually funded. Making matters worse is the speed in which funds are being depleted. The police plan was 16% funded just a few years ago; and has tacked on an additional $20 million dollar liability since just 2009. The combined unfunded liability between these two plans totals $72,720,000. If that wasn’t bad enough, there is apparently a third retirement plan set up for non-certified school personnel. The party ultimately responsible for funding the plan is under dispute between the town, school committee, board of trustees and union as to who should be funding the plan. Regardless of who is at fault, there is an additional $24 million in unfunded benefits floating around.

Compounding this problem is the fact that the towns funding percentage of the annual required contribution has gone down the last three years. The town fulfilled 74% of its obligation to the police plan in 2009, but was down to only 69% in 2011. The percentages of contributions that have been made toward the town municipal plan are even more ominous. Coventry paid 89% of its requirement in 2009 versus only 49% last year. The amount of benefits being paid out each year continues to increase while our funding levels have not. The COLA’s approved in 2010 will only enhance the problem. The math is simple; the pension plans are running out of money and require greater contributions, to do so requires higher taxes, taxes that many of our families cannot afford. 

The police officers and other town employees are not at fault for this massive shortfall. They paid their required contributions based on benefits bargained for in their contracts, which were ultimately accepted by our elected leaders. Regardless of who is at fault, this whole problem is a tough pill to swallow for many families not employed by the town. Many of us struggle to keep the roof over our family’s head and put food in their stomachs, let alone save up enough money to adequately fund our own retirement. Most will not complain about having to pay taxes in order to fund the integral services provided by the town, but many do have a problem with paying the generous retirement packages and healthcare benefits afforded to town employees. 

So what are our options? Do we raise taxes on the 35,000+ residents in town, or do we cut the benefits promised to the 697 employees counting on them? The Coventry Republican Town Committee believes that a fundamental overhaul of the system is required in order to protect all parties. If contributing to Social Security, Medicare and a 401(k) is good enough for the taxpayers, then why not is it not good enough for our municipal workers and police officers?

I will leave you with one final piece of information to ponder in attempt to show how unrealistic our pension obligations are and to show you, the taxpayer, how much money we can save if everyone were to go to a 401(k). Right now taxpayers are required to guarantee that our pensioners get a 7% return on their investments, regardless of what the economy does. Here’s where it gets interesting, the 7% return you’re guaranteeing is based on the full amount of money that should be in the pension fund. So, lets just use the police fund. There should be $67,351,000 in this account. At a 7% return, we are responsible for ensuring a contribution of over $4,700,000 this year (This does not include past returns/shortfalls). Unfortunately, there is only $7,598,000 actually in the fund. So, in order to meet the required annual contribution, the police fund investments would have to earn over 62% THIS YEAR!

Good luck making that kind of return on your 401(k). Now, if the police were to go to a 401(k), the town could match 100% of our officer’s contributions, and it would only cost the taxpayer a total of $273,097!!! With all the talk at the federal level about income equality and people paying their fair share, when it comes to pensions, I completely agree.



Reformed June 01, 2013 at 01:01 PM
So hear how this wonderful letter will be perceived. Union people will blast it, Non- Union people will love it. I for one think your points are brilliant, but, they will never be accepted because Unions have too much power. Bust the lazy unions who steal from the tax payers on an hourly basis, then you got a shot of real pension reform! Great thoughts.
mad hatter June 01, 2013 at 01:56 PM
well done! that was a great explanation of the issue. people need to realize that the math is impossible. any way you cut it and any formula you use, the pension system will implode at some point in the future. the town employees were handed a rotten deal and now the piper is calling. even if we were to do a hybrid like the teachers, i still dont think the math works. this is why i think you have to have certain educational requirements to run for the town council. let the mud slinging begin. anyone who bashes this, you are free to do so but offer a solution while you bash.
Leave RI June 01, 2013 at 02:10 PM
This is kind of like a girl cheating on a guy for years..she's breaking up with him..then to validate it she says "it"s not you, it's me".
Realistic voter June 01, 2013 at 05:09 PM
How can you write an op-ed with out a real name? This is like fantasyland, no matter what side you are on.
Cadre June 01, 2013 at 05:17 PM
Does this mean that I can submit an anonymous letter written yours truely, Cadre? If so, you are in for treat!
A Coventry Resident June 01, 2013 at 05:30 PM
what difference does it make? read the content!!!
Sandy Lukowicz June 01, 2013 at 06:13 PM
Being a retired state employee with 30 years under my belt, it really hurt when my COLA was taken away. I was very angry for a few months, until I realized how lucky I was to even have a pension. I would much rather give up my COLA, than to have my pension touched. So for the existing municipalities in West Warwick as well as Coventry.........think about it! Wouldn't you rather give up a little piece of the pie? The "Coventry Resident" knows all too well what he's talking about.
Kyle Pendola June 01, 2013 at 08:38 PM
Part I: So, here goes. I am a Coventry teacher and recently ran for state office. Believe it or not what would appear as a conflict of interest is not in terms of how I approach this issue. I know that pensions have to be addressed. I struggle trying to ascertain what people were thinking when they set the system up in the first place. Frankly, I don't know how any of the "experts" didn't see that such an endeavor was ECONOMICALLY UNSUSTAINABLE.
Kyle Pendola June 01, 2013 at 08:45 PM
Part II: I must disclose that as a Coventry teacher I am not yet vested in the pension system. I'm fast approaching the 10 year mark, however. With the state pension issue looming, this puts me at a crossroads with my career. I love my job, but feel the prospect of working for 36 years, paying for an untold number of years into a soon to be defunct retirement, doesn't fit into the category of responsible retirement planning. There is no way that money is there when I'm ready to retire in 25+ years. It's numerically impossible regardless of whatever measures, cuts, tax hikes, deals, etc. are undertaken. So, the state recently took "responsible" action and created a hybrid system wherein 60% of our retirement $ goes into the state retirement and 40% of it into a private company of the general treasurer's choosing. Part III is where I get angry...
Kyle Pendola June 01, 2013 at 08:53 PM
Part III: Coventry is now vested into a 401k style system. Progress right? To best sum up this progress I will borrow the words from recent column by a brilliant Forbes analyst who called "Rhode Island Pension Reform More Like a Wall Street Feeding Frenzy". This wasn't news to me, however, but further confirmed what I already knew. We are FORCED into this 401k style plan, forcefully aligned to a company that our General Treasurer has had business relations with in the past. I don't have a choice. Money is taken from me and there's nothing I can do about it. I can't invest as I choose. Sure, they give me categories, but on THEIR TERMS. There is no freedom in the retirement system in Coventry, or R.I. as a whole. You people are falling right in to the trap. We're at each others throats (State employees vs. taxpayers) by design so meanwhile, the pension money is stolen and retirement become an impossibility. You should look into the history of scapegoating because that's exactly what is taking place here. And most of you are buying into the propaganda. Just like a Pavlovian bell, most of you believe exactly what the media tells you, which is so very unfortunate.
Kyle Pendola June 01, 2013 at 09:02 PM
Part IV: At the end of the day, what is most infuriating about the pension issue is that I would love for nothing more than to disband from it altogether and invest my $ as I choose. I'm an investor myself, but I don't even have the freedom to do this. I wouldn't want anything to do with a pension system even if the system was sound and a cozy retirement pension was awaiting me when I retire. I never wanted that. But I don't have a choice. I am forced into. Now, as I watch the $80,000 that I put in wither away, a large percentage of which will end up into the pockets of the people who will try their best to get our General Treasurer elected as Governor someday, I have a crisis of conscience. Why is this okay? Why don't we have freedom? Someone tells me I have to work 38 years to retire-MAYBE retire when that time is up-when I want to say, no, I am an investor myself and with the money I AM FORCED AGAINST MY WILL to give to you (which you in turn illegally give to your friends-WAIT IT'S LEGAL WHEN POLITICIANS DO IT) I can turn into a self-made retirement of 20 years. No burden on the state, no money from anyone-Just me, myself, and I building a future on my terms. But, no, that is not an option. As a state employee you are at the mercy of a collapsing system. So thank you to all that are enabling this to continue. Our imprisonment. As the "feeding frenzy" continues, I wonder how it is some of these unsavory characters sleep at night. And you elect them.
Kyle Pendola June 01, 2013 at 09:16 PM
Part V: And as for the union talk, you are looking at the last democratically owned foothold of the people, by the people, for the people (for the most part anyway). You disband unions and you invite a corporate takeover of education. With health care (a forced mandate in a free county-amazing how valuable a commodity ignorance is nowadays) being privatized, and the post office soon to follow, education is the last untapped resource. Corporations, private companies can't wait to devour those lucrative property taxes. And you'll give it to them. The system is in place-a testing system designed to fail, engineered to fail if you look at the core infrastructure of it. But, we don't, because that would require critical thinking beyond what we're told from the media. When the world you live in (we're not just taking about the education system here) is birthed from a marriage of corporations and the state, and ownership is not easily identifiable, you have fascism. Look it up. It's all there.
Pat June 01, 2013 at 09:48 PM
It has been a long-term Communist goal to infiltrate and gain control of unions. Be aware that one of the Directors at NEA Rhode Island has publicly listed Mao Zedong as one of his heroes and uses a Socialist propaganda photo on one of his social networking profiles. You can cry "fascism" all you want, but the public sector unions are dying, and they did it to themselves.
Fire chief June 01, 2013 at 10:02 PM
Pendo you make some good points. Why don't you use that union power that you say is for the people, by the people, and throw your union representation out until your man/women is in place with your same views. People like you who are in a union need to vote the union bosses out!!!! It has to start with your own people. The union bosses are stealing your money and you have zero say. Get rid of the dirty rotten scoundrels union bosses and stand up for yourselves as rank and file!!!!!
Fred Johnson June 01, 2013 at 11:45 PM
If you read the Police contract, that our current council pass two years ago, $ 9 million dollar sweet heart deal, that is all I will say. The author of the article did not mention this. Police and teachers union have given nothing, your town council gave them !
Kyle Pendola June 02, 2013 at 12:15 AM
Do you see what's happening here? They're pitting us against each other.
Leave RI June 02, 2013 at 03:16 AM
Yes. I'd be curious as to your topic of choice. Mine would be.."is Bed Bath and Beyond really giving me 400 ct sheets or are they only 399 ct"..
Cadre June 02, 2013 at 10:50 PM
I will be distributing a publication titled; "How to Not Smell Like Ham when trying to loose weight without moving: A Sunday Afternoon Revelation by Cadre"
Leave RI June 03, 2013 at 12:10 AM
Please include at least a paragraph on covering your bacon while dancer-cising to "Suit and Tie".
mad hatter June 03, 2013 at 12:57 PM
pendo, i agree with most all of what you said with the exception of two things. 1) TIAA CREFF is the 401k system set up for teachers. they have the vast majority of teacher 403b and 401k plans. i dont think it was because of a back room deal. 2) the union negotiated as hard as they could for the old pension deals fully knowing that the math was impossible. there is a lot of blame to lay the at union that was "suppose" to be acting in the best interest of the teachers.
school June 03, 2013 at 06:34 PM
mad hatter you are correct. It is the Unions fault, and every time someone mentions this they are labeled union hater, buster, etc. The union heads are looking out for their own personnel interest,when things go bust they won't be around in the future but their pockets will be full. An those who pay dues have been left with promises that can't be honored.


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