Providence, R.I., Mayor Angel Taveras late Wednesday afternoon announced an agreement with municipal workers and retirees that city officials say will enable Rhode Island’s capital to avoid bankruptcy through cuts in pension and health care benefits.
Under the tentative accord, which could set a national precedent, the city expects to save more than $18 million in fiscal 2013 by capping pensions, suspending cost-of-living adjustments, or COLAs, for 10 years, eliminating 5% and 6% compounded COLAs and moving retirees to Medicare.
"I'm cautiously optimistic, because we still need to get approval, but it was obviously a good deal for Providence," Taveras said in an interview Wednedsay night. "This was not an easy agreement. It was all tough."
The City Council and three major Providence unions – police, fire and Laborers’ International Union, Local 1033 – would all have to approve the settlement, which could avert years of litigation. State Superior Court Judge Sarah Taft-Carter, who in February ordered all sides to the table when she ruled that the city could not unilaterally order retiree plans into Medicare, must also sign off on the deal.
Retirees are expected to form a class -- not unlike participants of a class action -- to vote on the proposed changes.
According to a new tier system for locally administered pensions released by state revenue director Rosemary Booth Gallogly, Providence has a 32.3% pension funding level, placing it “in critical status.”
